Laura has an average tax rate of 22 percent and a marginal tax rate of 28 percent. What is her after-tax yield on a corporate bond which has a 6.7 percent yield?
A. 4.82 percent
B. 5.09 percent
C. 5.47 percent
D. 6.00 percent
E. 11.34 percent
A. 4.82 percent
B. 5.09 percent
C. 5.47 percent
D. 6.00 percent
E. 11.34 percent
Answer:
The High Growth Technology Fund has an NAV of $51.06 and a 4.4 percent front-end load. What is the offering price?
A. $50.84
B. $51.36
C. $53.41
D. $54.53
E. $55.81
A. $50.84
B. $51.36
C. $53.41
D. $54.53
E. $55.81
Answer:
A $5,000 face value municipal bond matures in 6 years and has a market value of $5,110. The coupon rate is 3.5 percent with interest paid semiannually. What is the yield to maturity?
A. 2.92 percent
B. 3.10 percent
C. 3.73 percent
D. 5.13 percent
E. 6.38 percent
A. 2.92 percent
B. 3.10 percent
C. 3.73 percent
D. 5.13 percent
E. 6.38 percent
Answer:
Which of the following affect the expected rate of return for a portfolio?
I. weight of each security held in the portfolio
II. the probability of various economic states occurring
III. the variance of each individual security
IV. the expected rate of return of each security given each economic state
A. I and IV only
B. II and IV only
C. II, III, and IV only
D. I, II, and IV only
E. I, II, III, and IV
I. weight of each security held in the portfolio
II. the probability of various economic states occurring
III. the variance of each individual security
IV. the expected rate of return of each security given each economic state
A. I and IV only
B. II and IV only
C. II, III, and IV only
D. I, II, and IV only
E. I, II, III, and IV
Answer:
You have a portfolio which is comprised of 75 percent of stock A and 25 percent of stock B. What is the expected rate of return on this portfolio?
A. 10.70 percent
B. 10.87 percent
C. 11.13 percent
D. 12.11 percent
E. 12.80 percent
A. 10.70 percent
B. 10.87 percent
C. 11.13 percent
D. 12.11 percent
E. 12.80 percent
Answer:
What is beta?
A. a rate of return measure
B. the return on a stock relative to the overall market
C. the rate of dividend growth
D. the percentage of net income paid out as a dividend
E. measure of a stock’s risk relative to the stock market average
A. a rate of return measure
B. the return on a stock relative to the overall market
C. the rate of dividend growth
D. the percentage of net income paid out as a dividend
E. measure of a stock’s risk relative to the stock market average
Answer:
You purchased one SPX call option with a strike of 1,500. You wrote one SPX call option with the same maturity date and a strike of 1,450. At maturity, what is your payoff if the S&P 500 is at 1,475?
A. -$2,500
B. -$250
C. $25
D. $250
E. $2,500
A. -$2,500
B. -$250
C. $25
D. $250
E. $2,500
Answer:
A $5,000 face value municipal bond matures in 14 years and is priced at $4,862. The coupon rate is 4.5 percent with interest paid semiannually. What is the yield to maturity on the bond?
A. 4.77 percent
B. 5.14 percent
C. 5.40 percent
D. 5.61 percent
E. 5.97 percent
A. 4.77 percent
B. 5.14 percent
C. 5.40 percent
D. 5.61 percent
E. 5.97 percent
Answer:
The common stock of A.G. Tailor has a required return of 16 percent. The latest press release stated that last year’s dividend was $0.90 per share and that future dividends will increase by 15 percent for the following 3 years. After that, the dividend growth rate will be 3 percent indefinitely. What is one share of this stock worth to you today?
A. $8.42
B. $9.60
C. $10.26
D. $10.75
E. $12.03
A. $8.42
B. $9.60
C. $10.26
D. $10.75
E. $12.03
Answer:
The reward-to-risk ratio is 6.8 percent and the risk-free rate is 5.3 percent. What is the expected return on a risky asset if the beta of that asset is 1.03?
A. 7.00 percent
B. 12.00 percent
C. 12.02 percent
D. 12.07 percent
E. 12.30 percent
A. 7.00 percent
B. 12.00 percent
C. 12.02 percent
D. 12.07 percent
E. 12.30 percent
Answer:
To be listed on the NYSE, a firm must have at least:
A. 2,500 shareholders
B. 100,000 shares traded on an average day
C. 1.5 million shares held by the public
D. $75 million in market value for an IPO
E. pre-tax aggregate earnings of $10 million in the previous 3 years
A. 2,500 shareholders
B. 100,000 shares traded on an average day
C. 1.5 million shares held by the public
D. $75 million in market value for an IPO
E. pre-tax aggregate earnings of $10 million in the previous 3 years
Answer:
Your $785,000 investment in Mexico gained 6 percent. If the exchange rate moves from 13.4 pesos per dollar to 12.5 per dollar over the period, what is your total return on this investment?
A. 12.57%
B. 12.86%
C. 13.12%
D. 13.63%
E. 13.91%
A. 12.57%
B. 12.86%
C. 13.12%
D. 13.63%
E. 13.91%
Answer:
Which one of the following terms is applied to the process of creating mortgage-backed securities from a pool of mortgages?
A. mortgage aggregation
B. mortgage securitization
C. mortgage bundling
D. mortgage pooling
E. mortgage financing
A. mortgage aggregation
B. mortgage securitization
C. mortgage bundling
D. mortgage pooling
E. mortgage financing
Answer:
An unwillingness to take a risk after a loss describes:
A. over-confidence
B. the snakebite effect
C. the illusion of knowledge
D. the clustering illusion
E. loss aversion
A. over-confidence
B. the snakebite effect
C. the illusion of knowledge
D. the clustering illusion
E. loss aversion
Answer:
Which of the following should generally only be used to evaluate relatively diversified portfolios rather than individual securities?
I. Sharpe ratio
II. Treynor ratio
III. Jensen’s alpha
A. I only
B. II only
C. III only
D. I and II only
E. I, II, and III
I. Sharpe ratio
II. Treynor ratio
III. Jensen’s alpha
A. I only
B. II only
C. III only
D. I and II only
E. I, II, and III
Answer:
Which one of the following is the measure of interest rate risk for fixed-income securities?
A. standard deviation
B. Macaulay duration
C. variance
D. Jensen’s alpha
E. beta
A. standard deviation
B. Macaulay duration
C. variance
D. Jensen’s alpha
E. beta
Answer:
Southern Foods just paid an annual dividend of $1.10 a share. Management estimates the dividend will increase by 10 percent a year for the next four years. After that, the annual dividend growth rate is estimated at 3.2 percent. The required rate of return is 12 percent. What is the value of this stock today?
A. $12.55
B. $13.00
C. $14.54
D. $15.81
E. $16.21
A. $12.55
B. $13.00
C. $14.54
D. $15.81
E. $16.21
Answer:
The CPR for a seasoned 150 PSA mortgage is 9.8 percent. What is the single monthly mortality?
A. 0.8258 percent
B. 0.8558 percent
C. 0.8949 percent
D. 0.9013 percent
E. 0.9129 percent
A. 0.8258 percent
B. 0.8558 percent
C. 0.8949 percent
D. 0.9013 percent
E. 0.9129 percent
Answer:
Which one of the following statements related to common stock is correct?
A. Corporations are required to pay annual dividends to its common stockholders.
B. Corporations have the right to discontinue paying dividends.
C. Corporations pay dividends at the discretion of the firm’s president.
D. Common stock is a form of corporate debt.
E. Common stock has a pre-defined liquidation value.
A. Corporations are required to pay annual dividends to its common stockholders.
B. Corporations have the right to discontinue paying dividends.
C. Corporations pay dividends at the discretion of the firm’s president.
D. Common stock is a form of corporate debt.
E. Common stock has a pre-defined liquidation value.
Answer:
How will the returns on two assets react if those returns have a perfect positive correlation?
I. move in the same direction
II. move in opposite directions
III. move by the same amount
IV. move by either equal or unequal amounts
A. I and III only
B. I and IV only
C. II and III only
D. II and IV only
E. III only
I. move in the same direction
II. move in opposite directions
III. move by the same amount
IV. move by either equal or unequal amounts
A. I and III only
B. I and IV only
C. II and III only
D. II and IV only
E. III only
Answer:
The risk-free rate is 4.1 percent, the market rate is 13.2 percent, and the expected return on a stock is 15.84 percent. What is the beta of the stock?
A. .52
B. .81
C. 1.13
D. 1.19
E. 1.29
A. .52
B. .81
C. 1.13
D. 1.19
E. 1.29
Answer:
An index consists of the following securities. What is the value-weighted index return?
A. 12.75 percent
B. 15.00 percent
C. 16.50 percent
D. 18.75 percent
E. 25.00 percent
A. 12.75 percent
B. 15.00 percent
C. 16.50 percent
D. 18.75 percent
E. 25.00 percent
Answer:
According to the concept of house money, individual investors are most apt to do which one of the following?
A. take more risks with their initial investment than with the gains on that investment
B. value money differently depending upon its source
C. treat paper profits the same as initial cash investments
D. apply the same level of risk-aversion to all investments
E. place high value on paper profits but low value on paper losses
A. take more risks with their initial investment than with the gains on that investment
B. value money differently depending upon its source
C. treat paper profits the same as initial cash investments
D. apply the same level of risk-aversion to all investments
E. place high value on paper profits but low value on paper losses
Answer:
Modern term structure theory supports the contention that the term structure of interest rates will:
A. be upward sloping.
B. be downward sloping.
C. be upward sloping in the short-term and relatively flat in the long-term.
D. be constant over time.
E. change over time.
A. be upward sloping.
B. be downward sloping.
C. be upward sloping in the short-term and relatively flat in the long-term.
D. be constant over time.
E. change over time.
Answer:
If two assets have a zero correlation, their returns will:
A. always move in the same direction by the same amount.
B. always move in the same direction but not necessarily by the same amount.
C. move randomly and independently of each other.
D. always move in opposite directions but not necessarily by the same amount.
E. always move in opposite directions by the same amount.
A. always move in the same direction by the same amount.
B. always move in the same direction but not necessarily by the same amount.
C. move randomly and independently of each other.
D. always move in opposite directions but not necessarily by the same amount.
E. always move in opposite directions by the same amount.
Answer:
Which one of the following statements is correct based on the historical returns for the period 1926-2012?
A. For the period, Treasury bills yielded a higher rate of return than long-term government bonds.
B. The inflation rate exceeded the rate of return on Treasury bills during some years.
C. Small-company stocks outperformed large-company stocks every year during the period.
D. Bond prices, in general, were more volatile than stock prices.
E. For the period, large-company stocks outperformed small-company stocks.
A. For the period, Treasury bills yielded a higher rate of return than long-term government bonds.
B. The inflation rate exceeded the rate of return on Treasury bills during some years.
C. Small-company stocks outperformed large-company stocks every year during the period.
D. Bond prices, in general, were more volatile than stock prices.
E. For the period, large-company stocks outperformed small-company stocks.
Answer:
A fund that is basically an index fund that trades like a closed-end fund is called a(n):
A. open-end fund.
B. money market fund.
C. exchange-traded fund.
D. mutual fund.
E. depository receipt.
A. open-end fund.
B. money market fund.
C. exchange-traded fund.
D. mutual fund.
E. depository receipt.
Answer:
Which one of the following combinations will tend to produce the highest rate of return according to the Fama-French three-factor model? Assume beta is constant in all cases.
A. large market capitalization and high book-to-market ratio
B. large market capitalization and low book-to-market ratio
C. small market capitalization and high book-to-market ratio
D. small market capitalization and a book-to-market ratio of 1.0
E. small market capitalization and a low book-to-market ratio
A. large market capitalization and high book-to-market ratio
B. large market capitalization and low book-to-market ratio
C. small market capitalization and high book-to-market ratio
D. small market capitalization and a book-to-market ratio of 1.0
E. small market capitalization and a low book-to-market ratio
Answer:
The document that must be prepared in order to receive approval for a stock offering is called a:
A. tombstone.
B. prospectus.
C. offering agreement.
D. regulatory report.
E. offering paper.
A. tombstone.
B. prospectus.
C. offering agreement.
D. regulatory report.
E. offering paper.
Answer:
Which one of the following is another name for a junk bond?
A. high-yield
B. convertible
C. private placement
D. subordinated
E. called
A. high-yield
B. convertible
C. private placement
D. subordinated
E. called
Answer: