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1) money market securities are sometimes referred to as cash equivalents because
_____.
a.they are safe and marketable
b.they are not liquid
c.they are high-risk
d.they are low-denomination
2) a firm's earnings per share increased from $10 to $12, its dividends increased from
$4 to $4.40, and its share price increased from $80 to $100. given this information, it
follows that _________.
a.the stock experienced a drop in its p/e ratio
b.the company had a decrease in its dividend payout ratio
c.both earnings and share price increased by 20%
d.the required rate of return increased
3) which of the following results from firms holding inventories?
a.the economy is much more susceptible to business cycle fluctuations.
b.demand shocks occur with greater frequency.
c.demand shocks occur less frequently.
d.firms can maintain production levels and adjust inventories in response to demand
shocks.
4) a benchmark market value index is comprised of three stocks. yesterday the three
stocks were priced at $12, $20, and $60. the number of outstanding shares for each is
600,000 shares, 500,000 shares, and 200,000 shares, respectively. if the stock prices
changed to $16, $18, and $62 today respectively, what is the 1-day rate of return on the
index?
a.5.78%
b.4.35%
c.6.16%
d.7.42%
5) which one of the following firms falsely claimed to have a $4.8 billion bank account
at bank of america and vastly understated its debts, eventually resulting in the firm's
bankruptcy?
a.worldcom
b.enron
c.parmalat
d.global crossing
6) the accounting measure of a firm's equity value generated by applying accounting
principles to asset and liability acquisitions is called ________.
a.book value
b.market value
c.liquidation value
d.tobin's q
7) which of the following investment styles could be the best description of the long
term capital management market-neutral strategies?
a.convergence arbitrage
b.statistical arbitrage
c.pairs trading
d.convertible arbitrage
8) prices tend to be sticky because:
a.firms are worried about frequent price changes that would annoy consumers.
b.most firms have agreements with each other to fix prices at profit-maximizing levels.
c.government controls most prices.
d.foreign competition discourages domestic firms from price changes.
9) evidence supporting semistrong-form market efficiency suggests that investors
should _________________________.
a.rely on technical analysis to select securities
b.rely on fundamental analysis to select securities
c.use a passive trading strategy such as purchasing an index fund or an etf
d.select securities by throwing darts at the financial pages of the newspaper
10) a typical traditional initial investment in a hedge fund generally is in the range
between _____ and _____.
a.$1,000; $5,000
b.$5,000; $25,000
c.$25,000; $250,000
d.$250,000; $1,000,000
11) the supply of funds in the economy is controlled primarily by ____________.
a.the federal reserve system
b.congress
c.money center banks
d.the treasury department
12) __________ is the return on a stock beyond what would be predicted from market
movements alone.
a.a normal return
b.a subliminal return
c.an abnormal return
d.none of these options
13) during the 1926-2010 period the sharpe ratio was greatest for which of the
following asset classes?
a.small u.s. stocks
b.large u.s. stocks
c.long-term u.s. treasury bonds
d.bond world portfolio return in u.s. dollars
14) under a "passive core" portfolio management strategy, a manager would
___________.
a.index the entire portfolio
b.index part of the portfolio and actively manage the rest
c.delegate the management of core segments of the portfolio to other managers
d.actively manage the entire portfolio
15) the figures below show plots of monthly excess returns for two stocks plotted
against excess returns for a market index.
which stock is riskier to a nondiversified investor who puts all his money in only one of
these stocks?
a.stock a is riskier.
b.stock b is riskier.
c.both stocks are equally risky.
d.the answer cannot be determined from the information given.
16) stock prices that are stable over time _______.
a.indicate that prices are useful indicators of true economic value
b.indicate that the market is not incorporating new information into current stock prices
c.ensure that an economy allocates its resources efficiently
d.indicates that returns follow a random-walk process
17) personal trusts are typically allowed to engage in which of the following investment
activities?
i. buying and selling futures contracts.
ii. short-selling securities.
iii. purchasing and writing options.
iv. buying stock on margin.
a.i only
b.ii and iii only
c.ii and iv only
d.none of the given activities are allowed.
