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400
Funds 401:
Shades of Value
Test your knowledge
Choose wisely. There is only one correct answer to each question.
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Review your answers below to learn more.
1.
A value fund manager may sell a value stock once its price reaches some benchmark.
Choose wisely. There is only one correct answer.
True
False
True. To be fairly valued means to reach a benchmark of some kind.
2.
Value managers _______.
Choose wisely. There is only one correct answer.
Buy stocks that they believe are worth significantly more than the current price
Buy stocks whose price/earnings ratios are below the market's price/earnings ratio
Buy stocks whose price/book ratios are below their historical levels
Buy stocks that they believe are worth significantly more than the current price. Value managers buy stocks that they believe are undervalued.
3.
A stock becomes 'fairly valued' in the eyes of value fund managers when it _______.
Choose wisely. There is only one correct answer.
Has grown so much that its price ratios are now in line with industry norms
Now reflects the absolute worth the manager has placed on the company
Either of the above
Neither of the above
Either of the above. Either of these could be true, depending on the approach for valuation that the manager uses.
4.
Managers practicing absolute-value strategies calculate what a company is worth in absolute terms and then _______.
Choose wisely. There is only one correct answer.
Buy its stock at that price
Pay extra for the stock
Buy the stock for less than that
Buy the stock for less than that. Value investing is all about paying less than what the stock is intrinsically worth.
5.
Relative-value managers measure a stock's value by comparing its price ratios with _______.
Choose wisely. There is only one correct answer.
The absolute worth of a company
A benchmark
Each other
A benchmark. These managers use a benchmark of some kind for comparison purposes.
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