1) conservative investors are likely to want to invest in __________ mutual funds,
while risk-tolerant investors are likely to want to invest in __________.
a.income; high growth
b.income; moderate growth
c.moderate-growth; high growth
d.high-growth; moderate growth
2) which one of the following would be considered a risk-free asset in real terms as
opposed to nominal?
a.money market fund
b.u.s. t-bill
c.short-term corporate bonds
d.u.s. t-bill whose return was indexed to inflation
3) evidence suggests that there may be _______ momentum and ________ reversal
patterns in stock price behavior.
a.short-run; short-run
b.long-run; long-run
c.long-run; short-run
d.short-run; long run
4) an industry analysis for manufacturers of a small personal care gadget observed the
following characteristics:
1. industry sales have grown at 15%-20% per year in recent years and are expected to
grow at 10%-15% per year over the next 3 years, still well above the economic growth
rate.
2. some u.s. manufacturers are attempting to enter fast-growing non-u.s. markets, which
remain largely unexploited.
3. some manufacturers have created a new niche in the industry by selling directly to
customers through mail order. sales for this industry segment are growing at 40% per
year.
4. the current penetration rate in the united states is 60% of households and will be
difficult to increase.
5. manufacturers compete fiercely on the basis of price, and price wars within the
industry are common.
6. some manufacturers are able to develop new, unexploited niche markets in the united
states based on company reputation, quality, and service.
7. several manufacturers have recently merged, and it is expected that consolidation in
the industry will increase.
8. new manufacturers continue to enter the market.
characteristics 4 and 5 would indicate that the industry is in the _________ stage.
a.start-up
b.consolidation
c.maturity
d.relative decline
5) the financial statements of burnaby mountain trading company are shown below.
note: the common shares are trading in the stock market for $27 each.
refer to the financial statements of burnaby mountain trading company. the firm’s
market-to-book value for 2012 is _________.
a..1708
b..1529
c..1462
d..1636
6) investing in two assets with a correlation coefficient of -.5 will reduce what kind of
risk?
a.market risk
b.nondiversifiable risk
c.systematic risk
d.unique risk
7) an industry analysis for manufacturers of a small personal care gadget observed the
following characteristics:
1. industry sales have grown at 15%-20% per year in recent years and are expected to
grow at 10%-15% per year over the next 3 years, still well above the economic growth
rate.
2. some u.s. manufacturers are attempting to enter fast-growing non-u.s. markets, which
remain largely unexploited.
3. some manufacturers have created a new niche in the industry by selling directly to
customers through mail order. sales for this industry segment are growing at 40% per
year.
4. the current penetration rate in the united states is 60% of households and will be
difficult to increase.
5. manufacturers compete fiercely on the basis of price, and price wars within the
industry are common.
6. some manufacturers are able to develop new, unexploited niche markets in the united
states based on company reputation, quality, and service.
7. several manufacturers have recently merged, and it is expected that consolidation in
the industry will increase.
8. new manufacturers continue to enter the market.
which of the characteristics would be typical of an industry that is in the maturity stage?
a.1, 2, and 3
b.4 and 5
c.6, 7, and 8
d.all of these options
8) todd mountain development corporation is expected to pay a dividend of $3 in the
upcoming year. dividends are expected to grow at the rate of 8% per year. the risk-free
rate of return is 5%, and the expected return on the market portfolio is 17%. the stock of
todd mountain development corporation has a beta of .75. using the constant-growth
ddm, the intrinsic value of the stock is _________.
a.4
b.17.65
c.37.50
d.50
9) you have the following rates of return for a risky portfolio for several recent years.
assume that the stock pays no dividends.
what is the geometric average return for the period?
a.2.87%
b..74%
c.2.6%
d.2.21%
10) an investor in the 34% tax bracket would be indifferent between a corporate bond
with a before-tax yield of 8% and a municipal bond with a yield of _________.
a.3.91%
b.6.15%
c.5.28%
d.10.72%
11) a pension fund must pay out $1 million next year, $2 million the following year, and
then $3 million the year after that. if the discount rate is 8%, what is the duration of this
set of payments?
a.2 years
b.2.15 years
c.2.29 years
d.2.53 years
12) as of 2012, hedge funds had approximately _____ under management.
a.$.5 trillion
b.$1.6 trillion
c.$2 trillion
d.$3.2 trillion
13) which of the following affects a firm’s sensitivity of its earnings to the business
cycle?
i. financial leverage
ii. operating leverage
iii. type of product
a.ii only
b.i and ii only
c.i and iii only
d.i, ii, and iii
14) an 8%, 30-year bond has a yield to maturity of 10% and a modified duration of 8
years. if the market yield drops by 15 basis points, there will be a __________ in the
bond’s price.
a.1.15% decrease
b.1.2% increase
c.1.53% increase
d.2.43% decrease
15) you want to earn a return of 10% on each of two stocks, a and b. each of the stocks
is expected to pay a dividend of $4 in the upcoming year. the expected growth rate of
dividends is 6% for stock a and 5% for stock b. using the constant-growth ddm, the
intrinsic value of stock a _________.
a.will be higher than the intrinsic value of stock b
b.will be the same as the intrinsic value of stock b
c.will be less than the intrinsic value of stock b
d.the answer cannot be determined from the information given.
16) you purchase one ibm july 90 call contract for a premium of $4. the stock has a
2-for-1 split prior to the expiration date. you hold the option until the expiration date,
when ibm stock sells for $48 per share. you will realize a ______ on the investment.
a.$300 profit
b.$100 loss
c.$400 loss
d.$200 profit
17) investors who take short positions in futures contract agree to ___________
delivery of the commodity on the delivery date, and those who take long positions agree
to __________ delivery of the commodity.
a.make; make
b.make; take
c.take; make
d.take; take
18) the market capitalization rate on the stock of aberdeen wholesale company is 10%.
its expected roe is 12%, and its expected eps is $5. if the firm’s plowback ratio is 60%,
its p/e ratio will be _________.
a.7.14
b.14.29
c.16.67
d.22.22
19) use the following cash flow data of haven hardware for the year ended december
31, 2012.
what is the net cash provided by or used in financing activities of haven hardware?
a.-$10,000
b.-$120,000
c.$10,000
d.$120,000
20) a loan for a new car costs the borrower .8% per month. what is the ear?
a..80%
b.6.87%
c.9.6%
d.10.03%