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1) Assume that you purchase a 10-year $1,000 par value bond, with a 12% coupon, and
a yield of 9%. Immediately after you purchase the bond, yields fall to 8% and remain at
that level to maturity. Calculate the realized horizon yield, if you hold the bond for 5
years and then sell. Interest is paid annually.
a. 16.25%
b. 12.15%
c. 7.75%
d. 10.05%
e. 9.34%
2) The fact that tests have shown the CAPM intercept to be greater than the RFR is
consistent with a(n)
a. Zero beta model.
b. unstable beta or a higher borrowing rate.
c. Zero beta model or a higher borrowing rate.
d. higher borrowing rate.
e. unstable beta.
3) Exhibit 25.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the data presented below on three mutual funds and the market.
Compute the Sharpe Measure for the AAA fund.
a. 4.49
b. 2.74
c. 1.57
d. 1.70
e. 1.27
4) The institutions which invest most heavily in corporate bond issues are
a. Life insurance companies and commercial banks.
b. Life insurance companies and property and liability insurance companies.
c. Life insurance companies and pension funds.
d. Commercial banks and property and liability insurance companies.
e. Commercial banks and pension funds.
5) A one year call option has a strike price of 50, expires in 6 months, and has a price of
$5.04. If the risk free rate is 5%, and the current stock price is $50, what should the
corresponding put be worth?
a. $3.04
b. $4.64
c. $6.08
d. $3.83
e. $0
6) Which of the following is a financial tenet of Warren Buffett?
a. Long term prospects.
b. Resistance to institutional imperative.
c. Creation of one dollar of market value for every dollar retained.
d. Purchase at discount to intrinsic value.
e. Product is not faddish.
7) Exhibit 6.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Rit= return for stock i during period t
Rmt= return for the aggregate market during period t
Refer to Exhibit 6.3. What is the abnormal rate of return for Elliot during period t using
only the aggregate market return (ignore differential systematic risk)?
a.1.50
b.1.10
c.-1.50
d.-5.10
e.-8.00
8) Between 1980 and 1990, the standard deviation of the returns for the NIKKEI and
the DJIA indexes were 0.19 and 0.06, respectively, and the covariance of these index
returns was 0.0014. What was the correlation coefficient between the two market
indicators?
a. 8.1428
b. 0.0233
c. 0.0073
d. 0.2514
e. 0.1228
9) Exhibit 13.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Assume that you are an analyst for the U.S. Autoparts Industry. Consider the following
information that you propose to use to obtain an estimate of year 2002 EPS for the U.S.
Autoparts Industry:
In addition a regression analysis indicates the following relationship between growth in
industry sales per share and personal consumption expenditures (PCE) growth is
Calculate industry total assets per share for the year 2004.
a. $450
b. $565.67
c. $513.58
d. $479.07
e. $385.77
10) The value of a call option just prior to expiration is (where V is the underlying
asset's market price and X is the option's exercise price)
a. Max [0, V - X]
b. Max [0, X - V]
c. Min [0, V - X]
d. Min [0, X - V]
e. Max [0, V > X]
11) If 10 percent of the stocks are selling above their 200 day moving average, the
market is considered to be oversold.
12) Samurai bonds are yen-denominated bonds sold in markets outside Japan by
international syndicates.
13) The relative size of U.S. financial markets to the total investable assets in the global
capital markets has grown considerably over the last three decades.
14) The balance sheet shows what assets the firm controls at a point in time and how it
financed the assets.
15) If the efficient market hypothesis is true price changes are independent and biased.
16) When the 50 day MA line crosses the 200 day MA line from above it is considered
a buy signal.
