1) among emerging countries the largest equity market in 2011 was located in
_____________.
a.china
b.india
c.brazil
d.russia
2) two assets have the following expected returns and standard deviations when the
risk-free rate is 5%:
an investor with a risk aversion of a = 3 would find that _________________ on a
risk-return basis.
a.only asset a is acceptable
b.only asset b is acceptable
c.neither asset a nor asset b is acceptable
d.both asset a and asset b are acceptable
3) most studies indicate that investors’ risk aversion is in the range _____.
a.1-3
b.1.5-4
c.3-5.2
d.4-6
4)
identify the resistance-level stock price.
a.$40
b.$42
c.$44
d.$46
5) asset a has an expected return of 20% and a standard deviation of 25%. the risk-free
rate is 10%. what is the reward-to-variability ratio?
a..40
b..50
c..75
d..80
6) surf city software company develops new surf forecasting software. it sells the
software to microsoft in exchange for 1,000 shares of microsoft common stock. surf
city software has exchanged a _____ asset for a _____ asset in this transaction.
a.real; real
b.financial; financial
c.real; financial
d.financial; real
7) the two-factor model on a stock provides a risk premium for exposure to market risk
of 12%, a risk premium for exposure to silver commodity prices of 3.5%, and a
risk-free rate of 4%. the beta for exposure to market risk is 1, and the beta for exposure
to commodity prices is also 1. what is the expected return on the stock?
a.11.6%
b.13%
c.15.3%
d.19.5%
8) what is the standard deviation of a portfolio of two stocks given the following data:
stock a has a standard deviation of 18%. stock b has a standard deviation of 14%. the
portfolio contains 40% of stock a, and the correlation coefficient between the two
stocks is -.23.
a.9.7%
b.12.2%
c.14%
d.15.6%
9) choosing stocks by searching for predictable patterns in stock prices is called
________.
a.fundamental analysis
b.technical analysis
c.index management
d.random-walk investing
10) the risk-free rate, average returns, standard deviations, and betas for three funds and
the s&p 500 are given below.
what is the m2 measure for portfolio b?
a..43%
b.1.25%
c.1.77%
d.1.43%
11) a call option on brocklehurst corp. has an exercise price of $30. the current stock
price of brocklehurst corp. is $32. the call option is _________.
a.at the money
b.in the money
c.out of the money
d.knocked in
12) which of the following typically employ(s) significant amounts of leverage?
i. hedge funds
ii. equity mutual funds
iii. money market funds
iv. income mutual funds
a.i only
b.i and ii only
c.iii and iv only
d.i, ii, and iii only
13) in planning for retirement, an investor decides she will save $11,000 every year for
40 years. at an 11% return on her investment, how much money will she have at the end
of 40 years (to the nearest hundred thousand dollars)?
a.$1,400,000
b.$2,800,000
c.$4,900,000
d.$6,400,000
14) statistics show that life expectancy at age 66 for males is about _____ additional
years and for females is about _____ additional years.
a.15; 20
b.16; 19
c.18; 22
d.19; 24
15) you buy a call option on summit corp. with an exercise price of $40 and an
expiration date in september, and you write a call option on summit corp. with an
exercise price of $40 and an expiration date in october. this strategy is called a
_________.
a.time spread
b.long straddle
c.short straddle
d.money spread
16) under the provisions of a typical defined benefit pension plan, the employer is
responsible for _____________.
a.investing in conservative fixed-income assets
b.paying benefits to retired employees
c.counseling employees in the selection of asset classes
d.paying employees the market rate of return on employee contributions