1) immunization of coupon-paying bonds does not imply that the portfolio manager is
inactive because:
i. the portfolio must be rebalanced every time interest rates change.
ii. the portfolio must be rebalanced over time even if interest rates don’t change.
iii. convexity implies duration-based immunization strategies don’t work.
a.i only
b.i and ii only
c.ii only
d.i, ii, and iii
2) a saver who expects to have a higher tax rate after retirement would prefer a ______.
a.roth retirement plan
b.traditional retirement plan
c.401k plan
d.403b plan
3) which one of the following is probably the most direct and immediate way to
stimulate or slow the economy, although it is not very useful for fine-tuning economic
performance?
a.fiscal policy
b.monetary policy
c.supply-side policy
d.rising minimum wages
4) which one of the following is a true statement?
a.dividends on preferred stocks are tax-deductible to individual investors but not to
corporate investors.
b.common dividends cannot be paid if preferred dividends are in arrears on cumulative
preferred stock.
c.preferred stockholders have voting power.
d.investors can sue managers for nonpayment of preferred dividends.
5) ______ would not be included in the eafe index.
a.australia
b.canada
c.france
d.japan
6) which of the following is the rate at which the general level of prices for goods and
services is rising?
a.the exchange rate
b.the gross domestic product growth rate
c.the inflation rate
d.the real interest rate
7) to obtain an approximate estimate of the real interest rate, one must _________ the
__________ the nominal risk-free rate.
a.add; default premium to
b.subtract; default premium from
c.add; expected inflation to
d.subtract; expected inflation from
8) beta is a measure of ______________.
a.total risk
b.relative systematic risk
c.relative nonsystematic risk
d.relative business risk
9) generally speaking, countries with ______ capitalization of equities ________.
a.larger; have higher gdp
b.smaller; are wealthier
c.larger; have smaller gdp
d.larger; are higher-growth countries
10) an industry analysis for manufacturers of a small personal care gadget observed the
following characteristics:
1. industry sales have grown at 15%-20% per year in recent years and are expected to
grow at 10%-15% per year over the next 3 years, still well above the economic growth
rate.
2. some u.s. manufacturers are attempting to enter fast-growing non-u.s. markets, which
remain largely unexploited.
3. some manufacturers have created a new niche in the industry by selling directly to
customers through mail order. sales for this industry segment are growing at 40% per
year.
4. the current penetration rate in the united states is 60% of households and will be
difficult to increase.
5. manufacturers compete fiercely on the basis of price, and price wars within the
industry are common.
6. some manufacturers are able to develop new, unexploited niche markets in the united
states based on company reputation, quality, and service.
7. several manufacturers have recently merged, and it is expected that consolidation in
the industry will increase.
8. new manufacturers continue to enter the market.
characteristics _______ would be typical of an industry that is in the start-up stage.
a.4 and 7
b.1 and 4
c.2 and 5
d.none of these options
11) the m2 measure of portfolio performance was developed by ______________.
a.modigliani and miller
b.modigliani and modigliani
c.merton and miller
d.fama and french
12) the amount of risk an individual should take depends on his or her:
i. return requirements
ii. risk tolerance
iii. time horizon
a.i only
b.i and ii only
c.ii and iii only
d.i, ii, and iii
13) hedge ratios for long puts are always __________.
a.between -1 and 0
b.between 0 and 1
c.1
d.greater than 1
14) using the index model, the alpha of a stock is 3%, the beta is 1.1, and the market
return is 10%. what is the residual given an actual return of 15%?
a..0%
b.1%
c.2%
d.3%
15) you are cautiously bullish on the common stock of the wildwood corporation over
the next several months. the current price of the stock is $50 per share. you want to
establish a bullish money spread to help limit the cost of your option position. you find
the following option quotes:
to establish a bull money spread with puts, you would _______________.
a.sell the 55 put and buy the 45 put
b.buy the 45 put and buy the 55 put
c.buy the 55 put and sell the 45 put
d.sell the 45 put and sell the 55 put
16) which of the following is not a characteristic of common stock ownership?
a.residual claimant
b.unlimited liability
c.voting rights
d.limited life of the security
17) the financial statements of burnaby mountain trading company are shown below.
note: the common shares are trading in the stock market for $27 each.
refer to the financial statements of burnaby mountain trading company. the firm’s
current ratio for 2012 is _________.
a.1.3
b.1.5
c.1.69
d.2.83