What is the beta of a portfolio which consists of the following?
A. 1.18
B. 1.22
C. 1.23
D. 1.32
E. 1.37
A “block trade” is a trade in excess of how many shares?
A. 1,000
B. 5,000
C. 10,000
D. 50,000
E. 100,000
Which one of the following measures systematic risk?
A. beta
B. alpha
C. variance
D. standard deviation
E. correlation coefficient
The Cruise Ship Co. has taxable income of $4,000,000. The company paid out
$550,000 in interest expense. The tax rate is 35 percent and the dividend payout ratio is
30 percent. What is the amount that was paid out in dividends?
A. $420,000
B. $550,000
C. $682,500
D. $780,000
E. $980,000
Investors who tend to invest too heavily in the securities issued by their employer suffer
from the condition known as:
A. overconfidence.
B. loyalty adherence.
C. status quo.
D. local adhesion.
E. familiarity.
Which of the following are needed to compute the beta of an individual security?
I. average return on the market for the period
II. standard deviation of the security and the market
III. returns on the security and the market for multiple time periods
IV. correlation of the security to the market
A. I and III only
B. I and IV only
C. II and III only
D. II and IV only
E. I, II, and III only
Given a set of variables, the Black-Scholes option pricing formula has a call option
delta of .496. What is the put delta given these same variables?
A. -1.496
B. -.504
C. .504
D. 1.496
E. The answer cannot be determined based on the information provided.
Which one of the following is generally used as the basis for computing the cash flow
per share?
A. operating cash flow
B. investment cash flow
C. financing cash flow
D. net cash increase
E. retained cash earnings
A portfolio has a Jensen’s alpha of 0.82 percent, a beta of 1.40, and a CAPM expected
return of 13.7 percent. The risk-free rate is 2.5 percent. What is the actual return of the
portfolio?
A. 15.5 percent
B. 16.1 percent
C. 16.8 percent
D. 19.6 percent
E. 21.9 percent
Alfonso purchased 600 shares of Crosswinds, Inc., stock on 60% margin when the stock
was selling for $37 a share. The stock is currently selling for $32 a share. What is his
current equity position?
A. $7,680
B. $8,880
C. $9,600
D. $10,320
E. $11,560
A PAC support bond is most similar to which tranche in a sequential CMO?
A. A
B. B
C. C
D. Z
E. A PAC bond cannot be compared to a sequential CMO.
Which metric describes the percentage of a fund’s movement which can be explained by
movements in the market?
A. Jensen’s alpha
B. Information ratio
C. Tracking error
D. R Squared
E. Treynor ratio
Long Life Floors just paid an annual dividend of $0.82 a share and plans on increasing
future dividends by 2 percent annually. The discount rate is 15 percent. What will the
value of this stock be 5 years from today?
A. $6.96
B. $7.04
C. $7.10
D. $7.18
E. $7.25
You have a portfolio which is comprised of 35 percent of stock A and 65 percent of
stock B. What is the standard deviation of this portfolio?
A. 4.39 percent
B. 5.68 percent
C. 6.41 percent
D. 7.14 percent
E. 9.08 percent
You purchased one SPX put option with a strike of 1,400. You wrote one SPX put
option with the same maturity date and a strike of 1,300. At maturity, what is your total
payoff if the S&P 500 index is 1,320?
A. -$8,000
B. -$2,000
C. $2,000
D. $4,000
E. $8,000
A bond that is currently selling for $933.38 has a conversion price of $40.00. If the par
value is $1,000, what is the conversion ratio?
A. 23
B. 24
C. 25
D. 26
E. 27
Which one of the following is correct concerning a head and shoulders top pattern?
A. The outside of the right shoulder is a bullish signal.
B. The shoulders are higher than the head.
C. The left shoulder must be higher than the right shoulder, but lower than the head.
D. A piercing of the neckline is a reversal signal.
E. The trendline must be relatively flat throughout the pattern.
Growth stocks are frequently described as having which one of the following
characteristics?
A. high dividends
B. a value orientation
C. high P/E ratios
D. low cash flows per share
E. low retention ratios
A portfolio is comprised of two stocks. Stock A comprises 65 percent of the portfolio
and has a beta of 1.31. Stock B has a beta of .98. What is the portfolio beta?
A. .98
B. 1.03
C. 1.08
D. 1.19
E. 1.22
In a recent IPO, the Sausage Co. offered 1.4 million shares of stock at an offer price of
$16 a share. The underwriting was conducted on a best efforts basis with a spread of 7.0
percent. The Sausage Co. received a total of $20,079,868.00 in sale proceeds. How
many shares were sold?
A. 1,349,453 shares
B. 1,486,500 shares
C. 1,498,200 shares
D. 1,505,700 shares
E. 1,508,400 shares
Which one of the following features of corporate bonds has the greatest appeal to
pension fund investors?
A. call provision
B. convertible provision
C. zero repayment risk
D. prospectus availability
E. predictable cash flows
Use these option quotes to answer this question:
You own 700 shares of ZZ Industries stock which you purchased for $36.60 a share.
You would like to have the right to sell your shares for $32.50 a share. What will be the
cost to obtain this right?
A. $0.40
B. $0.90
C. $7.00
D. $396.00
E. $900.00
Investors who use the MACD indicator as a signal for trading are most apt to buy a
security when the MACD:
A. equals zero.
B. is equal to 1.0.
C. rises above the signal line.
D. parallels the signal line.
E. falls below the signal line.
If the closing tick of the day is +32, this means that the:
A. DJIA ended the day up 32 basis points.
B. discount rate at the end of the day was 3.20 percent.
C. number of stocks closing on an uptick was 32.
D. number of stocks closing on an uptick exceeded those closing on a downtick by 32.
E. number of stocks closing on an uptick was 32 more than on the prior trading day.
The common stock of Industrial Technologies has an expected return of 12.4 percent.
The market return is 9.2 percent and the risk-free return is 3.87 percent. What is the
stock’s beta?
A. 0.42
B. 1.00
C. 1.32
D. 1.42
E. 1.60
Josh owns 2 call options on Foster Glass stock. The exercise price is $47.50 and the
stock price at expiration is $49.01. What is the total payoff on the option contracts?
A. -$0.00
B. -$3.02
C. $3.02
D. $30.20
E. $302.00
Alaskan Motors has outstanding bonds that mature in 13 years and pay $34.50 every 6
months in interest. The par value is $1,000 per bond and the market value is $990. The
coupon rate is _____ percent, the current yield is _____ percent, and the yield to
maturity is _____ percent.
A. 6.90; 6.57; 6.67
B. 6.90; 6.73; 6.71
C. 6.90; 6.97; 7.02
D. 7.00; 7.37; 7.07
E. 7.00; 7.67; 7.21
Harvest Fields sold ten September futures contracts on oats. Harvest Fields will:
A. pay for the oats in September.
B. take delivery of the oats in September.
C. pay for the oats now and take delivery in September.
D. receive payment now and deliver in September.
E. both receive payment and deliver in September.
Suzette recently purchased 300 shares of Nu Electronics stock for $4.40 a share. Her
broker required a cash payment of $1,320, plus trading costs, for the purchase. What is
the initial margin requirement on this stock?
A. 70 percent
B. 75 percent
C. 80 percent
D. 90 percent
E. 100 percent
O’Hara’s Market has net income of $1.6 million and 525,000 shares of stock
outstanding. What is the amount of the dividends per share if the plowback ratio is 60
percent?
A. $0.94
B. $1.07
C. $1.22
D. $1.67
E. $1.98
Stocks A, B, and C have identical risks. Stock A earns an annual return of 9.9 percent as
compared to 9.6 percent returns on stocks B and C. Given this, you can correctly
assume that:
A. Stock A is overpriced.
B. the market return is 9.75 percent.
C. Stock A represents the smallest-sized firm.
D. Stock A has a positive excess return.
E. Stocks B and C represent firms that are in the process of merging.