If a trader holding a long position in corn futures fails to meet the obligations of a
futures contract, the party that is hurt by the failure is
A.the offsetting short trader.
B. the corn farmer.
C. the clearinghouse.
D. the broker.
E. the commodities dealer.
Advantage(s) of the APT is(are)
A. that the model provides specific guidance concerning the determination of the risk
premiums on the factor portfolios.
B. that the model does not require a specific benchmark market portfolio.
C. that risk need not be considered.
D. that the model provides specific guidance concerning the determination of the risk
premiums on the factor portfolios, and that the model does not require a specific
benchmark market portfolio.
E. that the model does not require a specific benchmark market portfolio, and that risk
need not be considered.
The financial statements of Black Barn Company are given below.
Note: The common shares are trading in the stock market for $40 each.
Refer to the financial statements of Black Barn Company. The firm’s return on equity
ratio for 2009 is
A. 16.88%.
B. 15.63%.
C. 14.00%.
D. 15.00%.
E. 16.24%.
Benchmark risk is defined as
A. the return difference between the portfolio and the benchmark.
B. the standard deviation of the return of the benchmark portfolio.
C.the standard deviation of the return difference between the portfolio and the
benchmark.
D. the standard deviation of the return of the actively-managed portfolio.
Ferris Corp. wants to increase its current ratio from the present level of 1.5 when it
closes the books next week. The action of __________ will have the desired effect.
A. payment of current payables from cash
B. sales of current marketable securities for cash
C. write-down of impaired assets
D. delay of next payroll
E. None of the options are correct.
The industry with the highest ROE in 2015-2016 was
A.-major airlines.
B. trucking.
C. business software.
D. computer systems.
E. integrated oil and gas.
Like mutual funds, hedge funds
A. allow private investors to pool assets to be managed by a fund manager.
B. are commonly organized as private partnerships.
C. are subject to extensive SEC regulations.
D. are typically only open to wealthy or institutional investors.
E. are commonly organized as private partnerships and are typically only open to
wealthy or institutional investors.
Assume you sell short 1,000 shares of common stock at $35 per share, with initial
margin at 50%. What would be your rate of return if you repurchase the stock at $25 per
share? The stock paid no dividends during the period, and you did not remove any
money from the account before making the offsetting transaction.
A. 20.47%
B. 25.63%
C. 57.14%
D. 77.23%
Which of the following characteristics apply to unit investment trusts? I) Most are
invested in fixed-income portfolios.
II) They are actively-managed portfolios.
III) The sponsor pools securities, then sells public shares in the trust.
IV) The portfolio is fixed for the life of the fund.
A. I and IV
B. I and II
C. I, III, and IV
D. I, II, and III
E. I, II, III, and IV
When computing yield to maturity, the implicit reinvestment assumption is that the
interest payments are reinvested at the
A. coupon rate.
B. current yield.
C. yield to maturity at the time of the investment.
D. prevailing yield to maturity at the time interest payments are received.
E. the average yield to maturity throughout the investment period.
Over the past year, you earned a nominal rate of interest of 8% on your money. The
inflation rate was 4% over
the same period. The exact actual growth rate of your purchasing power was
A. 15.5%.
B. 10.0%.
C. 3.8%.
D. 4.8%.
E. 15.0%.
Single men trade far more often than women. This is due to greater ________ among
men.
A. framing
B. regret avoidance
C. overconfidence
D. conservatism
SI International had a FCFE of $122.1M last year and has 12.43M shares outstanding.
SI’s required return on equity is 11.3%, and WACC is 9.8%. If FCFE is expected to
grow at 7.0% forever, the intrinsic value of SI’s shares is
A. $108.00.
B. $68.29.
C. $244.43.
D. $14.76.
According to Michael Porter, there are five determinants of competition. An example of
_____ is when a buyer purchases a large fraction of an industry’s output and can
demand price concessions.
A. threat of entry
B. rivalry between existing competitors
C. pressure from substitute products
D.-bargaining power of buyers
E. bargaining power of suppliers
Industrial production refers to
A. the amount of personal disposable income in the economy.
B. the difference between government spending and government revenues.
C.-the total manufacturing output in the economy.
D. the total production of goods and services in the economy.
Skewness is a measure of
A. how fat the tails of a distribution are.
B. the downside risk of a distribution.
C. the symmetry of a distribution.
D. the dividend yield of the distribution.
E. None of the options are correct.
The percentage change in the stock call-option price divided by the percentage change
in the stock price is called
A. the elasticity of the option.
B. the delta of the option.
C. the theta of the option.
D. the gamma of the option.
The stock market exhibiting the highest U.S. dollar return in 2015 was
A.-Japan.
B. Singapore.
C. Greece.
D. South Korea.
E. China.
The holding-period return (HPR) on a share of stock is equal to
A. the capital gain yield during the period plus the inflation rate.
B. the capital gain yield during the period plus the dividend yield.
C. the current yield plus the dividend yield.
D. the dividend yield plus the risk premium.
E. the change in stock price.
You invest $100 in a risky asset with an expected rate of return of 0.12 and a standard
deviation of 0.15 and a
T-bill with a rate of return of 0.05.
What percentages of your money must be invested in the risk-free asset and the risky
asset, respectively, to
form a portfolio with a standard deviation of 0.06?
A. 30% and 70%
B. 50% and 50%
C. 60% and 40%
D. 40% and 60%
E. Cannot be determined.
Barber and Odean (2001) report that women trade __________ frequently than men.
A. less
B. less in down markets
C. more in up markets
D. more
Fiscal policy generally has a _______ direct impact than monetary policy on the
economy, and the formulation and implementation of fiscal policy is ______ than that
of monetary policy.
A. more; quicker
B.-more; slower
C. less; quicker
D. less; slower
E. Cannot tell from the information given
If interest rates decrease, business investment expenditures are likely to ______, and
consumer durable expenditures are likely to _________.
A.-increase; increase
B. increase; decrease
C. decrease; increase
D. decrease; decrease
E. be unaffected; be unaffected
A firm has a return on equity of 14% and a dividend-payout ratio of 60%. The firm’s
anticipated growth rate is
A. 5.6%.
B. 10%.
C. 14%.
D. 20%.
You purchased a futures contract on oats at a futures price of 233.75, and at the time of
expiration, the price was 261.25. What was your profit or loss?
A. $1375.00
B. –$1375.00
C. –$27.50
D. $27.50
If arbitrage opportunities are to be ruled out, each well-diversified portfolio’s expected
excess return must be
A. inversely proportional to the risk-free rate.
B. inversely proportional to its standard deviation.
C. proportional to its weight in the market portfolio.
D. proportional to its standard deviation.
E. proportional to its beta coefficient.
A two-asset portfolio with a standard deviation of zero can be formed when
A. the assets have a correlation coefficient less than zero.
B. the assets have a correlation coefficient equal to zero.
C. the assets have a correlation coefficient greater than zero.
D. the assets have a correlation coefficient equal to one.
E. the assets have a correlation coefficient equal to negative one.
Market risk is also referred to as
A. systematic risk or diversifiable risk.
B. systematic risk or nondiversifiable risk.
C. unique risk or nondiversifiable risk.
D. unique risk or diversifiable risk.
The weak form of the efficient-market hypothesis asserts that
A. stock prices do not rapidly adjust to new information contained in past prices or past
data.
B. future changes in stock prices cannot be predicted from past prices.
C. technicians cannot expect to outperform the market.
D. stock prices do not rapidly adjust to new information contained in past prices or past
data, and future changes in stock prices cannot be predicted from past prices.
E. future changes in stock prices cannot be predicted from past prices, and technicians
cannot expect to outperform the market.
Deposits of commercial banks at the Federal Reserve Bank are called
A. bankers’acceptances.
B. repurchase agreements.
C. time deposits.
D. federal funds.
E. reserve requirements.