1) the current stock price of alcoa is $70, and the stock does not pay dividends. the
instantaneous risk-free rate of return is 6%. the instantaneous standard deviation of
alcoa’s stock is 40%. you want to purchase a put option on this stock with an exercise
price of $75 and an expiration date 30 days from now. according to the black-scholes
opm, you should hold __________ shares of stock per 100 put options to hedge your
risk.
a.30
b.34
c.69
d.74
2) if all ______ are ______ in the treynor-black model, there would be no reason to
depart from the passive portfolio.
a.alphas; zero
b.alphas; positive
c.betas; positive
d.standard deviations; positive
3) when stock returns exhibit positive serial correlation, this means that __________
returns tend to follow ___________ returns.
a.positive; positive
b.positive; negative
c.negative; positive
d.positive; zero
4) ace ventura, inc., has expected earnings of $5 per share for next year. the firm’s roe is
15%, and its earnings retention ratio is 40%. if the firm’s market capitalization rate is
10%, what is the present value of its growth opportunities?
a.$25
b.$50
c.$75
d.$100
5) the dow jones industrial average is _________.
a.a price-weighted average
b.a value weight and average
c.an equally weighted average
d.an unweighted average
6) a portfolio consists of three index funds: an equity index accounting for 40% of the
total portfolio, a bond index accounting for 30% of the total portfolio, and an
international index accounting for 30% of the total portfolio. after each quarter the
portfolio manager buys and sells some of each sector to preserve the original weights
for each sector. this is an example of ____________.
a.a passively managed core with an actively managed component
b.a totally passively managed fund
c.passive asset allocation with active security selection
d.active asset allocation with passive security selection
7) perfect-timing ability is equivalent to having __________ on the market portfolio.
a.a call option
b.a futures contract
c.a put option
d.a forward contract
8) 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
current ratio for 2012 indicates that flathead’s liquidity has ________ since 2011.
a.risen
b.fallen
c.stayed the same
d.the answer cannot be determined from the information given.
9) you believe that you can earn 2% more on your portfolio if you engage in full-time
stock research. however, the additional trading costs and tax liability from active
management will cost you about .5%. you have an $800,000 stock portfolio. what is the
most you can afford to spend on your research?
a.$4,000
b.$8,000
c.$12,000
d.$16,000
10) the average maturity of fund investments in a money market mutual fund is
_______.
a.slightly more than 1 month
b.slightly more than 1 year
c.about 9 months
d.between 2 and 3 years
11) when the housing bubble burst in 2007, it set off the worst financial crisis _____.
a.in 25 years.
b.in 40 years.
c.in 50 years.
d.in 75 years.