Factory Stores pays annual dividends and increases those dividends by 2 percent each year. The stock is currently valued at $12 a share and has a required return of 16 percent. You own 400 shares of this stock. What is the total amount of dividend income you should expect to receive next year?
A. $646
B. $659
C. $672
D. $685
E. $699
A. $646
B. $659
C. $672
D. $685
E. $699
Answer:
Angie owns a portfolio which has an expected annual return of 11.70 percent. What is the two-year expected return on her portfolio?
A. 13.80 percent
B. 19.52 percent
C. 23.40 percent
D. 27.60 percent
E. 29.10 percent
A. 13.80 percent
B. 19.52 percent
C. 23.40 percent
D. 27.60 percent
E. 29.10 percent
Answer:
A stock fund has a standard deviation of 16 percent and a bond fund has a standard deviation of 4 percent. The correlation of the two funds is .11. What is the weight of the stock fund in the minimum variance portfolio?
A. 3.47 percent
B. 6.48 percent
C. 11.92 percent
D. 14.67 percent
E. 18.22 percent
A. 3.47 percent
B. 6.48 percent
C. 11.92 percent
D. 14.67 percent
E. 18.22 percent
Answer:
A $5,000 face value bond is quoted at a bank discount yield of 2.8 percent. What is the current value of the bond if it matures in 36 days?
A. $4,972
B. $4,978
C. $4,982
D. $4,986
E. $4,991
A. $4,972
B. $4,978
C. $4,982
D. $4,986
E. $4,991
Answer:
Marley Enterprises has financing cash flow of -$41,400 and investment cash flow of $28,600 for the year. The beginning cash balance was $65,300 and the ending cash balance was $44,800. What was the operating cash flow for the period?
A. -$15,500
B. -$9,600
C. -$7,700
D. $8,900
E. $15,500
A. -$15,500
B. -$9,600
C. -$7,700
D. $8,900
E. $15,500
Answer:
Which one of the following statements is true?
A. Risk and return are inversely related.
B. Investors are compensated only for diversifiable risk.
C. The beta of a portfolio may be lower than the lowest beta of any individual security held within the portfolio.
D. How a security affects the risk of a portfolio is less important than the actual risk of the security itself.
E. Investing has two dimensions: risk and return.
A. Risk and return are inversely related.
B. Investors are compensated only for diversifiable risk.
C. The beta of a portfolio may be lower than the lowest beta of any individual security held within the portfolio.
D. How a security affects the risk of a portfolio is less important than the actual risk of the security itself.
E. Investing has two dimensions: risk and return.
Answer:
A Treasury bill has a face value of $75,000, an asked yield of 3.05 percent, and matures in 35 days. What is the price of this bill?
A. $74,687.14
B. $74,777.60
C. $74,819.80
D. $74,868.00
E. $74,878.42
A. $74,687.14
B. $74,777.60
C. $74,819.80
D. $74,868.00
E. $74,878.42
Answer:
Yesterday, Krista stated that Overland stock was only worth $12 a share and since it was selling for $15 a share, she declared it overpriced and refused to buy any shares. This morning, she learned that she is inheriting 3,500 shares of Overland stock from her grandmother. Suddenly, she is saying that Overland stock is a great buy at $15 and is probably worth at least $17 a share. This is an example of which one of the following?
A. endowment effect
B. money illusion
C. regret aversion
D. myopic loss aversion
E. sunk cost fallacy
A. endowment effect
B. money illusion
C. regret aversion
D. myopic loss aversion
E. sunk cost fallacy
Answer:
Which of the following statements are true?
I. Lenders have a preference for shorter maturities.
II. Lenders have a preference for longer maturities.
III. Borrowers have a preference for shorter maturities.
IV. Borrowers have a preference for longer maturities.
A. I only
B. I and III only
C. I and IV only
D. II and III only
E. II and IV only
I. Lenders have a preference for shorter maturities.
II. Lenders have a preference for longer maturities.
III. Borrowers have a preference for shorter maturities.
IV. Borrowers have a preference for longer maturities.
A. I only
B. I and III only
C. I and IV only
D. II and III only
E. II and IV only
Answer:
Which one of the following is a tangible fixed asset?
A. cash
B. equipment
C. accounts receivable
D. right
E. inventory
A. cash
B. equipment
C. accounts receivable
D. right
E. inventory
Answer:
A firm has $2,500 of cash, equipment worth $45,000, inventory of $16,300, $14,000 worth of patents, and $12,200 of accounts receivable. What is the value of the total current assets?
A. $1,500
B. $14,700
C. $16,700
D. $31,000
E. $72,900
A. $1,500
B. $14,700
C. $16,700
D. $31,000
E. $72,900
Answer:
You would like to lock in the selling price on 60,000 bushels of wheat, which you plan to harvest and deliver to the market in September. The September futures price quote is currently 902΄6. If you write September futures contracts on your wheat, you will be guaranteed a total price of _____ for your crop. Each contract is quoted in cents and 1/8 ths of a cent per bushel with a contract size of 5,000 bushels.
A. $45,637.50
B. $541,650.00
C. $11,908.75
D. $297,700.50
E. $2,977,000.25
A. $45,637.50
B. $541,650.00
C. $11,908.75
D. $297,700.50
E. $2,977,000.25
Answer:
A 7.5 percent coupon bond is currently quoted at 89.3 and has a face value of $1,000. What is the amount of each semi-annual coupon payment if you own three (3) of these bonds?
A. $56.25
B. $75.00
C. $100.46
D. $112.50
E. $200.93
A. $56.25
B. $75.00
C. $100.46
D. $112.50
E. $200.93
Answer:
A firm has a price-cash flow ratio of 12.5 and a price-book value ratio of 7.6. If the cash flow per share is $4.67, what is the book value per share?
A. $2.84
B. $3.55
C. $4.44
D. $6.45
E. $7.68
A. $2.84
B. $3.55
C. $4.44
D. $6.45
E. $7.68
Answer:
Southern Fuel has an inventory of 756,000 gallons of heating oil. The futures contracts on heating oil are based on 42,000 gallons. If the firm wishes to fully hedge its inventory, it should take which one of the following positions in heating oil futures contracts?
A. long on 16
B. long on 17
C. short on 18
D. short on 19
E. short on 20
A. long on 16
B. long on 17
C. short on 18
D. short on 19
E. short on 20
Answer:
An order to buy shares of stock at a stated price or less is called a _____ order.
A. limit
B. stop
C. market
D. short
E. bid
A. limit
B. stop
C. market
D. short
E. bid
Answer:
Which one of the following situations will produce the highest call price, all else constant? Assume the options are all in-the-money.
A. $20 strike price; 45 days to option expiration
B. $20 strike price; 60 days to option expiration
C. $25 strike price; 45 days to option expiration
D. $25 strike price; 60 days to option expiration
E. Insufficient information is provided to answer this question.
A. $20 strike price; 45 days to option expiration
B. $20 strike price; 60 days to option expiration
C. $25 strike price; 45 days to option expiration
D. $25 strike price; 60 days to option expiration
E. Insufficient information is provided to answer this question.
Answer:
From the end of 1989 to the spring of 2003, the Nikkei Index declined in value approximately _____ percent.
A. 50
B. 60
C. 70
D. 80
E. 90
A. 50
B. 60
C. 70
D. 80
E. 90
Answer:
A 6-month call has a strike price of $30. The underlying stock is priced at $31.80 and the option premium on the call is $2.40. What is the per share time value of the call?
A. $0.00
B. $0.60
C. $1.40
D. $2.80
E. $3.60
A. $0.00
B. $0.60
C. $1.40
D. $2.80
E. $3.60
Answer:
Which one of the following correctly applies to a mortgage passthrough bond?
A. The primary collateral for the bond is the underlying pool of mortgages.
B. All interest received is immediately passed through while principal payments are held until the bond matures.
C. Each bond represents one home mortgage.
D. These bonds are created via a process known as mortgage collaring.
E. All of these bonds are guaranteed by the full faith and credit of the U.S. government.
A. The primary collateral for the bond is the underlying pool of mortgages.
B. All interest received is immediately passed through while principal payments are held until the bond matures.
C. Each bond represents one home mortgage.
D. These bonds are created via a process known as mortgage collaring.
E. All of these bonds are guaranteed by the full faith and credit of the U.S. government.
Answer:
When an underwriting syndicate purchases an entire issue of new securities and accepts the risk of unsold shares, the underwriting is known as a _____ underwriting.
A. Dutch auction
B. full-fledge
C. firm commitment
D. best efforts
E. guaranteed sale
A. Dutch auction
B. full-fledge
C. firm commitment
D. best efforts
E. guaranteed sale
Answer:
A Treasury bond has a quoted bid price of 100:10 and a quoted ask price of 100:11. What is the amount you will receive if you sell your bond that has a par value of $20,000?
A. $20,016.00
B. $20,050.00
C. $20,062.60
D. $20,100.08
E. $21,600.00
A. $20,016.00
B. $20,050.00
C. $20,062.60
D. $20,100.08
E. $21,600.00
Answer:
You are borrowing $260,000 for 25 years at 5.5 percent. Payments will be made monthly. What is the total amount of interest you will pay if you pay the loan as agreed over the 25 years?
A. $314,786
B. $324,340
C. $346,360
D. $364,120
E. $396,342
A. $314,786
B. $324,340
C. $346,360
D. $364,120
E. $396,342
Answer:
An index consists of the following securities and has an index divisor of 3.0. What is the price-weighted index return?
A. 9.33 percent
B. 10.35 percent
C. 11.54 percent
D. 12.33 percent
E. 13.00 percent
A. 9.33 percent
B. 10.35 percent
C. 11.54 percent
D. 12.33 percent
E. 13.00 percent
Answer:
Which one of the following should be used to compare the overall performance of three different investments?
A. holding period dollar return
B. capital gains yield
C. dividend yield
D. holding period percentage return
E. effective annual return
A. holding period dollar return
B. capital gains yield
C. dividend yield
D. holding period percentage return
E. effective annual return
Answer:
Which one of the following applies to “Yankee bonds”?
A. U.S. corporate bonds that are sold internationally
B. U.S. corporate bonds denominated in a foreign currency
C. U.S. government bonds that are sold internationally
D. any bond that is denominated in U.S. dollars
E. foreign-issued bonds sold in the U.S.
A. U.S. corporate bonds that are sold internationally
B. U.S. corporate bonds denominated in a foreign currency
C. U.S. government bonds that are sold internationally
D. any bond that is denominated in U.S. dollars
E. foreign-issued bonds sold in the U.S.
Answer:
You purchased 5 put option contracts on Mountain Builders stock at an option premium of $0.65. The strike price is $25. What is your break-even stock price?
A. $19.90
B. $24.35
C. $25.00
D. $25.75
E. $30.10
A. $19.90
B. $24.35
C. $25.00
D. $25.75
E. $30.10
Answer:
Which one of the following best describes the type(s) of information included in a strong-form efficient market?
A. historical
B. historical and public
C. private and public
D. current and public
E. historical and private
A. historical
B. historical and public
C. private and public
D. current and public
E. historical and private
Answer:
Which one of the following increases the probability that a bond will be called?
A. The call premium is relatively high.
B. The bond is within the call protection period.
C. The bond was issued within the past year.
D. Market interest rates decline.
E. The bond is selling at par.
A. The call premium is relatively high.
B. The bond is within the call protection period.
C. The bond was issued within the past year.
D. Market interest rates decline.
E. The bond is selling at par.
Answer:
A closed-end fund has total assets of $379 million and liabilities of $640,000. There are 36 million shares outstanding. What is the premium or discount if the shares are currently selling for $9.85 each?
A. 7.46 percent discount
B. 6.28 percent discount
C. 6.94 percent discount
D. 6.80 percent premium
E. 7.46 percent premium
A. 7.46 percent discount
B. 6.28 percent discount
C. 6.94 percent discount
D. 6.80 percent premium
E. 7.46 percent premium
Answer:
Municipal bonds that are secured by the full faith and credit of the issuer are referred to as which one of the following?
A. general obligation bonds
B. local taxation bonds
C. fully funded bonds
D. revenue bonds
E. private activity bonds
A. general obligation bonds
B. local taxation bonds
C. fully funded bonds
D. revenue bonds
E. private activity bonds
Answer:
Alicia owns 500 shares of Danube stock. She thinks the market price will continue to rise but would like to ensure that she can get at least $47.50 a share should she decide to sell her shares.
The 47.50 call option is quoted at $1.05 bid, $1.15 ask. The 47.50 put is quoted at $0.80 bid, $0.85 ask. How much will it cost her to ensure that she can sell all of her shares for at least $47.50 each?
A. $805
B. $740
C. $670
D. $530
E. $425
The 47.50 call option is quoted at $1.05 bid, $1.15 ask. The 47.50 put is quoted at $0.80 bid, $0.85 ask. How much will it cost her to ensure that she can sell all of her shares for at least $47.50 each?
A. $805
B. $740
C. $670
D. $530
E. $425
Answer: