MP Fundamentals of Investments with Stock-Trak card 7th Edition

Lisa owns a stock that has an average geometric return of 11.34 percent and an average arithmetic return of 11.51 percent over the past six years. What average annual rate of return should Lisa expect to earn over the next four years? A. 11.38 percent B. 11.41 percent C. 11.44 percent D. 11.47 percent E.

What is the beta of a portfolio which consists of the following? A. 1.18 B. 1.22 C. 1.23 D. 1.32 E. 1.37 Answer: D.Portfolio value = $2,000 + $5,000 + $9,000 + $4,000 = $20,000 Answer: D.Portfolio value = $2,000 + $5,000 + $9,000 + $4,000 = $20,000 Answer: D. Portfolio value = $2,000 + $5,000 + $9,000

Which one of the following is the risk associated with receiving a mortgage bond's principal payments sooner than anticipated? A. prepayment risk B. default risk C. amortized risk D. market risk E. seasoned risk Answer: A.See Section 20.3 Answer: A.See Section 20.3 Answer: A. See Section 20.3 You combine a set of assets using different weights such that you

What is the difference between this day's high and closing prices for one 10-year Treasury note futures contract? Treasury note, $100,000, pts and one-half of 1/32 of a point A. -$435.00 B. -$550.00 C. -$800.00 D. -$971.88 E. -$1,093.75 Answer: E.Difference = $100,000 (116% + (6.5/32)% - 115% - (3.5/32)%) = $1,093.75 Answer: E.Difference = $100,000 (116%

In the U.S., what percentage of the GDP is consumer spending? A. 45% B. 55% C. 65% D. 75% E. 85% Answer: C.See Section 19.3 Answer: C.See Section 19.3 Answer: C. See Section 19.3 Which one of the following options is out-of-the-money? A. call with a $20 strike and a stock price of $21 B. put with a $35 strike and

Which one of the following rates is used by brokerage firms as the basis for determining margin loan rates? A. discount B. Fed funds C. prime D. brokerage E. call money Answer: E.See Section 9.1. Answer: E.See Section 9.1. Answer: E. See Section 9.1. You own shares of AZT stock. Which of the following strategies can you use to

The relationship between GDP and market capitalization for the leading economies of the world is generally _______. A. weakly related B. inversely related C. negatively correlated D. positively correlated E. unrelated Answer: D.See Section 19.2 Answer: D.See Section 19.2 Answer: D. See Section 19.2 Which one of the following options is in-the-money? A. call with a $45 strike and an

A bond has a par value of $1,000 and a coupon rate of 6.5 percent. What is the dollar amount of each semiannual interest payment if you own 8 of these bonds? A. $180 B. $260 C. $320 D. $420 E. $840 Answer: B.Semiannual coupon = [($1,000 .065)/2] 8 = $260 Answer: B.Semiannual coupon = [($1,000

Which one of the following best describes a real interest rate? A. current rate on a U.S. Treasury bill B. nominal rate minus the risk-premium on an individual security C. market return minus the risk-free rate D. nominal rate minus inflation E. historical rate rather than a projected rate Answer: D.See Section 9.5. Answer: D.See Section

Riverside Metals recently issued some debt that had an original maturity of nine months. This debt is best classified as a(n): A. option contract. B. money market instrument. C. fixed-income security. D. derivative security. E. futures contract. Answer: B.See Section 3.2 Answer: B.See Section 3.2 Answer: B. See Section 3.2 Assume that the Federal Reserve injects $45 billion into

Which one of the following advance/decline lines is the most bullish signal? A. relatively flat B. slightly upward sloping C. slightly downward sloping D. steeply upward sloping E. steeply downward sloping Answer: D.See Section 8.7 Answer: D.See Section 8.7 Answer: D. See Section 8.7 What is the percentage of a firm's net income which is reinvested in the firm

Which one of the following trading symbols is associated with the ETF on the S&P 500 index? A. DIA B. QQQQ C. SPY D. SPX E. DIAX Answer: C.See Section 4.8. Answer: C.See Section 4.8. Answer: C. See Section 4.8. PT Boats plans to pay a $2.25 a share dividend at the end of each of the next 2 years.

A basic bond that has a face value of $1,000 and pays regular semiannual coupon payments is referred to as which one of the following? A. pure discount bond B. premium bond C. inflation bond D. straight bond E. conversion bond Answer: D.See Section 10.1 Answer: D.See Section 10.1 Answer: D. See Section 10.1 An asset had annual returns

Over the past 5 years, DL Insulation has paid annual dividends of $1.40, $1.55, $1.70, $1.73, and $1.77 per share. What is the geometric average dividend growth rate for this period? A. 4.80 percent B. 5.79 percent C. 5.88 percent D. 6.04 percent E. 6.33 percent Answer: D. Answer: D. Answer: D. Security A and Security B have

Sugar Tree Cookies has current net income of $268,000 of which $110,000 was paid out in dividends. The remaining $158,000 will be shown in which account on the firm's financial statements for next year? A. long-term debt B. common stock C. net income D. retained earnings E. paid in surplus Answer: D.See Section 17.2 Answer: D.See

The spot rate on a non-dividend-paying stock is $42.30. The risk-free rate is 3.75 percent and the market rate is 11.50 percent. What is the three-month futures rate if spot-futures parity exists? A. $42.14 B. $42.54 C. $42.69 D. $42.82 E. $43.89 Answer: C.Futures rate = $42.30 (1 + .0375)1/4 = $42.69 Answer: C.Futures rate =

The following portfolio has an expected return of _____ percent and a beta of _____. A. 12.45; 1.38 B. 12.84; 1.39 C. 13.39; 1.23 D. 13.39; 1.40 E. 13.45; 1.32 Answer: B.Portfolio value = $26,000 + $24,000 + $30,000 = $80,000 Answer: B.Portfolio value = $26,000 + $24,000 + $30,000 = $80,000 Answer: B. Portfolio value = $26,000

An investment will make one payment of $22,500 nine years from now. What is the current value of this investment if the nominal rate of return is 4.8 percent? A. $11,980.86 B. $12,124.29 C. $12,390.08 D. $13,515.46 E. $14,754.72 Answer: E. Answer: E. Answer: E. What is the put option premium given the following information? A. $7.49 B. $7.98 C. $8.28 D.

A frequency distribution, which is completely defined by its average (mean) and standard deviation, is referred to as a(n): A. normal distribution. B. variance distribution. C. expected rate of return. D. average geometric return. E. average arithmetic return. Answer: A.See Section 1.4 Answer: A.See Section 1.4 Answer: A. See Section 1.4 What is the put option premium given the

Which one of the following assesses the ability of a money manager to balance high returns with an acceptable level of risk? A. probability analysis B. raw return ratio C. risk assessment D. performance evaluation E. market analysis Answer: D.See Section 13.1 Answer: D.See Section 13.1 Answer: D. See Section 13.1 Which one of the following is the best

The concept that well-capitalized, rational traders may be unable to correct a mispricing defines which one of the following terms? A. noise trading bounds B. market bounds C. limits to arbitrage D. implementation limits E. sentiment borders Answer: C.See Section 8.6 Answer: C.See Section 8.6 Answer: C. See Section 8.6 A Treasury bill has a face value of $100,000, a

Rudolfo purchased 900 shares of stock for $62.20 a share and sold them ten months later for $64.60 a share. The initial margin requirement on this stock is 75 percent and the maintenance margin is 40 percent. Ignoring dividends and costs, what is his holding period return? A. 3.72 percent B. 3.86

Julie purchased four (4) S&P 500 index futures at a price of 1392. The contract size is $250 times the index value. The futures are maturing today at a price of 1387.50. What is the amount of her profit or loss? A. -$3,125 B. -$4,500 C. -$5,625 D. -$13,575 E. -$15,625 Answer: B.Profit = 4

Over the past four years, Hi-Tech Development stock returned 35.2, 38.8, 18.4, and -32.2 percent annually. What is the arithmetic average return? A. 15.05 percent B. 17.67 percent C. 20.53 percent D. 24.20 percent E. 32.25 percent Answer: A.Return = (.352 + .388 + .184 - .322)/4 = 15.05 percent Answer: A.Return = (.352 + .388

You bought a put with a strike price of $25. The current stock price is $23. What is the current payoff value of this option? A. -$2 B. -$1 C. $0 D. $1 E. $2 Answer: E.See Section 15.6 Answer: E.See Section 15.6 Answer: E. See Section 15.6 Over the past 5 days, the common stock of Tyler Mfg.

Which of the following reflects the value of economic output adjusted to remove the effects of inflation? A. current year GDP B. real GDP C. nominal GDP D. adjusted GDP E. actual GDP Answer: B.See Section 19.2 Answer: B.See Section 19.2 Answer: B. See Section 19.2 A 6-month put has a strike price of $32.50. The underlying stock's price

The sustainable growth rate is equal to: A. ROE (1 - Payout ratio). B. ROA (1 - Payout ratio). C. ROE (1 - Retention ratio). D. ROA (1 - Retention ratio). E. ROE ROA. Answer: A.See Section 6.2 Answer: A.See Section 6.2 Answer: A. See Section 6.2 You open a margin account with a local broker and purchase shares

By the end of 2002, the AMEX Internet Index was at a level approximately equal to _____ percent of the index high. A. 75 B. 50 C. 25 D. 17 E. 9 Answer: E.See Section 7.11[/cpmembership] Answer: E.See Section 7.11[/cpmembership] Answer: E. See Section 7.11[/cpmembership] A 5.5 percent coupon bond has a face value of $1,000 and a current

A 12b-1 fee is a fee charged by a mutual fund: A. at the time shares are issued. B. if shares are sold within a stated period of time. C. to cover trading costs. D. to pay the fund's managers. E. to cover marketing costs. Answer: E.See Section 4.4. Answer: E.See Section 4.4. Answer: E. See Section 4.4. A

Which of the following statements are true as applied to U.S. agency debt? I. It is equally as risky as Treasury debt. II. It is frequently subject to state taxes. III. It has the same credit guarantee as U.S. Treasury debt. IV. It generally has a lower yield than U.S. Treasury debt with the

Which one of the following terms is used to describe a stock price that moves over time creating no discernible pattern? A. deviated pattern B. dispersed flow C. efficient movement D. overreaction and correction E. random walk Answer: E.See Section 7.6 Answer: E.See Section 7.6 Answer: E. See Section 7.6 Employee stock options grant an employee which one of the

You purchased a stock for $29.40 a share, received a dividend of $0.72 per share, and sold the stock after one year for $31.30 a share. What was your dividend yield on this investment? A. 2.30 percent B. 2.38 percent C. 2.45 percent D. 2.67 percent E. 2.80 percent Answer: C.$0.72/$29.40 = 2.45 percent Answer: C.$0.72/$29.40

The yield that a bond will earn given that it is bought back by the issuer at the earliest possible date is the: A. market yield. B. current yield. C. yield to maturity. D. yield to put. E. yield to call. Answer: E.See Section 10.3 Answer: E.See Section 10.3 Answer: E. See Section 10.3 Todd purchased 600 shares of

For the period 1926-2012, long-term government bonds had an average return that ______ the average return on long-term corporate bonds while having a standard deviation that _______ the standard deviation of the long-term corporate bonds. A. exceeded; was less than B. exceeded; equaled C. exceeded; exceeded D. was less than; exceeded E. was less than;

Sugar is currently selling for $0.201 a pound while the 6-month futures price is $0.208. You take a long position in the 6-month sugar futures. Which one of the following prices would cause you the greatest loss if that price turns out to be the actual price of sugar per

The one-year standard deviation of your portfolio is 14.8 percent. What is the two-year standard deviation? A. 16.47 percent B. 18.23 percent C. 20.93 percent D. 25.41 percent E. 27.20 percent Answer: C.Two-year standard deviation = .148 2 = 20.93 percent Answer: C.Two-year standard deviation = .148 2 = 20.93 percent Answer: C. Two-year standard deviation = .148

Which of the following affect the earnings per share? I. decrease in interest expense II. share repurchase III. increase in tax rates IV. preferred stock dividend A. I and III only B. II and IV only C. I, II, and III only D. II, III, and IV only E. I, II, III, and IV Answer: E.See Section 17.2 Answer: E.See

Which one of the following describes a short position? A. Purchasing a security on margin B. Selling a security that you originally purchased on margin C. Loaning a security to your broker to cover a margin call D. Having less equity than required in your margin account E. Selling a security that you do not

Which one of the following debt instruments guarantees investors a positive real rate of return? A. zero-coupon bond B. default-free, pure-discount bond C. T-bill D. TIPS E. T-bond Answer: D.See Section 9.5. Answer: D.See Section 9.5. Answer: D. See Section 9.5. Which one of the following should be used as the mean return when you are defining the normal

Which one of the following is the type of risk that affects a large number of assets? A. unique B. systematic C. asset-specific D. unsystematic E. firm-specific Answer: B.See Section 12.2 Answer: B.See Section 12.2 Answer: B. See Section 12.2 Which of the following interest rates is directly controlled by the Federal Reserve? A. the fed funds rate B. the discount

Which one of the following is the key function of GNMA? A. providing direct financing for first-time home buyers only B. directly refinancing existing home mortgages C. providing mortgage funds to military personnel only D. providing direct financing to first-time home buyers, military personnel, and farmers E. sponsoring the repackaging of mortgages into mortgage-backed securities

Suppose you are a U.S. investor who is planning to invest $350,000 in China. Your Chinese investment gains 8 percent. If the exchange rate moves from 6.09 Yuan per dollar to 6.12 per dollar over the period, what is your total return on this investment? A. 6.55% B. 6.71% C. 6.98% D. 7.29% E. 7.47%

A bond has a current yield that is equal to the yield-to-maturity. Given this, which one of the following must also be true? A. The bond must pay annual interest. B. The maturity value must be greater than the bond price. C. The bond can have any maturity date. D. The coupon rate must

You invested $5,000 in a mutual fund 27 months ago when the NAV of the fund was $30.00. You have not acquired or sold any shares since that time. Today, the NAV is $28.40. The fund charges a contingent deferred sales charge of 6, 5, 4, 3, 2, 2, and

Which of the following are impediments to the correction of a security's mispricing? I. sentiment-based risk II. implementation costs III. firm-specific risk IV. noise trader risk A. II only B. II and IV only C. I, III, and IV only D. II, III, and IV only E. I, II, III, and IV Answer: E.See Section 8.6 Answer: E.See Section 8.6 Answer:

Which one of the following is the largest market in the world for new debt securities with maturities of one year or less? A. commercial paper B. U.S. Treasury bill C. banker's acceptance D. Eurodollar money market E. certificates of deposit Answer: B.See Section 9.1. Answer: B.See Section 9.1. Answer: B. See Section 9.1. What is the variance of

Stocks which are listed on the NYSE can: A. not be listed on any other exchange. B. only be dual listed on a regional exchange. C. only be dual listed on Instinet. D. only be dual listed on the Archipelago Exchange. E. also be listed on NASDAQ. Answer: E.See Section 5.5 Answer: E.See Section 5.5 Answer: E. See

Stacy purchased 400 shares of stock for $38 a share. She sold those shares six months later for $34 a share. The initial margin requirement is 80 percent and the maintenance margin is 40 percent. Ignore margin interest and trading costs. If she purchased the shares for cash her holding period

The party who serves as a dealer for a few securities on an exchange floor and is obligated to maintain an orderly market for those securities is called a: A. floor trader. B. designated market maker. C. floor broker. D. member. E. house broker. Answer: B.See Section 5.2 Answer: B.See Section 5.2 Answer: B. See Section 5.2 How will

Which one of the following terms is used to identify the evaluation method that determines the value of a stock by reviewing a firm's financial statement in conjunction with other financial and economic information? A. technical analysis B. conceptual analysis C. prediction valuation D. fundamental analysis E. discounted valuation Answer: D.See Section 6.1 Answer: D.See Section

Which one of the following is defined as the market value of goods and services produced over a period of time? A. Domestic Market Product (DMP) B. Gross Domestic Product (GDP) C. Gross Economic Activity (GEA) D. Gross Market Value (GMV) E. Market Value Product (MVP) Answer: B.See Section 19.2 Answer: B.See Section 19.2 Answer: B. See Section