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.
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.
3.
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.
4.
Given that value fund managers seek to buy stocks for less than they are intrinsically worth, we should expect their funds to have fairly similar earnings patterns.
False. Value fund managers define value in different ways. That results in strategies that can sometimes have wildly differing performances.
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.
