1) Exhibit 5.6
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Refer to Exhibit 5.6. Calculate a value weighted average for Day T + 1. Assume a base
index value of 100 on Day T.
a.46.20
b.53.33
c.54.12
d.92.39
e.108.23
2) A Long futures positions in the S&P500 has the effect of ____ portfolio exposure to
equities, while short futures positions in the S&P500 has the effect of ____ portfolio
exposure to equities.
a. Increasing, decreasing.
b. Decreasing, increasing,
c. Increasing, increasing.
d. Decreasing, decreasing.
e. None of the above.
3)
Refer to Exhibit 7.2. What is the expected return of a portfolio of two risky assets if the
expected return E(Ri), standard deviation (si), covariance (COVi,j), and asset weight
(Wi) are as shown above?
a. 18.64%
b. 20.0%
c. 22.5%
d. 13.65%
e. 11%
4) To a technician that believed in the importance of volume, a bullish signal would
occur when
a. Prices increase on light volume.
b. Prices decrease on light volume.
c. Prices increase on heavy volume.
d. Prices decrease on heavy volume.
e. None of the above.
5) Exhibit 22.4
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the following information on put and call options for Citigroup
Calculate the payoffs of a long strap at a stock price at expiration of $20 and a stock
price at expiration of $45.
a. $6.35, $18.85
b. $29.65, $42.15
c. $21.65, $34.15
d. $8, $8
e. -$8, -$8
6) When forecasting industry sales it can be useful to
a. Utilize the industry life cycle.
b. Use input-output analysis.
c. Use the relationship between an industry and the aggregate economy.
d. All of the above.
e. None of the above.
7) ABC Co. has paid annual dividends in the past five years of $.20, $.25, $.28, $.33,
and $.36. Calculate the average growth rate of its dividends.
a. 1.16%
b. 1.80%
c. 12.47%
d. 15.83%
e. None of the above
8) Bailey, Richards, and Tierney maintain that any useful benchmark should have the
following characteristics:
a. Measurable.
b. Investable.
c. Value-weighted.
d. a and b.
e. a, b and c.
9) A growth company can invest in projects that generate a return greater than the firm’s
a. Return on equity.
b. Cost of debt.
c. Cost of equity.
d. Cost of capital.
e. Return on assets.
10) Convertible bonds are bonds
a.That are convertible into more bonds.
b.That are convertible from unsecured to secured status.
c.That are convertible into company stock.
d.That are convertible into specific assets.
e.That have an option attached.
11) Exhibit 6.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Rit= return for stock i during period t
Rmt= return for the aggregate market during period t
Refer to Exhibit 6.5. What is the abnormal rate of return for Stock Z during period t
using only the aggregate market return (ignore differential systematic risk)?
a.1.80
b.1.40
c.-1.80
d.-4.80
e.-8.80
12) All of the following are assumptions of the Capital Asset Pricing Model (CAPM)
except
a. Investors can borrow and lend any amount at the risk-free rate.
b. Investors all have homogeneous expectations regarding expected returns.
c. Investors can have different time horizons, daily, weekly, annual, or some other
period.
d. All investments are infinitely divisible.
e. Capital markets are in equilibrium.
13) According to contrary opinion technicians, the ratio of mutual funds cash to total
assets ____ near troughs in the market cycle and ____ near peaks.
a.
b. Remains low, remains high
c. Is published near, is not published
d. Increases, decreases
e. Decreases, increases
14) Convertible arbitrage hedge funds profit from disparities in the relationship between
prices for convertible bonds and fixed-income bonds.
15) A forward contract gives its holder the option to conduct a transaction involving
another security or commodity.
16) A high put/call ratio indicates a pervasive bearish attitude by sophisticated investors
so it is a bearish indicator.
17) The constant growth dividend growth model is not appropriate for the valuation of
growth companies.
18) If you borrow money at the RFR and invest the money in the market portfolio, the
rate of return on your portfolio will be higher than the market rate of return.
19) Growth stocks consistently outperform value stocks.