Choose wisely. There is only one correct answer to each question.
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1.
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.
2.
Relative-value managers measure a stock's value by comparing its price ratios with _______.
A benchmark. These managers use a benchmark of some kind for comparison purposes.
3.
If a stock is 'fairly valued,' what does that mean?
The stock is no longer cheap by whatever benchmark the manager uses. The other answers might apply to relative-value managers or absolute-value managers, who would use either relative or absolute benchmarks.
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.
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.
