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Question 1 of 10
1. Question
Which of the following statements is true regarding triangle?
Correct
Triangle
A triangle is similar to a head and shoulders pattern in that the trend takes on the form of a triangle, rising to a peak and then declining. An ascending triangle is a series of triangles, and the peak value is successively higher. At some point, usually a defined resistance level, the trend will display a breakout, which is considered bullish. A descending triangle is the opposite condition (successively lower peaks), and this trend is considered bearish.
Incorrect
Triangle
A triangle is similar to a head and shoulders pattern in that the trend takes on the form of a triangle, rising to a peak and then declining. An ascending triangle is a series of triangles, and the peak value is successively higher. At some point, usually a defined resistance level, the trend will display a breakout, which is considered bullish. A descending triangle is the opposite condition (successively lower peaks), and this trend is considered bearish.
Question 2 of 10
2. Question
Which of the following statements is true regarding congestion?
Correct
Congestion
Congestion is the term used to describe the situation in which little if any change in pricing occurs over successive days. Technical analysis theory interprets a period of congestion as one in which traders are holding orders until pricing is considered more favorable. Such periods can be followed by a volume surge and a breakout in pricing. The longer the period of congestion, the greater the subsequent breakout. A period of congestion is one in which the need of traders to offset or unwind positions is greater than the supply of traders willing to accept the counterparty position. Volume becomes stagnant, and traders are forced to pay premiums or accept discounts (depending upon the trading position) in order to execute their strategies.
Incorrect
Congestion
Congestion is the term used to describe the situation in which little if any change in pricing occurs over successive days. Technical analysis theory interprets a period of congestion as one in which traders are holding orders until pricing is considered more favorable. Such periods can be followed by a volume surge and a breakout in pricing. The longer the period of congestion, the greater the subsequent breakout. A period of congestion is one in which the need of traders to offset or unwind positions is greater than the supply of traders willing to accept the counterparty position. Volume becomes stagnant, and traders are forced to pay premiums or accept discounts (depending upon the trading position) in order to execute their strategies.
Question 3 of 10
3. Question
Regarding open interest and volume, which of the following statements is true?
Correct
Open interest and volume
Open interest is the measure of the number of contracts unsettled (that is, contracts that have not been delivered or liquidated) at the end of a trading period. A period of increasing open interest reflects a situation in which long positions exceed short positions, a condition known as an entering market. This type of market is considered bullish, as pricing is reinforced by new orders. Conversely, a period of decreasing open interest reflects a situation in which short positions exceed long positions, a condition known as an exiting market. This type of market is considered bearish, as more traders are leaving the market and price levels will no longer be supported.
Incorrect
Open interest and volume
Open interest is the measure of the number of contracts unsettled (that is, contracts that have not been delivered or liquidated) at the end of a trading period. A period of increasing open interest reflects a situation in which long positions exceed short positions, a condition known as an entering market. This type of market is considered bullish, as pricing is reinforced by new orders. Conversely, a period of decreasing open interest reflects a situation in which short positions exceed long positions, a condition known as an exiting market. This type of market is considered bearish, as more traders are leaving the market and price levels will no longer be supported.
Question 4 of 10
4. Question
From the statements below regarding factors in evaluation of a security, which one seems to be the most appropriate to you?
Correct
Factors in evaluation of a security
A fundamental analyst is concerned with factors that are thought to influence the financial performance of the underlying entity upon which a security is based. For example, an equity analyst would examine factors such as competition, innovation, ease of market entry, capitalization, market share, and technology. Macroeconomic conditions may also be examined. These include the political environment, fiscal and tax policies, and government to government relations.
Incorrect
Factors in evaluation of a security
A fundamental analyst is concerned with factors that are thought to influence the financial performance of the underlying entity upon which a security is based. For example, an equity analyst would examine factors such as competition, innovation, ease of market entry, capitalization, market share, and technology. Macroeconomic conditions may also be examined. These include the political environment, fiscal and tax policies, and government to government relations.
Question 5 of 10
5. Question
Which of the following statements is true regarding defensive stock?
Correct
Defensive stock
Defensive stocks are those that are characterized by consistent performance. They remain below market peaks but above market troughs. Such stocks are more resistant to changes in the economic cycle. During a period of strong growth, defensive stocks would be less favorable than growth stocks. However, in a weak economic environment, defensive stocks would be more favorable.
Incorrect
Defensive stock
Defensive stocks are those that are characterized by consistent performance. They remain below market peaks but above market troughs. Such stocks are more resistant to changes in the economic cycle. During a period of strong growth, defensive stocks would be less favorable than growth stocks. However, in a weak economic environment, defensive stocks would be more favorable.
Question 6 of 10
6. Question
Which of the following statements is false regarding factors in evaluation of agricultural futures product?
Correct
Factors in evaluation of agricultural futures product
An agricultural analyst would consider factors affecting crop yield and availability, such as weather, disease, pestilence, financing, transportation, and storage. Demand side factors the analyst might consider would include end user demand, substitutability, consumer trends, export opportunities, new markets, etc. Macroeconomic conditions might also be examined by the analyst. These would include government agricultural policy, the political environment, fiscal and tax policies, inflation, currency rates, and intergovernmental relations.
Incorrect
Factors in evaluation of agricultural futures product
An agricultural analyst would consider factors affecting crop yield and availability, such as weather, disease, pestilence, financing, transportation, and storage. Demand side factors the analyst might consider would include end user demand, substitutability, consumer trends, export opportunities, new markets, etc. Macroeconomic conditions might also be examined by the analyst. These would include government agricultural policy, the political environment, fiscal and tax policies, inflation, currency rates, and intergovernmental relations.
Question 7 of 10
7. Question
Regarding inelastic demand, which of the following statements is true?
Correct
Inelastic demand
When used in relation to product supply and demand, inelasticity indicates that demand will remain stable regardless of supply (and, by extension, regardless of price). An inelastic demand is generally favorable to suppliers, since the demand for their product would presumably be unaffected by any increases in price (at least in the short run). The inelasticity of demand may indicate the level of fungibility of a product. That is, demand may remain constant regardless of price because consumers have a ready supply of acceptable substitutes. Commodities with specific grades (e.g., No. 2 yellow corn) and cross-listed stocks are examples of fungible assets.
Incorrect
Inelastic demand
When used in relation to product supply and demand, inelasticity indicates that demand will remain stable regardless of supply (and, by extension, regardless of price). An inelastic demand is generally favorable to suppliers, since the demand for their product would presumably be unaffected by any increases in price (at least in the short run). The inelasticity of demand may indicate the level of fungibility of a product. That is, demand may remain constant regardless of price because consumers have a ready supply of acceptable substitutes. Commodities with specific grades (e.g., No. 2 yellow corn) and cross-listed stocks are examples of fungible assets.
Question 8 of 10
8. Question
From the statements below regarding feed ratio, which one seems to be the most appropriate to you?
Correct
Feed ratio
Fair commodity prices can be figured by using various ratios. The Feed Ratio is used to describe the relationship between feeding costs and the value of livestock. For example, a hog/corn ratio refers to the hog feeding cost as it relates to the monetary value of the hog. To derive the hog corn ratio, divide the hog price by the corn price. The hog price is based on price per hundred pounds. The corn price is based on price per bushel. When corn prices are high compared to hog prices, then it will take fewer units of corn to equal the value of 100 pounds of hog. This information will help determine what commodity should be bought or sold.
Incorrect
Feed ratio
Fair commodity prices can be figured by using various ratios. The Feed Ratio is used to describe the relationship between feeding costs and the value of livestock. For example, a hog/corn ratio refers to the hog feeding cost as it relates to the monetary value of the hog. To derive the hog corn ratio, divide the hog price by the corn price. The hog price is based on price per hundred pounds. The corn price is based on price per bushel. When corn prices are high compared to hog prices, then it will take fewer units of corn to equal the value of 100 pounds of hog. This information will help determine what commodity should be bought or sold.
Question 9 of 10
9. Question
Which of the following statements is true regarding yield curve?
Correct
Yield curve
A yield curve is a graphical representation of the return or yield of debt instruments of a like risk class. It is presented to show the returns associated with successively longer maturities. The actual measure of return is calculated as the yield to maturity. This is an iterative calculation to solve for the rate (r) at which the present value of all remaining interest payments is equal to the price paid for the bond. In effect, since the present value of the bond itself is the price paid, the yield to maturity calculation is applied to perform a reverse calculation and solve for the rate. The normal yield state for debt instruments is a higher yield for longer maturities. Therefore, a normal yield curve is polynomial and upward sloping to the right.
Incorrect
Yield curve
A yield curve is a graphical representation of the return or yield of debt instruments of a like risk class. It is presented to show the returns associated with successively longer maturities. The actual measure of return is calculated as the yield to maturity. This is an iterative calculation to solve for the rate (r) at which the present value of all remaining interest payments is equal to the price paid for the bond. In effect, since the present value of the bond itself is the price paid, the yield to maturity calculation is applied to perform a reverse calculation and solve for the rate. The normal yield state for debt instruments is a higher yield for longer maturities. Therefore, a normal yield curve is polynomial and upward sloping to the right.
Question 10 of 10
10. Question
Which of the following statements is false regarding effect of government policy on interest rates?
Correct
Effect of government policy on interest rates
Monetary policy refers to the actions of a government operating through a central bank that are intended to control the money supply and, by extension, interest rates. A restrictive monetary policy is one in which interest rates are moved upward to curtail the availability of funds, while an expansionary policy moves rates lower to accommodate growth.
Incorrect
Effect of government policy on interest rates
Monetary policy refers to the actions of a government operating through a central bank that are intended to control the money supply and, by extension, interest rates. A restrictive monetary policy is one in which interest rates are moved upward to curtail the availability of funds, while an expansionary policy moves rates lower to accommodate growth.
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