1) The growth rate (g) of dividends is affected by all of the following except
a. Required return
b. Retention rate
c. Total asset turnover
d. Financial leverage
e. Net profit margin
2) ____ has coupons denominated in a currency other than that of their principal.
a. Eurodollar bonds
b. Dual currency bonds
c. Euromarket bonds
d. Bi-currency bonds
e. Forward currency bonds
3) Exhibit 4.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Kathy Smith has a margin account with a balance of $60,000. Initial margin
requirements are 80 percent, and Jackson Industries is currently selling at $40 per share.
Refer to Exhibit 4.3. What is Kathy’s profit if Jackson’s price rises to $50?
a.$18,750
b.$15,750
c.$55,000
d.$37,750
e.$28,570
4) The US secondary market with the largest number of issues traded is the:
a.AMEX
b.NASDAQ
c.NYSE
d.LSE
e.Both a and c
5) The Investment Advisors Act of 1940
a. Contains various anti-fraud provisions and record keeping and reporting requirements
for fund advisors.
b. Regulates broker-dealers.
c. Requires federal registration of all public offerings of securities.
d. Regulates the structure and operations of mutual funds.
e. Contains a code of ethics and standards of professional conduct.
6) Exhibit 25.11
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The last year’s performance for four mutual funds is presented below. The market return
was 10.70%, last year with a standard deviation of 13.1% and the risk-free rate of return
was 5%.
Based on the Sharpe Measure which portfolio preformed best?
a. A
b. B
c. C
d. D
e. Market
7) Exhibit 5.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
*2:1 Split on Stock Z after Close on Jan. 13, 2005
**3:1 Split on Stock X after Close on Jan. 15, 2005
The base date for index calculations is January 13, 2005
Refer to Exhibit 5.2. What is the divisor at the beginning of January 16th?
a.1.9375
b.3.0
c.2.5
d.2.2734
e.None of the above
8) What effect does a stock substitution or stock split have on a price-weighted series?
a.Index remains the same, divisor will increase/decrease.
b.Divisor remains the same, index will increase/decrease.
c.Index and divisor will both remain the same.
d.Index and divisor will both reflect the changes (immediately).
e.Not enough information is provided.
9) The promised yield to maturity calculation assumes that
a. All coupon interest payments are reinvested at the current market interest rate for the
bond.
b. All coupon interest payments are reinvested at the coupon interest rate for the bond.
c. All coupon interest payments are reinvested at short term money market interest
rates.
d. All coupon interest payments are not reinvested.
e. None of the above
10) A money spread involves buying and selling call options in the same stock with
a. The same time period and exercise price.
b. The same time period but different exercise price.
c. A different time period but same exercise price.
d. A different time period and different exercise price.
e. Options in different markets.
11) A bond typically pays interest payments every six months equal to the coupon rate
times the face value of the bond.
12) Because all firms in an industry do not move together there is little value in industry
analysis.
13) As of 2008, approximately 80% of all new municipal bond issues are insured.
14) A measure that only considers deviations above the mean is semi-variance.
15) Using the S&P index as the proxy market portfolio when evaluating a portfolio
manager relative to the SML will tend to underestimate the manager’s performance.
16) In the rapid accelerating growth stage, profit margins are typically very high.
17) Cash flows for nonlife insurance companies, such as property and casualty, are
similar to cash flows of life insurance companies.
18) An investor is risk neutral if she chooses the asset with lower risk given a choice of
several assets with equal returns.