1) if you are going to earn abnormal returns based on your macroeconomic analysis, it
will most likely have to be because __________.
a.you have more information than others
b.you are a better analyst than others
c.you have the same information as others
d.you are an equally good analyst as others
2) you have an investment horizon of 6 years. you choose to hold a bond with a
duration of 6 years and continue to match your investment horizon and duration
throughout your holding period. your realized rate of return will be the same as the
promised yield on the bond if:
i. interest rates increase.
ii. interest rates stay the same.
iii. interest rates fall.
a.i only
b.ii only
c.i and ii only
d.i, ii, and iii
3)
based on the cash flow data in the table for interceptors inc., which of the following
statements is (are) correct?
i. this firm appears to be a good investment because of its steady growth in cash.
ii. this firm has been able to generate growing cash flows only by borrowing or selling
equity to offset declining operating cash flows.
iii. financing activities have been increasingly important for this firm’s operations, at
least in the short run.
a.i only
b.ii and iii only
c.ii only
d.i and ii only
4) the elliott wave theory gives a buy signal when you can identify a primary bull trend
by identifying _________.
a.when the long-term direction of the market is positive
b.when the long-term direction of the market is negative
c.when the long-term direction of the market is stable
d.good stocks without regard to the long-term direction of the market
5) a life insurance firm wants to minimize its interest rate risk, and it is planning on
paying out $250,000 in 5 years. which one of the following investments best matches
its goal?
a.high-yield utility stocks
b.5-year zero-coupon bonds
c.10-year coupon bonds
d.money market investments rolled over as needed
6) a debenture is _________.
a.secured by other securities held by the firm
b.secured by equipment owned by the firm
c.secured by property owned by the firm
d.unsecured
7) the standard deviation of return on investment a is .10, while the standard deviation
of return on investment b is .04. if the correlation coefficient between the returns on a
and b is -.50, the covariance of returns on a and b is _________.
a.-.0447
b.-.0020
c..0020
d..0447
8) liquidity is a risk factor that __________.
a.has yet to be accurately measured and incorporated into portfolio management
b.is unaffected by trading mechanisms on various stock exchanges
c.has no effect on the market value of an asset
d.affects bond prices but not stock prices
9) which of the following is an example of a demand shock?
a.hurricane harry knocks out oil drilling platforms in the gulf of mexico.
b.consumers become worried about job loss and buy fewer goods and services than
expected.
c.floods in the midwest destroy crops.
d.the federal government unexpectedly requires automobile producers to raise fuel
efficiency standards.
10) bonds with coupon rates that fall when the general level of interest rates rise are
called _____________.
a.asset-backed bonds
b.convertible bonds
c.inverse floaters
d.index bonds