1) Exhibit 10.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
What is BMC’S traditional cash flow?
a. 69
b. 86
c. 38
d. 55
e. 701
2) Exhibit 14.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Modular Industries currently has a 16% annual growth rate while the market average is
6 percent. The market multiple is 10.
Determine the justified P/E ratio for Modular Industries assuming Modular can
maintain its superior growth rate for the next 5 years.
a. 6.4
b. 13.1
c. 16.5
d. 23.8
e. 15.7
3) The optimal portfolio is identified at the point of tangency between the efficient
frontier and the
a. highest possible utility curve.
b. lowest possible utility curve.
c. middle range utility curve.
d. steepest utility curve.
e. flattest utility curve.
4) Which of the following would not normally be a reason for a bond swap?
a. Increasing current yield
b. Improving the quality of the portfolio
c. Taking advantage of interest rate shifts
d. Tax savings
e. Realigning the portfolio’s duration
5) When compared to the overall market P/E, the retail store P/E was estimated to be
____ and near the ____ of the range.
a. More volatile, low end
b. More volatile, high end
c. Less volatile, low end
d. Less volatile, high end
e. Equally volatile, middle
6) Funds that adjust the asset allocation weights in the portfolio to match the needs of
an investor who is nearing retirement are known as
a. Balanced funds
b. Flexible portfolio funds
c. Lifetime funds
d. Money market funds
e. Target date funds
7) Certificates of ownership issued by a U.S. bank that represent indirect ownership of a
certain number of shares of a specific foreign firm on deposit in a bank in the firm’s
home country are known as:
a.American Depository Receipts (ADRs)
b.Exchange Traded Funds (ETFs)
c.Warrants
d.Options
e.Futures
8) The retirement plan that promises to pay a specific benefit to its beneficiaries is
a. A defined contribution plan.
b. A defined benefit pension plan.
c. A non-contribution pension plan.
d. An actuarial pension plan.
e. Supplemental Retirement Account (SRA).
9) Excess return portfolio performance measures
a. Adjust portfolio risk to match benchmark risk.
b. Compare portfolio returns to expected returns under CAPM.
c. Evaluate portfolio performance on the basis of return per unit of risk.
d. Indicate historic average differential return per unit of historic variability of
differential return.
e. None of the above.
10) Exhibit 10.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
You are provided with the following information about Albermarle Corp.
Calculate the income tax rate.
a. 40.6%
b. 25.6%
c. 16.8%
d. 28.9%
e. 44.9%
11) Exhibit 19.10
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
You are creating a portfolio that consists of the following two bonds. Bond A pays an
annual 7% coupon, matures in two years, has a yield to maturity of 8%, and a face
value of $1,000. Bond B pays an annual 8% coupon, matures in three years, has a yield
to maturity of 9%, and a face value of $1,000.
Calculate the Macaulay Duration for Bond A.
a. 0.98
b. 1.79
c. 1.90
d. 1.93
e. 2.31
12) Which of the following is not a determinant of the capital gain component?
a. The percentage of earnings retained for reinvestment.
b. The relative rate of return earned on the funds retained.
c. The time period for these growth investments.
d. The amount of capital invested in growth investments.
e. All of the above are determinants of the capital gain component.
13) Technical analysts feel that financial accounting statements lack information, or
report it in a way that makes comparisons difficult. Which of the following does not
constitute a problem?
a. Detailed information concerning sales and expenses by product line.
b. Statements of change in financial position.
c. Alternative ways of reporting expenses.
d. Alternative ways of reporting assets and liabilities.
e. The availability of psychological and nonquantitative variables.
14) For a given change in yield bond price volatility is directly related to duration.
15) Some factors that determine financial risk include interest coverage and cash flow
coverage.
16) The most important input the investor must provide in determining option values is
the strike price.
17) Changes in the dividend payout ratio are positively related to changes in the
retention rate.
18) An appropriate composite risk measure that indicates the relative price volatility for
a bond compared to interest rate changes is the bond’s yield to maturity.
19) The confidence index increases as the yield on lower grade bonds decreases,
everything else being constant.