Which of the following would not be considered a capital market security?
a. a 20-year corporate bond
b. a common stock
c. a 6-month Treasury bill
d. a mutual fund share
The following information is to be used to answer questions
SD_ Beta alpha R 2
_
Fund 1 1.97 1.0 1.3 0.95
Fund 2 2.94 0.8 0.6* 0.80
Fund 3 3.82 1.2 -3.5 0.90
Fund 4 4.70 1.4 4.2 0.65
*Significant at the 5 percent level
Which of these funds had the highest performance as determined by Jensen’s
performance measure?
a. Fund 1
b. Fund 2
c. Fund 3
d. Fund 4
Other things equal, after an option first becomes available in the market,
a. its time value approaches zero.
b. its time value increases into maturity.
c. the volatility of the stock is negatively related to the value of the call.
d. if it is out of the money, it will have no time value.
Which statement about the quality of reported EPS is FALSE?
a. Earnings quality assessments are difficult to make and require considerable expertise
in accounting and financial analysis.
b. Reported EPS is not the precise figure that it first appears to be.
c. It is necessary to make adjustments to reported EPS figures when
making cross-sectional comparisons.
d. Quality of earnings is generally consistent among companies in the same
industry.
The NYSE is:
a. a free agent market.
b. an agency auction market.
c. a negotiated market.
d. a dealer market.
Which of the following is not a characteristic of investments companies?
a. pooled investing
b. diversification
c. managed portfolios
d. reduced expenses
If NAV > market price of a fund, then the fund:
a. is selling at a discount.
b. is selling at a premium.
c. is an index fund.
d. is an ETF.
How is the value of a bond determined?
a) The present value of the bond’s future cash flows is discounted by one or more
appropriate rate(s).
b) The perpetuity model is used to determine the value of a bond.
c) The present value of the company’s future cash flows is discounted by one or more
appropriate rate(s).
d) The constant growth dividend model is often used to value bonds.
As the dollar falls,
a. foreign investors owning U.S. stocks suffer.
b. U.S. investors owning U.S. stocks suffer.
c. U.S. investors owning foreign stocks suffer.
d. foreign investors owning foreign stocks suffer.
With a continuous probability distribution,:
a. a probability is assigned to each possible outcome.
b. possible outcomes are constantly changing.
c. an infinite number of possible outcomes exist.
d. there is no variance.
Savings accounts are ———- but are not————.
a. negotiable; liquid.
b. marketable; liquid.
c. liquid; personal
d. liquid; marketable
A major advantage of bond index funds is their:
a. higher performance than regular bond funds.
b. ability to shelter income from taxes.
c. relatively low expense ratios.
d. all of the above are true.
Portfolios lying on the upper right portion of the efficient frontier are likely to be
chosen by
a. aggressive investors
b. conservative investors
c. risk-averse investors
d. defensive investors
Indifference curves reflect ————– while the efficient set of portfolios represent
—————.
a. portfolio possibilities; investor preferences.
b. investor preferences; portfolio possibilities.
c. portfolio return; investor risk.
d. investor preferences; portfolio return.
According to the random walk hypothesis, price(s)
a. over time are independent of one another.
b. changes over time are independent.
c. levels over time are independent.
d. changes today are dependent on yesterday’s price changes.
Gross Domestic Product (GDP) is a basic measure of the economy, and is defined as the
market value of what items produced by an economy for some time period (typically a
year)?
a. final goods.
b. final goods and services.
c. final goods, services, and labor.
d. final goods, services, labor, and capital.
What happens to the price of bonds, if interest rates go up?
a) The price of bonds goes up.
b) The price of bonds stays the same.
c) The price of bonds goes down.
d) The relationship between interest rates and bond prices cannot be determined.
Which of the following is a problem using the dividend discount model to value
common stock?
a. The model does not account for the risk of the stock.
b. The model does not consider the present value of the dividends.
c. The model does not consider that dividends may not be paid
d. The model does not account for small dividends.
The first step to establishing an investment policy is to state the
a. minimum investment and maximum fees.
b. SEC guidelines for prudent man investing.
c. objectives and constraints and preferences.
d. asset allocation parameters and time horizons.
Earnings derived under GAAP and shown on the income statement are known as:
a. reported earnings.
b. certified earnings.
c. audited earnings.
d. verified earnings.
A Chartered Financial Analyst designation is a (an)
a. SEC-approved and awarded designation.
b. certification of a successful investing record.
c. professional designation awarded for meeting recognized standards of conduct and
competency.
d. professional designation awarded by the brokerage industry.
Which of the following is not a component of GDP?
a. business investment spending.
b. government “investment” (really spending).
c. net exports.
d. financial transactions.
Which of the following is a situation in which an investor will NOT receive the
promised yield to maturity?
a) The investor holds the bond until maturity, and reinvests coupon payment at the
original yield to maturity.
b) Interest rates do not change during the life of the bond.
c) The issuer calls the bond prior to original maturity.
d) The realized compound yield is equal to the promised yield to maturity.
A sell stop order is placed:
a. above the current price.
b. below the current price.
c. at the current price.
d. at the breakeven point.
Fixed assets generally consist of?
a. Cash and marketable securities
b. Property, plant and equipment, at cost
c. Intangible assets, like goodwill
d. Shareholders’ Equity
What are the two components of interest-rate risk? How do they work to immunize a
portfolio?
What is insider trading? Does it only affect large investors?
How is EPS computed? After-tax net income divided by
current common shares outstanding.previous years common shares outstanding.treasury
shares outstanding.average common shares outstanding.
New financial disclosure regulations affecting the brokerage industry are a type of:
market riskfinancial riskbusiness riskliquidity risk
The rate spreads between the different money market securities of the same term tend to
be quite large.
Compare and contrast the passive strategies of buy-and-hold and buying index funds.
A stock investor wants to hedge the Microsoft stock in his portfolio. How can he use a
protective put to do this?