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1) annual percentage rates can be converted to effective annual rates by means of the
following formula:
a.[1 + (apr/n)]n - 1
b.(apr)(n)
c.(apr/n)
d.(periodic rate)(n)
2) a preferred share of coquihalla corporation will pay a dividend of $8 in the upcoming
year and every year thereafter; that is, dividends are not expected to grow. you require a
return of 7% on this stock. using the constant-growth ddm to calculate the intrinsic
value, a preferred share of coquihalla corporation is worth _________.
a.$13.50
b.$45.50
c.$91
d.$114.29
3) the only way for behavioral patterns to persist in prices is if ______________.
a.markets are not weak-form efficient
b.there are limits to arbitrage activity
c.there are no significant trading costs
d.market psychology is inconsistent over time
4) tips are an example of _______________.
a.eurobonds
b.convertible bonds
c.indexed bonds
d.catastrophe bonds
5) the efficient market hypothesis suggests that _______.
a.active portfolio management strategies are the most appropriate investment strategies
b.passive portfolio management strategies are the most appropriate investment
strategies
c.either active or passive strategies may be appropriate, depending on the expected
direction of the market
d.a bottom-up approach is the most appropriate investment strategy
6) the portfolio that contains the benchmark asset allocation against which a manager
will be measured is often called _____________.
a.the bogey portfolio
b.the vanguard index
c.jensen's alpha
d.the treynor measure
7) if the risk-free rate is greater than the dividend yield, then we know that
_______________.
a.the futures price will be higher as contract maturity increases
b.f0 < s0
c.ft > st
d.arbitrage profits are possible
8) the __________ index is a widely used index of non-u.s. stocks.
a.cboe
b.dow jones
c.eafe
d.lehman index
9) it would be costly to provide wage insurance because of the ___________ problem.
a.moral hazard
b.adverse selection
c.texas hedge
d.actuarial error
10) you can tax-shelter only one-half of your retirement savings. you want to invest
one-half of your savings in bonds and one-half in stocks. how much of the bonds and
how much of the stocks should you allocate to the tax-sheltered investment?
a.stock and bond investments should be equally invested in both tax-sheltered and
nonsheltered accounts.
b.you should place all the stocks in tax-sheltered accounts and all the bonds in
nonsheltered accounts.
c.you should place all the bonds in tax-sheltered accounts and all the stocks in
nonsheltered accounts.
d.it makes no difference how you allocate your stock and bond investments among tax
sheltered and nonsheltered accounts.
11) the rate of return on _____ is known at the beginning of the holding period, while
the rate of return on ____ is not known until the end of the holding period.
a.risky assets; treasury bills
b.treasury bills; risky assets
c.excess returns; risky assets
d.index assets; bonds
12) according to results by seyhun, the main reason that investors cannot earn excess
returns by following inside trades after they become public is that ______________.
a.the information isn't available for at least 2 weeks
b.transaction costs offset abnormal returns
c.the sec late-disclosure rule doesn't apply to insiders
d.insiders don't have to disclose their trades
13) the __________ is the stock price minus exercise price, or the profit that could be
attained by immediate exercise of an in-the-money call option.
a.intrinsic value
b.time value
c.stated value
d.discounted value
