1) earnings yields tend to _______ when treasury yields fall.
a.fall
b.rise
c.remain unchanged
d.fluctuate wildly
2) you sold short 300 shares of common stock at $30 per share. the initial margin is
50%. you must put up _________.
a.$4,500
b.$6,000
c.$9,000
d.$10,000
3) currently, the maximum combined taxable income of a retired household that avoids
having to pay any taxes on a portion of their social security benefit is ______.
a.$15,000
b.$32,000
c.$45,000
d.$75,000
4) an important assumption underlying the use of technical analysis techniques is that
___________________.
a.security prices adjust rapidly to new information
b.security prices adjust gradually to new information
c.security dealers will provide enough liquidity to keep price changes relatively small
d.all investors have immediate and costless access to information
5) firm a is high-risk, and firm b is low-risk. everything else equal, which firm would
you expect to have a higher p/e ratio?
a.firm a
b.firm b
c.both would have the same p/e if they were in the same industry.
d.there is not necessarily any linkage between risk and p/e ratios.
6) the major asset most people have during their early working years is their ________.
a.home
b.stock portfolio
c.earning power derived from their skills
d.bond portfolio
7) a __________ bond gives the issuer an option to retire the bond before maturity at a
specific price after a specific date.
a.callable
b.coupon
c.puttable
d.treasury
8) flanders, inc., has expected earnings of $4 per share for next year. the firm’s roe is
8%, and its earnings retention ratio is 40%. if the firm’s market capitalization rate is
15%, what is the present value of its growth opportunities?
a.-$6.33
b.$0
c.$20.34
d.$26.67
9) everything else equal, if you expect a larger interest rate increase than other market
participants, you should _________.
a.buy long-term bonds
b.buy short-term bonds
c.buy common stocks
d.buy preferred stocks
10) each listed stock option contract gives the holder the right to buy or sell
__________ shares of stock.
a.1
b.10
c.100
d.1,000
11) one way that life insurance firms can hedge the risk created by offering whole-life
insurance policies is by ________________.
a.holding long-term bonds
b.holding equities
c.holding short-term bonds
d.exercising its right to terminate the policy