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1) barnegat light sold 200,000 shares in an initial public offering. the underwriter's
explicit fees were $90,000. the offering price for the shares was $35, but immediately
upon issue, the share price jumped to $43. what is the best estimate of the total cost to
barnegat light of the equity issue?
a.$90,000
b.$1,290,000
c.$2,390,000
d.$1,690,000
2) the average rate of return on u.s. treasury bills since 1926 was _________.
a.less than 1%
b.less than 3%
c.less than 4%
d.less than 7%
3) an investor refuses to invest in any firm that produces alcohol or tobacco. this is an
example of a ___________ constraint.
a.return requirement
b.risk-tolerance
c.liquidity
d.social
4) 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 quick
ratio for 2012 is _________.
a.1.3
b.1.5
c.1.69
d.2.83
5) the financial statements of flathead lake manufacturing company are shown below:
note: the common shares are trading in the stock market for $15 per share
refer to the financial statements of flathead lake manufacturing company. the firm's p/e
ratio for 2012 is _________.
a.3.39
b.3.6
c.13.33
d.10.67
6) _______ is a life insurance policy that provides a death benefit and a fixed-rate
tax-deferred savings plan.
a.term life
b.whole life
c.variable life
d.universal life
7) a 45 put option on a stock priced at $50 is priced at $3.50. this call has an intrinsic
value of ______ and a time value of _____.
a.$3.50; $0
b.$5; $3.50
c.$3.50; $5
d.$0; $3.50
8) the duration rule always ________ the value of a bond following a change in its
yield.
a.underestimates
b.provides an unbiased estimate of
c.overestimates
d.the estimated price may be biased either upward or downward, depending on whether
the bond is trading at a discount or a premium.
9) consider the following $1,000 par value zero-coupon bonds:
the expected 1-year interest rate 2 years from now should be _________.
a.7%
b.8%
c.9%
d.10%
10) under the pure expectations hypothesis and constant real interest rates for different
maturities, an upward-sloping yield curve would indicate __________________.
a.expected increases in inflation over time
b.expected decreases in inflation over time
c.the presence of a liquidity premium
d.that the equilibrium interest rate in the short-term part of the market is lower than the
equilibrium interest rate in the long-term part of the market
11) which one of the following institutions typically has the longest investment
horizon?
a.mutual funds
b.pension funds
c.property and casualty insurers
d.banks
