Choose wisely. There is only one correct answer to each question.
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1.
Value managers _______.
Buy stocks that they believe are worth significantly more than the current price. Value managers buy stocks that they believe are undervalued.
2.
A value fund manager may sell a value stock once its price reaches some benchmark.
True. To be fairly valued means to reach a benchmark of some kind.
3.
Absolute-value managers _______.
Buy stocks that are cheaper than what they deem to be the company's entire worth. Managers practicing absolute-value strategies calculate what a company is worth in absolute terms and will only buy the company's stock for less than that figure.
4.
Which statement is true?
Absolute value funds require patience because management's concentrated style can lead to ups and downs in the short term. Absolute-value managers can calculate a company's worth in a variety of ways. They also tend to have lumpy performance due to their style, and require patience of fund investors.
5.
Relative-value managers _______.
Buy stocks trading below their historical price ratios, their industry peers, or the market. Relative-value managers measure a stock's value by comparing its price ratios with some benchmark.
