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1) Which of the following is a market tenet of Warren Buffett?
a. Long term prospects.
b. Resistance to institutional imperative.
c. Creation of one dollar of market value for every dollar retained.
d. Purchase at discount to intrinsic value.
e. Product is not faddish
2) Assume that you have purchased a call option with a strike price $60 for $5. At the
same time you purchase a put option on the same stock with a strike price of $60 for $4.
If the stock is currently selling for $75 per share, calculate the dollar return on this
option strategy.
a. $10
b. -$4
c. $5
d. $6
e. $15
3) Exhibit 10.9
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
You are provided with the following year end information for All Systems Corporation.
Calculate the total asset turnover ratio for the firm.
a. 0.76
b. 1.31
c. 1.64
d. 2.81
e. 3.24
4) A U.S. dollar-denominated bond sold in the United States by a Japanese-firm is
called a(n):
a. Yankee bond.
b. Homeland bond.
c. International bond.
d. U.S. Domestic bond.
e. Japanese U.S. Regional bond.
5) Research from the 1970s to the 1990s found that over 90 percent of a fund's returns
over time is explained by:
a.Market timing
b.Stock selection
c.Manager selection
d.Asset allocation
e.All of the above
6) Exhibit 10.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
What was Star's current ratio at year-end 2004?
a. 1.59
b. 1.00
c. 0.82
d. 0.74
e. 0.33
7) Exhibit 2.1
USE THE TAX TABLE PROVIDED BELOW FOR THE FOLLOWING
PROBLEM(S)
Refer to Exhibit 2.1. What is the average tax for a single individual with taxable income
of $85,000?
a.13.57%
b.15.68%
c.21.68%
d.25.74%
e.29.55%
8) What is the expected return of the three stock portfolio described below?
a. 18.45%
b. 12.82%
c. 13.38%
d. 15.27%
e. 16.67%
9) The most important criteria when adding new investments to a portfolio is the
a. Expected return of the new investment.
b. Standard deviation of the new investment.
c. Correlation of the new investment with the portfolio.
d. Both a and b
e. All of the above are equally important
10) In the evaluation of bond portfolio performance, the interest rate anticipation effect
refers to
a. The difference in portfolio duration and index duration.
b. The extra return attributable to acquiring bonds that are temporarily mispriced
relative to risk.
c. Short-run changes in the portfolio during a specific period.
d. The differential return from changing duration of the portfolio during a specific
period.
e. None of the above
11) The opportunity to take advantage of the downward pressure on stock prices that
result from end-of-the-year tax selling is known as
a.The End-of-the-Year Effect.
b.The December Anomaly.
c.The End-of-the-Year Anomaly.
d.The January Anomaly.
e.The New Years Anomaly.
12) Exhibit 20.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Sarah Kling bought a 6-month Peppy Cola put option with an exercise price of $55 for
a premium of $8.25 when Peppy was selling for $48.00 per share.
What is Sarah's annualized gain/loss?
a. 11.51% gain
b. 115.15% gain
c. 11.51% loss
d. 115.15% loss
e. None of the above
13) Consumer staples tend to outperform other industries the most at the peak of a
business cycle.
14) An investor should be cautious when selecting a fund based solely on the manager's
past performance, since past performance may not be repeated in the future.
15) The market price of shares of a closed-end fund is typically determined by supply
and demand.
16) There are no composite series currently available that will measure the performance
of all securities (i.e. stocks and bonds) in a given country.
17) Traditional cash flow and Free cash flow are equivalent concepts.
18) Even when fees and costs are considered most mutual fund managers outperform
the aggregate market.
19) A firm's competitive strategy can be either defensive or offensive.
20) Inventory turnover, net fixed asst turnover and equity turnover are measures of
operating efficiency.
21) Open-end and closed-end investment companies are similar in that both companies
will repurchase shares on demand.
22) The information ratio permits only relative assessments of performance for different
portfolios in a style class.
