1) the capital asset pricing model was developed by _________.
a.kenneth french
b.stephen ross
c.william sharpe
d.eugene fama
2) why are high rates of unemployment of concern to economists?
a.higher rates of unemployment are linked to higher crime rates and other social
problems.
b.a larger fraction of the nation’s labor resource is going unutilized.
c.there is lost output that could have been produced if the unemployed had been
working.
d.all of the above are reasons why economists are concerned about high unemployment
rates.
3) supply-side economics tends to focus on _______________.
a.government spending
b.price controls
c.monetary policy
d.increasing productive capacity
4) all other things equal, a bond’s duration is _________.
a.higher when the yield to maturity is higher
b.lower when the yield to maturity is higher
c.the same at all yield rates
d.indeterminable when the yield to maturity is high
5) when computing the bank discount yield, you would use ____ days in the year.
a.260
b.360
c.365
d.366
6) suppose a u.s. investor wants to invest in a british firm currently selling for 50 per
share. the investor has $7,000 to invest, and the current exchange rate is $1.40/.
after 1 year, the exchange rate is unchanged and the share price is 55. what is the
dollar-denominated return?
a.14%
b.10%
c.9.3%
d.7.1%
7) in calculating the dow jones industrial average, the adjustment for a stock split
occurs _________.
a.automatically
b.by adjusting the divisor
c.by adjusting the numerator
d.by adjusting the market value weights
8) short interest is a ______ indicator.
a.sentiment
b.flow of funds
c.market structure
d.fundamental
9)
refer to the figure above. assuming this market is representative of the economy as a
whole, a negative demand shock will:
a.cause inflation.
b.increase unemployment.
c.lower prices, but leave output unaffected.
d. reduce both prices and output.
10) all other things equal (ytm = 10%), which of the following has the longest duration?
a.a 30-year bond with a 10% coupon
b.a 20-year bond with a 9% coupon
c.a 20-year bond with a 7% coupon
d.a 10-year zero-coupon bond
11) you decide to purchase an equal number of shares of stocks of firms to create a
portfolio. if you wanted to construct an index to track your portfolio performance, your
best match for your portfolio would be to construct ______.
a.a value-weighted index
b.an equally weighted index
c.a price-weighted index
d.a bond price index
12) an investor can design a risky portfolio based on two stocks, a and b. stock a has an
expected return of 18% and a standard deviation of return of 20%. stock b has an
expected return of 14% and a standard deviation of return of 5%. the correlation
coefficient between the returns of a and b is .50. the risk-free rate of return is 10%. the
standard deviation of return on the optimal risky portfolio is _________.
a.0%
b.5%
c.7%
d.20%
13) suppose a u.s. investor wants to invest in a british firm currently selling for 50 per
share. the investor has $7,000 to invest, and the current exchange rate is $1.40/.
after 1 year, the exchange rate is unchanged and the share price is 55. what is the
pound-denominated return?
a.14%
b.10%
c.9.3%
d.7.1%
14) rank the following from highest average historical standard deviation to lowest
average historical standard deviation from 1926 to 2010.
i. small stocks
ii. long-term bonds
iii. large stocks
iv. t-bills
a.i, ii, iii, iv
b.iii, iv, ii, i
c.i, iii, ii, iv
d.iii, i, ii, iv
15) the ratio of the purchasing power of two economies is termed the _______.
a.balance of trade
b.real exchange rate
c.real interest rate
d.nominal exchange rate
16) if the prices of all goods and services rose, but the quantity produced remained
unchanged, what would happen to nominal and real gdp?
a.nominal and real gdp would both rise.
b.nominal and real gdp would both be unchanged.
c.real gdp would rise, but nominal gdp would be unchanged.
17) the tax burden of the firm is .4, the interest burden is .65, the return on sales is .05,
the asset turnover is .90, and the leverage ratio is 1.35. what is the roe of the firm?
a.1.58%
b.5.68%
c.12.2%
d.13.33%