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1) order the following stages in the industry life cycle from the earliest to latest to occur
after the start-up phase:
i. maturity
ii. relative decline
iii. consolidation
a.iii, i, ii
b.i, iii, ii
c.iii, ii, i
d.i, ii, iii
2) which of the following provides the profit to a short position at contract maturity?
a.original futures price - spot price at maturity
b.spot price at maturity - original futures price
c.zero
d.basis
3) investors will earn higher rates of returns on tips than on equivalent default-risk
standard bonds if _______________.
a.inflation is lower than anticipated over the investment period
b.inflation is higher than anticipated over the investment period
c.the u.s. dollar increases in value against the euro
d.the spread between commercial paper and treasury securities remains low
4) if interest rates increase, business investment expenditures are likely to __________
and consumer durable expenditures are likely to _________.
a.increase; increase
b.increase; decrease
c.decrease; increase
d.decrease; decrease
5) which of the following is an example of economic investment?
a.volvo buys an old factory building from general motors.
b.nike buys a new machine that increases shoe production.
c.bill gates buys shares of stock in ibm.
d.warren buffet buys u.s. savings bonds.
6) you invest in the stock of rayleigh corp. and write a call option on rayleigh corp. this
strategy is called a _________.
a.covered call
b.long straddle
c.naked call
d.money spread
7) an investor who goes long in a futures contract will _____ any increase in value of
the underlying asset and will _____ any decrease in value in the underlying asset.
a.pay; pay
b.pay; receive
c.receive; pay
d.receive; receive
8) an investor with low risk aversion will likely prefer which of the following risk and
return combinations?
a.expected return = 11%, historical standard deviation = 12%
b.expected return = 12%, historical standard deviation = 14%
c.expected return = 14%, historical standard deviation = 18%
d.expected return = 17%, historical standard deviation = 21%
9) in 2011 mortgages represented approximately __________ of total liabilities and net
worth of american households.
a.12%
b.14%
c.28%
d.42%
10) the most actively traded interest rate futures contract is for ___________.
a.libor
b.treasury bills
c.eurodollars
d.treasury bonds
11) a firm cuts its dividend payout ratio. as a result, you know that the firm's _______.
a.return on assets will increase
b.earnings retention ratio will increase
c.earnings growth rate will fall
d.stock price will fall
12) the practice of 'selling" large quantities of goods to customers in order to get
quarterly sales up while allowing these customers to return the goods next quarter is
termed _____________.
a.channel stuffing
b.clogging the network
c.spamming the johns
d.artificial sales
13) the duration of a bond normally increases with an increase in:
i. term to maturity
ii. yield to maturity
iii. coupon rate
a.i only
b.i and ii only
c.ii and iii only
d.i, ii, and iii
14) if a firm has a positive tax rate and a positive operating roa, and the interest rate on
debt is the same as the operating roa, then operating roa will be _________.
a.greater than zero, but it is impossible to determine how operating roa will compare to
roe
b.equal to roe
c.greater than roe
d.less than roe
15) in a pure yield pickup swap, ________ bonds are exchanged for _________ bonds.
a.longer-duration; shorter-duration
b.shorter-duration; longer-duration
c.high-coupon; high-yield
d.low-yield; high-yield
16) in the context of a futures contract, the basis is defined as ______________.
a.the futures price minus the spot price
b.the spot price minus the futures price
c.the futures price minus the initial margin
d.the profit on the futures contract
17) a company that mines bauxite, an aluminum ore, decides to short aluminum futures.
this is an example of __________ to limit its risk.
a.cross-hedging
b.long hedging
c.spreading
d.speculating
18) a typical hedge fund incentive bonus is usually equal to ________ of investment
profits beyond a predetermined benchmark index.
a.5%
b.10%
c.20%
d.25%
19) a decrease of 1% in both your tax exemption and your income tax rate would, on
net, _______________.
a.make you better off
b.make you worse off
c.make you neither better off nor worse off
d.make you either better or worse off depending on your age
20) 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
debt-to-equity ratio for 2012 is _________.
a.2.13
b.2.44
c.2.56
d.2.89
