1) __________ are examples of synthetically created zero-coupon bonds.
a.colts
b.opossms
c.strips
d.arms
2) if the beta of the market index is 1 and the standard deviation of the market index
increases from 12% to 18%, what is the new beta of the market index?
a..8
b.1
c.1.2
d.1.5
3)
what must cash flow from financing have been in 2008 for interceptors, inc.?
a.$5
b.$28
c.$30
d.$33
4) one year u.s. interest rates are 5%, and european interest rates are 7%. the spot euro
direct exchange rate quote is 1.32, and the 1-year forward rate direct quote is 1.35. if
you can borrow either $1 million or 1 million to start with, what would be your dollar
profits from interest arbitrage based on these data?
a.$94,322
b.$55,345
c.$44,318
d.$33,595
5) a hog farmer decides to sell hog futures. this is an example of __________ to limit
risk.
a.cross-hedging
b.short hedging
c.spreading
d.speculating
6) in a defined benefit pension plan, the _____ bears all of the fund’s investment
performance risk.
a.employer
b.employee
c.fund manager
d.government
7) you would typically find all but which one of the following in a bond contract?
a.a dividend restriction clause
b.a sinking fund clause
c.a requirement to subordinate any new debt issued
d.a price-earnings ratio
8) a(n) _______________ hedge fund attempts to profit from situations such as
mergers, acquisitions, restructuring, bankruptcy, or reorganization.
a.multistrategy
b.managed futures
c.dedicated short bias
d.event-driven
9) which one of the following best describes fundamental risk?
a.a stock is overpriced, but your fund does not allow you to engage in short sales.
b.your models indicate a stock is mispriced, but you are not sure if this is a real profit
opportunity or a model input error.
c.you buy a stock that you believe is underpriced, and the underpricing persists for a
long time, hurting your short-term results.
d.a stock is trading in two different markets at two different prices.
10) the objectives of personal trusts normally are __________ in scope than those of
individual investors, and personal trust managers typically are __________ than
individual investors.
a.broader; more risk averse
b.broader; less risk averse
c.more limited; more risk averse
d.more limited; less risk averse
11) according to the capm, which of the following is not a true statement regarding the
market portfolio.
a.all securities in the market portfolio are held in proportion to their market values.
b.it includes all risky assets in the world, including human capital.
c.it is always the minimum-variance portfolio on the efficient frontier.
d.it lies on the efficient frontier.
12) which one of the following statements about market and book value is correct?
a.all firms sell at a market-to-book ratio above 1.
b.all firms sell at a market-to-book ratio greater than or equal to 1.
c.all firms sell at a market-to-book ratio below 1.
d.most firms have a market-to-book ratio above 1, but not all.
13) real assets in the economy include all but which one of the following?
a.land
b.buildings
c.consumer durables
d.common stock
14) you are considering investing $1,000 in a complete portfolio. the complete portfolio
is composed of treasury bills that pay 5% and a risky portfolio, p, constructed with two
risky securities, x and y. the optimal weights of x and y in p are 60% and 40%,
respectively. x has an expected rate of return of 14%, and y has an expected rate of
return of 10%. if you decide to hold 25% of your complete portfolio in the risky
portfolio and 75% in the treasury bills, then the dollar values of your positions in x and
y, respectively, would be __________ and _________.
a.$300; $450
b.$150; $100
c.$100; $150
d.$450; $300
15) beta is a measure of security responsiveness to _________.
a.firm-specific risk
b.diversifiable risk
c.market risk
d.unique risk