1) a bond portfolio and a stock portfolio both provided an unrealized pretax return of
8% to a taxable investor. if the stocks paid no dividends, we know that the ________.
a.after-tax return of the stock portfolio was higher than the after-tax return of the bond
portfolio
b.after-tax return of the bond portfolio was higher than the after-tax return of the stock
portfolio
c.after-tax income of the stock portfolio was equal to the after-tax income of the bond
portfolio
d.after-tax income of the stock portfolio could have been higher or lower than the
after-tax income of the bond portfolio, depending on the marginal tax rate of the
investor
2) the price of a stock is $38 at the beginning of the year and $41 at the end of the year.
if the stock paid a $2.50 dividend, what is the holding-period return for the year?
a.6.58%
b.8.86%
c.14.47%
d.18.66%
3) suppose you purchase one texas instruments august 75 call contract quoted at $8.50
and write one texas instruments august 80 call contract quoted at $6. if, at expiration,
the price of a share of texas instruments stock is $79, your profit would be _________.
a.$150
b.$400
c.$600
d.$1,850
4) in a single-factor market model the beta of a stock ________.
a.measures the stock’s contribution to the standard deviation of the market portfolio
b.measures the stock’s unsystematic risk
c.changes with the variance of the residuals
d.measures the stock’s contribution to the standard deviation of the stock
5) consider a hedge fund with $250 million in assets at the start of the year. if the gross
return on assets is 18% and the total expense ratio is 2.5% of the year-end value, what is
the rate of return on the fund?
a.15.05%
b.15.5%
c.17.25%
d.18%
6) a bank has $50 million in assets, $47 million in liabilities, and $3 million in
shareholders’ equity. if the duration of its liabilities is 1.3 and the bank wants to
immunize its net worth against interest rate risk and thus set the duration of equity equal
to zero, it should select assets with an average duration of _________.
a.1.22
b.1.5
c.1.6
d.2
7) the cfa institute standards of professional conduct require that members _____.
a.place their clients’ interests before their own
b.disclose conflicts of interest to clients
c.inform their employers that they are obligated to comply with the standards of
professional conduct
d.all of these options
8) someone who invests in the vanguard index 500 mutual fund could most accurately
be described as using which approach?
a.active management
b.arbitrage
c.fundamental analysis
d.passive investment
9)
refer to the above figures. which of the following events would most likely result in
inflation?
a.a shift from d2 to d1 in figure a.
b.a shift from d2 to d3 in figure a.
c.a shift from d2 to d1 in figure b.
d.a shift from d2 to d3 in figure b.
10) firm b produce gadgets. the price of gadgets is $2 each. firm b has total fixed costs
of $300,000 and variable costs of $1.40 per gadget. the corporate tax rate is 30%. if the
economy is strong, the firm will sell 2,000,000 gadgets. if the economy enters a
recession, the firm will sell only half as many gadgets. if the economy is strong, the
after-tax profit of firm b will be _________.
a.$90,000
b.$210,000
c.$300,000
d.$630,000
11) firm-specific risk is also called __________ and __________.
a.systematic risk; diversifiable risk
b.systematic risk; nondiversifiable risk
c.unique risk; nondiversifiable risk
d.unique risk; diversifiable risk
12) a bond pays a semiannual coupon, and the last coupon was paid 61 days ago. if the
annual coupon payment is $75, what is the accrued interest? (assume 182 days in the
6-month period.)
a.$13.21
b.$12.57
c.$15.44
d.$16.32
13) you believe that stock prices reflect all information that can be derived by
examining market trading data such as the history of past stock prices, trading volume,
or short interest, but you do not believe stock prices reflect all publicly available and
inside information. you are a proponent of the ____________ form of the emh.
a.semistrong
b.strong
c.weak
d.perfect
14) your return will generally be higher using the __________ if you time your
transactions poorly, and your return will generally be higher using the __________ if
you time your transactions well.
a.dollar-weighted return method; dollar-weighted return method
b.dollar-weighted return method; time-weighted return method
c.time-weighted return method; dollar-weighted return method
d.time-weighted return method; time-weighted return method
15) which one of the following contracts requires no cash to change hands when
initiated?
a.listed put option
b.short futures contract
c.forward contract
d.listed call option
16) the expected return of a portfolio is 8.9%, and the risk-free rate is 3.5%. if the
portfolio standard deviation is 12%, what is the reward-to-variability ratio of the
portfolio?
a.0
b..45
c..74
d.1.35
17) an investor purchases a long call at a price of $2.50. the expiration price is $35. if
the current stock price is $35.10, what is the break-even point for the investor?
a.$32.50
b.$35
c.$37.50
d.$37.60
18) the market portfolio has a beta of _________.
a.-1
b.0
c..5
d.1
19) the proper formula for interest rate parity is ___________.
a.[1 + rf(foreign)]/[1 + rf(us)] = f1/e0
b.[1 + rf(us)]/[1 + rf(foreign)] = e0/f1
c.[1 + rf(us)]/[1 + rf(foreign)] = f0/e0
d.[1 + rf(foreign)]/[1 + rf(foreign)] = f0/e1
20) suppose a u.s. investor wants to invest in a british firm currently selling for 50 per
share. the investor has $7,000 to invest, and the current exchange rate is $1.40/.
how many shares can the investor purchase?
a.140
b.100
c.71.43
d.none of these options