1) the spot price for gold is $1,550 per ounce. the dividend yield on the s&p 500 is
2.5%. the risk-free interest rate is 3.5%. the futures price for gold for a 6-month contract
on gold should be __________.
a.$1,504.99
b.$1,569.08
c.$1,554.04
d.$1,557.73
2) which of the following mortgage scenarios will benefit the homeowner the most?
a.adjustable rate mortgage when interest rate increases.
b.fixed rate mortgage when interest rates falls.
c.fixed rate mortgage when interest rate rises.
d.none of these options, as the banker’s interest will always be protected.
3) your investment has a 20% chance of earning a 30% rate of return, a 50% chance of
earning a 10% rate of return, and a 30% chance of losing 6%. what is your expected
return on this investment?
a.12.8%
b.11%
c.8.9%
d.9.2%
4) the time value of a call option is likely to decline most rapidly ________ days before
expiration?
a.10
b.30
c.60
d.90
5) a firm that has an roe of 12% is considering cutting its dividend payout. the
stockholders of the firm desire a dividend yield of 4% and a capital gain yield of 9%.
given this information, which of the following statements is (are) correct?
i. all else equal, the firm’s growth rate will accelerate after the payout change.
ii. all else equal, the firm’s stock price will go up after the payout change.
iii. all else equal, the firm’s p/e ratio will increase after the payout change.
a.i only
b.i and ii only
c.ii and iii only
d.i, ii, and iii
6) grott and perrin, inc., has expected earnings of $3 per share for next year. the firm’s
roe is 20%, and its earnings retention ratio is 70%. if the firm’s market capitalization
rate is 15%, what is the present value of its growth opportunities?
a.$20
b.$70
c.$90
d.$115
7) eagle brand arrowheads has expected earnings of $1.25 per share and a market
capitalization rate of 12%. earnings are expected to grow at 5% per year indefinitely.
the firm has a 40% plowback ratio. by how much does the firm’s roe exceed the market
capitalization rate?
a..5%
b.1%
c.1.5%
d.2%
8) which model is preferred by academics, and is gaining in popularity with
practitioners, when evaluating investment performance?
a.the treynor-black model
b.the single-index model
c.the fama-french three-factor model
d.the sharpe model
9) assume that you have invested $500,000 to purchase shares in a hedge fund reporting
$800 million in assets, $100 million in liabilities, and 70 million shares outstanding.
your initial lockout period is 3 years.
what is your annualized return over the 3-year holding period?
a.14.45%
b.15.18%
c.16%
d.17.73%
10) go global investment management has an asset allocation strategy of 60% u.s.
investments and 40% global investments. within the united states, go global has
allocated 70% of its portfolio to equities and 30% to bonds. go global now holds 3% of
its u.s. equity portfolio in the stock of wally world. internationally, go global has
allocated 55% to equities and 45% to bonds. about what percentage of go global’s total
portfolio is invested in wally world?
a.1%
b.1.26%
c.1.5%
d.1.77%
11) the social security primary insurance amount formula favors ______.
a.older workers
b.high-income workers
c.younger workers
d.low-income workers
12) a callable bond pays annual interest of $60, has a par value of $1,000, matures in 20
years but is callable in 10 years at a price of $1,100, and has a value today of $1055.84.
the yield to call on this bond is _________.
a.6%
b.6.58%
c.7.2%
d.8%