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1) Open-end mutual funds that charge a sales fee when the fund is initially offered to
the investor are known as
a. 12b-1.
b. Americus trusts.
c. Unit investment trusts.
d. Load funds.
e. Contingency funds.
2) Consider an asset that has a beta of 1.5. The return on the risk-free asset is 6.5% and
the expected return on the stock index is 15%. The estimated return on the asset is 20%.
Calculate the alpha for the asset.
a. 19.25%
b. 0.75%
c. -0.75%
d. 9.75%
e. 9.0%
3) What is the expected return of the three stock portfolio described below?
a. 12.04%
b. 12.83%
c. 13.07%
d. 15.89%
e. 17.91%
4) A money market fund would be likely to invest in a portfolio containing all of the
following except
a. Commercial paper.
b. Banker's acceptances.
c. U.S. Treasury bills.
d. Bank certificates of deposit.
e. U.S. Treasury notes.
5) Exhibit 11.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A major manufacturer is reevaluating its bonds since it is planning to issue a new bond
in the current market. The firm's outstanding bond issue has 7 years remaining till
maturity. The bonds were issued with an 8 percent coupon rate (paid quarterly) and a
par value of $1,000. The required rate of return is 10 percent.
What is the current value of these securities?
a. $900.18
b. $1151.92
c. $972.52
d. $1113.63
e. $904.00
6) Exhibit 25.9
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the following information for four portfolios, the market and the risk free rate
(RFR):
Calculate the Jensen alpha Measure for each portfolio.
a. A1 = 0.014, A2 = - 0.002, A3 = 0.002, A4 = - 0.02
b. A1 = 0.002, A2 = - 0.02, A3 = 0.002, A4 = - 0.014
c. A1 = 0.02, A2 = - 0.002, A3 = 0.002, A4 = - 0.014
d. A1 = 0.02, A2 = - 0.002, A3 = 0.02, A4 = - 0.14
e. None of the above
7) Which of the following is not an advantage of technical analysis identified by
technicians?
a. Fundamental analysis depends heavily on financial accounting statements.
b. The majority of investors cannot consistently process new information correctly.
c. Fundamental analysis may not time the investment properly when trading under- or
over-valued securities.
d. The majority of investors cannot process new information quickly enough.
e. All of the above are advantages identified by technicians.
8) Exhibit 14.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Harcourt Industries currently has an 18% annual growth rate while the market average
is 8 percent. The market multiple is 12.
Determine the P/E ratio for Harcourt Industries assuming Harcourt can maintain its
superior growth rate for the next 3 years.
a. 4.25
b. 12.50
c. 15.67
d. 30.10
e. 42.80
9) A 7.0 percent coupon bond issued by the State of Tennessee sells for $1,000. What
coupon rate on a corporate bond selling at $1,000 par value would produce the same
after tax return to the investor as the municipal bond if the investor is in the 29 percent
marginal tax bracket?
a. 7.59%
b. 12.25%
c. 9.86%
d. 14.63%
e. 30.71%
10) Exhibit 23.6
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
BioTech Industries has debentures outstanding (par value $1,000) convertible into the
company's common stock at $30. The coupon rate is 11 percent payable semiannually
and they mature in 10 years.
At present, what would be the minimum value of the bond?
a. $600.00
b. $796.83
c. $889.82
d. $900.00
e. $1000.00
11) What would the equivalent taxable yield be on an investment that offers a 6 percent
tax exempt yield? Assume a marginal tax rate of 28%.
a.0.125%
b.7.20%
c.6.48%
d.8.33%
e.32.14%
12) Which of the following ratios is the most commonly used ratio for predicting the
performance of a growth company?
a.PE ratio
b.PG ratio
c.PEG ratio
d.MV/BV ratio
e.BV/MV ratio
13) Which portfolio measurement uses the mean excess return in the numerator divided
by the amount of residual risk that the investor incurred in pursuit of those excess
returns?
a. Jensen measure.
b. Fama measure.
c. Sharpe measure.
d. Treynor ratio.
e. Information ratio.
