FE 14262

subject Type Homework Help
subject Pages 13
subject Words 2066
subject Authors Bradford Jordan, Steve Dolvin, Thomas Miller

Unlock document.

This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
page-pf1
Riverside Metals recently issued some debt that had an original maturity of nine
months. This debt is best classified as a(n):
A. option contract.
B. money market instrument.
C. fixed-income security.
D. derivative security.
E. futures contract.
Assume that the Federal Reserve injects $45 billion into the financial system. If the
money supply increases by a maximum of $300 billion, what must the reserve
requirement be?
A. 10%
B. 12%
C. 15%
D. 18%
E. 20%
page-pf2
Two bonds have a coupon rate of 6.5 percent, semi-annual payments, face values of
$1,000, and yields to maturity of 7.1 percent. Bond S matures in 6 years and bond L
matures in 12 years. What is the difference in the current prices of these bonds?
A. $15.26
B. $16.19
C. $17.40
D. $18.38
E. $19.02
If you ignore a margin call, your broker:
page-pf3
A. will seize all the assets in your account.
B. will close your account.
C. may place a short sale on your behalf to cover the amount of the call.
D. may sell some of your securities to repay the margin loan.
E. will increase both your margin loan and the rate of interest on that loan.
PAC bondholders receive payments of principal based on which one of the following?
A. an amortization schedule
B. PAC collar's lower PSA prepayment schedule
C. PAC collar's upper PSA prepayment schedule
D. receipt of all principal collected on the underlying pool of mortgages until the bond
is paid in full
E. zero principal from the underlying pool of mortgages until after the PAC companion
bonds have been paid in full
page-pf4
Lakeside Sheet Metal is downsizing and plans on completely closing 3 years from now.
The firm's liquidation plan calls for annual dividends of $3, $6, and $36 over the next 3
years, respectively. What is the current value of this stock given a discount rate of 14
percent?
A. $26.94
B. $27.16
C. $28.46
D. $31.50
E. $36.29
You have decided to pay $1,800 a month on your 30-year, $225,000 mortgage. The
interest rate is 7.75 percent. What is your total prepayment amount for year two?
A. $2,208
B. $2,257
C. $3,387
D. $3,979
E. $4,002
page-pf5
Newcomer Mills is a relatively new firm which will retain all of its earnings for the
next four years. Four years from now, the firm expects to pay its first dividend of $0.25
a share. After that, it intends to increase the dividend by 4 percent annually. What is the
value of this stock today at a discount rate of 12 percent?
A. $1.53
B. $1.78
C. $2.04
D. $2.22
E. $2.60
A stock produced annual returns of 5, -21, 11, 42, and 4 percent over the past five years,
respectively. What is the geometric average return?
A. 5.78 percent
B. 6.03 percent
C. 6.34 percent
D. 7.21 percent
E. 8.20 percent
page-pf6
Investment advisory firms generally provide which of the following services to a
mutual fund?
I. marketing
II. record keeping
III. investment research
IV. tax payment
A. I only
B. II and III only
C. I, II, and III only
D. II, III, and IV only
E. I, II, III, and IV
You purchased six put option contracts with a strike price of $30 and a premium of
$0.90. At expiration, the stock was selling for $26.80 a share. What is the total net
amount you received for your shares, assuming that you disposed of your shares on the
page-pf7
expiration date?
A. $17,955
B. $17,460
C. $17,045
D. $17,815
E. $17,160
What is the beta of an average asset?
A. 0
B. > 0 but < 1
C. < 1
D. 1
E. > 1
page-pf8
Last year, ABC stock returned 11.4 percent, the risk-free rate was 3.2 percent, and the
inflation rate was 2.8 percent. What was the risk premium on ABC stock?
A. 8.20 percent
B. 8.43 percent
C. 8.60 percent
D. 8.88 percent
E. 8.97 percent
You are considering two bonds. Both have semi-annual, 8 percent coupons, $1,000 face
values, and yields to maturity of 7.5 percent. Bond S matures in 4 years and Bond L
matures in 8 years. What is the difference in the current prices of these bonds?
A. $10.51
B. $11.33
C. $11.52
D. $12.67
E. $12.88
page-pf9
Sales minus cost of goods sold are equal to which one of the following?
A. net sales
B. operating income
C. gross profit
D. pretax income
E. net income
Which one of the following is defined as anything a firm owns that has value?
A. equity
B. asset
C. liability
D. cash inflow
page-pfa
E. cash outflow
A stock has an average arithmetic return of 10.55 percent and an average geometric
return of 10.41 percent based on the annual returns for the last 15 years. What is
projected average annual return on this stock for the next 10 years?
A. 10.17 percent
B. 10.21 percent
C. 10.38 percent
D. 10.46 percent
E. 10.79 percent
Which of the following occurred during the Crash of 1987?
I. market prices were kept up-to-date which increased investors' anxiety
II. the market declined another 5 percent within the 2 days following the crash
III. trading volume exceeded the exchange's capacities
page-pfb
IV. NASDAQ went off-line
A. I and II only
B. III and IV only
C. I, II and IV only
D. II, III, and IV only
E. I, II, III, and IV
What is the total option premium you will receive if you sell 6 October $25 calls on
Texas Instruments?
A. $80
B. $350
C. $695
D. $4,170
E. $4,375
page-pfc
How much will you be paid if you own a bond that is called under a make-whole call
provision?
A. the face value
B. an amount equal to the par value plus the total amount of the remaining interest
payments
C. the present value of all future bond payments that will not be paid because of the call
D. the current market value plus a prespecified call premium
E. an amount equal to the normal maturity value of the bond
You can withdraw funds from your margin account without closing your futures
contract given which two of the following?
I. marking-to-market deducts funds from your margin account
II. marking-to-market adds funds to your margin account
III. margin balance after the withdrawal will exceed the maintenance margin
requirement
IV. margin balance after the withdrawal will exceed the initial margin requirement
A. I and III only
B. I and IV only
C. II and III only
D. II and IV only
E. Funds cannot be withdrawn as long as the futures contract is outstanding.
page-pfd
All else held constant, which of the following will increase the expected return on a
security based on CAPM? Assume the market return exceeds the risk-free rate and both
values are positive. Also assume the beta exceeds 1.0.
I. decrease in the security beta
II. increase in the market risk premium
III. decrease in the risk-free rate
IV. increase in the market rate of return
A. I and III only
B. II and IV only
C. I, II, and IV only
D. II, III, and IV only
E. I, II, III, and IV
Your broker requires an initial margin of $1,500 and a maintenance margin of $1,000 on
Treasury note futures. Treasury note futures contracts are based on a $100,000 par value
and quoted in points and one-half of 1/32 of a point. You own one Treasury futures
page-pfe
contract that had a closing settlement quote of 113"245 yesterday. Today, the settlement
quote is 112"265. Your margin balance at yesterday's close was $1,150. All margin calls
restore margin levels to their initial level. Will you receive a margin call based on
today's settlement quote and if so, for what amount?
A. no margin call
B. call for $1,037.50
C. call for $937.50
D. call for $1,100
E. call for $1,287.50
Which one of the following will increase the current residual income of a firm?
A. an increase in required earnings
B. a decrease in the current earnings per share
C. a decrease in future earnings per share
D. a decrease in the required return on the firm's equity
E. an increase in the firm's beginning book equity per share
page-pff
The U.S. Treasury bill is yielding 1.85 percent and the market has an expected return of
7.48 percent. What is the Treynor ratio of a correctly-valued portfolio that has a beta of
1.33 and a variance of .0045?
A. .056
B. .064
C. .069
D. .082
E. .087
According to the theory of recency bias, investors tend to believe the financial markets
will:
A. gravitate to their long-term average rates of return.
B. react over the next year in direct opposition to the performance of the prior year.
C. have a maximum of three years of positive annual returns before declining
somewhat.
D. continue to perform as they have over the past couple of years.
E. tend to reverse direction at least every five years.
page-pf10
A bond has a dollar value of an 01 of .0684. What is the yield value of a 32nd?
A. .4408
B. .4569
C. .4629
D. .4847
E. .5084
You currently own 300 shares of Microsoft stock. If you purchase options on this stock
to protect against future declines in the price of the stock you are implementing which
one of the following?
A. covered call
B. naked call
C. protective put
D. bear spread
E. straddle
page-pf11
At the beginning of the year, you invested $4,000 in a no-load mutual fund with a NAV
of $20.00. At the end of the year, the fund distributed $1.06 in short-term earnings and
$3.10 in long-term earnings. The end of year NAV was $19.42. What was your annual
rate of return on this investment?
A. -5.90 percent
B. -1.86 percent
C. 11.80 percent
D. 15.36 percent
E. 17.90 percent
Barn Wood Interiors announced today that it is going out of business. As of today, no
more regular dividends will be paid. The firm will, however, pay two liquidating
dividends. The first will be paid one year from now in the amount of $14 a share. The
second and final payment will be paid two years from now at an estimated $38 a share.
What is the value of this stock today at a discount rate of 18.7 percent?
A. $38.76
B. $39.03
page-pf12
C. $41.41
D. $43.78
E. $46.01
Which one of the following must be equal for two individual securities with differing
betas if those securities are correctly priced according to the capital asset pricing
model?
A. standard deviation
B. rate of return
C. beta
D. risk premium
E. reward-to-risk ratio
Historically, Jones Trucking has had a P/E ratio of 14.6. The firm has current net
page-pf13
income of $92,000 with 85,000 shares of stock outstanding. The EPS growth rate is 4.5
percent. What is the expected price of this stock one year from now?
A. $15.32
B. $15.85
C. $16.41
D. $16.51
E. $17.10
Last year, Kathy purchased 3 shares of stock A at $50 a share. At the same time, she
purchased 5 shares of stock B at $35 a share. Today, stock A is valued at $65 a share
and stock B is worth $42 a share. What is the relative strength of stock A as compared
to stock B?
A. .84
B. .88
C. .93
D. 1.04
E. 1.14

Trusted by Thousands of
Students

Here are what students say about us.

Copyright ©2022 All rights reserved. | CoursePaper is not sponsored or endorsed by any college or university.