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1) Based on Stock Z's beta of 0.9 the normal return is 9%. However, the actual return
for Stock Z was 8%. What is Stock Z's abnormal rate of return?
a.-1.0%
b.-0.1%
c.0.1%
d.1.0%
e.1.1%
2) The 12b-1 plan permits funds to deduct as much as ____ percent of average net asset
per year to cover distribution costs, brokers' commissions, and general marketing
expenses.
a. 0.25
b. 0.50
c. 0.75
d. 1.00
e. 1.50
3) According to put/call parity
a. Stock price + Call Price = Put Price + Risk Free Bond Price
b. Stock price + Put Price = Call Price + Risk Free Bond Price
c. Put price + Call Price = Stock Price + Risk Free Bond Price
d. Stock price - Put Price = Call Price + Risk Free Bond Price
e. Stock price + Call Price = Put Price - Risk Free Bond Price
4) Exhibit 22.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
If you establish a long straddle using the options with an 85 exercise price, what is your
dollar gain or loss if at expiration XYZ is still trading at 101 11/16?
a. $18.75 loss
b. $18.75 gain
c. $1,668.75 gain
d. $1,668.75 loss
e. $1,687.50 loss
5) Consider a 12%, 15 year bond that pays interest semiannually, and its current price is
$675. What is the promised yield to maturity?
a. 10.23%
b. 18.45%
c. 17.77%
d. 2.31%
e. 9.26%
6) An agreement that provides for the future delivery or receipt of an asset at a specified
date for a specified price is a
a.Eurobonds contract.
b.Futures contract.
c.Put option contract.
d.Call option contract.
e.Warrant contract.
7) Refer to Exhibit 15.1. Calculate a 4-day moving average for day 5.
a. 10,102.3
b. 9905.6
c. 9875.4
d. 10,215.7
e. 10,157.6
8) Exhibit 5.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Stocks W and X had 2 for 1 splits after the close on Dec 31, 2003.
Refer to Exhibit 5.5. Calculate the price weighted series for Dec 31, 2003, prior to the
splits.
a.81.69
b.100.0
c.72.5
d.121.25
e.119.25
9) In order to confirm the weak-form efficient market hypothesis, an examination of
stock price runs over time would reveal that stock price changes over time were
a.Highly positively correlated.
b.Moderately positively correlated.
c.Highly negatively correlated.
d.Moderately negatively correlated.
e.None of the above.
10) Exhibit 6.2
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 6.2. What is the abnormal rate of return for Stock XYZ when you
consider its systematic risk measure (beta)?
a.2.0%
b.-1.5%
c.2.4%
d.1.3%
e.-3.2%
11) Exhibit 7.14
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Stocks A and B have a correlation coefficient of -0.8. The stocks' expected returns and
standard deviations are in the table below. A portfolio consisting of 40% of stock A and
60% of stock B is constructed.
Refer to Exhibit 7.14. What is the expected return of the stock A and B portfolio?
a. 17.0%
b. 17.5%
c. 18.0%
d. 18.5%
e. 19.0%
12) A technical analyst might use credit balances in brokerage accounts as follows:
a. Sell stock when credit balances rise
b. Buy stock when credit balances rise
c. Sell stock when credit balances decline
d. b and c
e. None of the above
13) The conversion premium for a convertible bond is calculated as:
a. (Market Price + Minimum Value)/Minimum Value.
b. (Market Price/Minimum Value) - Minimum Value.
c. (Market Price + Minimum Value) - Minimum Value.
d. (Market Price - Minimum Value)/Minimum Value.
e. (Market Price - Minimum Value)/Minimum Value.
14) Exhibit 19.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The following information is given concerning a pure yield pick-up swap: You currently
hold a 20 year, Aa 8 percent coupon bond priced to yield 10 percent. As a swap
candidate you are considering a 20 year, Aa 10 percent coupon bond priced to yield
10.75 percent. Assume a reinvestment rate of 12.00 percent, semiannual compounding,
and a one-year workout period.
The value of the swap is ____ basis points in one year.
a. 40.4
b. 60.6
c. 80.8
d. 20.5
e. 100.1
15) A speculative stock possesses a ____ probability of ____ return and is currently
____.
a. High, negative, underpriced.
b. High, negative, overpriced.
c. High, positive, overpriced.
d. Low, negative, overpriced.
e. Low, positive, underpriced.
16) Exhibit 21.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
As a relationship officer for a money-center commercial bank, one of your corporate
accounts has just approached you about a one-year loan for $3,000,000. The customer
would pay a quarterly interest expense based on the prevailing level of LIBOR at the
beginning of each quarter. As is the bank's convention on all such loans, the amount of
the interest payment would then be paid at the end of the quarterly cycle when the new
rate for the next cycle is determined. You observe the following LIBOR yield curve in
the cash market:
What is the implied 90-day forward rate at the beginning of the second quarter?
a. 4.70%
b. 4.85%
c. 4.60%
d. 4.94%
e. None of the above
17) Which of the following is not a determinant of the aggregate gross profit margin?
a. Unit labor costs of production
b. Rate of inflation
c. Unemployment rate
d.
e. Growth rate of M2 money supply
18) If the holding period is equal to the term to maturity for a corporate bond the rate of
discount represents the
a. Coupon yield.
b. Effective yield.
c. Yield to call.
d. Yield to maturity.
e. Reinvestment rate.
