In the U.S., what percentage of the GDP is consumer spending?
A. 45%
B. 55%
C. 65%
D. 75%
E. 85%
Which one of the following options is out-of-the-money?
A. call with a $20 strike and a stock price of $21
B. put with a $35 strike and a stock price of $33
C. call with a $45 strike and stock price of $46
D. put with a $75 strike and a stock price of $70
E. call with a $50 strike and a stock price of $49
The common stock of JL Recyclers has a required return of 12 percent and a current
value of $18.72. The company pays its dividend annually and increases the amount by 4
percent each year. You own 300 shares of this stock. What was the total amount of the
last dividend you received?
A. $319
B. $360
C. $432
D. $480
E. $513
According to Elliott wave theory, market predictions should be based on which one of
the following?
A. eight-week repetitive trading patterns
B. the tidal waves created by the gravitational pull of the moon
C. series of historical market price swings
D. an industry’s historical rate of growth
E. market fads and trends
Blue Water Homes has 8 percent bonds outstanding that mature in 13 years. The bonds
pay interest semiannually. These bonds have a par value of $1,000 and are callable in 2
years at a premium of $75. What is the yield to call if the current price is equal to
103.25 percent of par?
A. 7.51 percent
B. 7.70 percent
C. 8.06 percent
D. 8.98 percent
E. 9.66 percent
A fund which tracks the S&P 500 would best be classified as which type of fund?
A. sector
B. global
C. equity income
D. index
E. growth
The Grand Isle has 12,000 shares of stock outstanding at a market price of $31.60 per
share. The book value per share is $12.08. The firm has earnings per share of $1.86 and
a dividend payout ratio of .40. What is the firm’s sustainable rate of growth?
A. 8.88 percent
B. 9.24 percent
C. 9.71 percent
D. 10.57 percent
E. 10.86 percent
How should cumulative abnormal returns react in an efficient market?
A. relatively constant, sharp break, relatively constant
B. relatively constant with no breaks
C. steadily increasing
D. steadily decreasing
E. remain constant at zero
Which one of the following is used to pay dividends or kept as retained earnings by a
firm?
A. equity
B. net cash flow
C. revenue
D. net income
E. expense
Exchange traded notes were first created to mimic _____ index.
A. the S&P 500
B. a commodity
C. the dollar
D. the Indian stock market
E. the DJIA
Which of the following are three key advantages of mutual funds?
A. diversification, taxes, high initial investments
B. low initial investments, professional management, diversification
C. liquidity, high initial investments, diversification
D. professional management, high initial investments, taxes
E. costs, diversification, liquidity
A mutual fund is created by which one of the following parties?
A. fund shareholders
B. fund’s board of directors
C. SEC
D. investment advisory firm
E. discount broker
Which one of the following will maximize the value of an IO strip?
A. prepaying all mortgages in the underlying mortgage pool
B. minimizing the duration of the underlying mortgage pool
C. maximizing the value of the PO strip
D. amortizing the bonds in the underlying pool faster than anticipated
E. creating conditions where no prepayments occur in the underlying mortgage pool
What is the area of finance called that addresses issues such as how reasoning errors
affect investment decisions?
A. logical
B. individual
C. behavioral
D. rational
E. personal
Which one of the following is a trade that will close out a previously established futures
position?
A. maintenance call
B. margin call
C. reverse trade
D. position reversal
E. margin closeout
Which one of the following is the basis for prospect theory?
A. Investors react differently to prospective gains and losses.
B. Investors make cognitive errors.
C. Some investors are irrational.
D. Investors react differently depending on the day of the week.
E. Investors suffer from money illusion.
You purchased four September corn futures contracts at what turned out to be the
lowest price of the day and sold those contracts at today’s close. What is your total
profit or loss on this investment?
A. -$287.50
B. -$1,100
C. -$2,875
D. $1,100
E. $14,250
A portfolio consists of the following two funds.
What is the Sharpe ratio of the portfolio?
A. .39
B. .45
C. .52
D. .60
E. .64
The NYSE’s Super Display Book is an electronic system which:
A. maintains the historical records of each customer’s trading activity.
B. transmits the latest market information to the news media.
C. allows floor traders to execute trades via cell phones.
D. tracks the activity on an exchange floor to ensure regulatory compliance.
E. is based on NYSE’s ARCA electronic trading engine.
ETFs are:
A. limited to diversified index funds.
B. generally held until they mature.
C. sponsored primarily by large investment banks.
D. based on market-cap-weighted indexes only.
E. claims on shares held in a trust.
A private equity fund:
I. is set up as a limited partnership
II. usually use a 2/20 fee structure
III. place no constraints on manager compensation
IV. typically have a stated life of 7 to 10 years
A. I and II only
B. I and III only
C. I, II and III only
D. I, II and IV only
E. I, II, III, and IV
You purchased a put with a strike price of $37.5 and an option premium of $0.45. You
simultaneously bought the stock at a price of $36 a share. What is your profit per share
on these transactions if the stock price at expiration is $33.50?
A. -$1.15
B. -$0.15
C. $0.15
D. $0.75
E. $1.05
An investment company will be treated as a “regulated investment company” by the
Internal Revenue Service provided that it:
I. invests almost all of its assets in bonds, stocks, and other securities.
II. invests solely in U.S. securities.
III. does not invest more than two percent of its assets in any one security.
IV. passes all its realized investment income through to its shareholders.
A. I and III only
B. I and IV only
C. II and III only
D. I, II, and IV only
E. I, III, and IV only
The primary difference between an international fund and a global fund is the fact that:
A. a global fund invests in U.S. stocks while an international fund does not.
B. an international fund invests in U.S. stocks while a global fund does not.
C. all international funds are country specific while global funds are not.
D. global funds may opt to be country or region specific while international funds may
not.
E. international funds tend to be more geographically diversified than global funds.
The Satellite Shoppe has current sales per share of $8.40. The sales per share are
expected to increase at an annual rate of 12 percent. The historical P/E ratio is 16.2 and
the historical P/S ratio is 7.6. What is the expected price of this stock one year from
now?
A. $59.72
B. $66.67
C. $71.50
D. $115.18
E. $129.00
Which one of the following is the prepayment rate for a mortgage pool which is
dependent upon the age of the mortgages comprising the pool?
A. unseasoned rate
B. average life rate
C. aged payment rate
D. conditional prepayment rate
E. amortized rate
Winter’s Clothing has a loan payable to a bank which is due 18 months from now. How
is this loan classified on the firm’s financial statements?
A. fixed asset
B. current liability
C. long-term debt
D. equity
E. expense
Which one of the following correctly defines the range of time values for a put option?
A. $0 to +$1
B. -$1 to +$1
C. ≤ $0
D. ≥ $0
E. $0
When a group of underwriters jointly work together to sell a new issue of securities, the
underwriters form a(n):
A. underwriting cartel.
B. market union.
C. venture capital association.
D. Dutch market.
E. syndicate.
A firm has paid annual dividends of $1.32, $1.43, $1.55, $1.62, $1.64, and $1.70 per
share over the past 6 years, respectively. What is the geometric average growth rate for
these dividends?
A. 5.19 percent
B. 5.28 percent
C. 5.48 percent
D. 5.57 percent
E. 5.74 percent
What is the absolute price difference on a $100,000, 5-year Treasury note futures
contract between the high and low prices?
Treasury note, $100,000, pts and one-quarter of 1/32 of a point
A. $428.13
B. $512.08
C. $625.33
D. $787.50
E. $811.33
Use these option quotes to answer this question:
The price you will pay (per underlying share) to buy the 50 call option on JL stock is:
A. $4.75.
B. $4.80.
C. $5.00.
D. $5.90.
E. $6.00.
A $1,000 face value bond matures in 11 years, pays interest semiannually, and has a 6.5
percent coupon. The bond currently sells for $1,025. What is the yield to maturity?
A. 6.17 percent
B. 6.18 percent
C. 6.28 percent
D. 6.34 percent
E. 6.37 percent
Ted constantly ignores the effects of inflation on money. Ted is suffering from which
one of the following?
A. endowment effect
B. money illusion
C. regret aversion
D. myopic loss aversion
E. sunk cost fallacy