Over the past 5 years, DL Insulation has paid annual dividends of $1.40, $1.55, $1.70,
$1.73, and $1.77 per share. What is the geometric average dividend growth rate for this
period?
A. 4.80 percent
B. 5.79 percent
C. 5.88 percent
D. 6.04 percent
E. 6.33 percent
Security A and Security B have similar risks. However, Security A has a higher rate of
return than Security B. The return on Security A minus the return on Security B is
referred to as which one of the following?
A. market return
B. abnormal return
C. deviated return
D. excess return
E. real return
The Retail Box has an historical P/CF ratio of 21.5. The current CFPS is $1.42 and the
projected CFPS growth rate is 5.6 percent. The current EPS is $1.02. What is the
expected price of this stock one year from now?
A. $30.53
B. $32.24
C. $32.88
D. $34.11
E. $34.20
Art Supplies has a net income of $138,600. The firm has $1.25 million in assets and
$500,000 in liabilities. What is the return on equity?
A. 13.87 percent
B. 15.09 percent
C. 16.44 percent
D. 18.48 percent
E. 21.21 percent
Small-cap funds:
A. generally focus on dividend-paying stocks.
B. focus more on capital appreciation than on current income.
C. are defined as the smallest 20 percent of all funds based on total asset value.
D. are defined as the 20 percent of funds with the smallest NAVs.
E. are generally also classified as equity income funds.
Todd has a margin account with $17,400 in available cash. The initial margin is 70
percent and the maintenance margin is 30 percent. What is the maximum number of
shares he can purchase if the price per share is $44?
A. 395 shares
B. 564 shares
C. 698 shares
D. 744 shares
E. 842 shares
Which one of the following entails the use of computers to monitor prices and also to
submit trade orders in response to arbitrage opportunities?
A. computer simulation
B. computer hedging
C. automated monitoring
D. program trading
E. cash-futures parity
Market prices tend to _____ earnings “surprises”.
A. adjust quickly and efficiently to
B. overreact and then correct in response to
C. overreact and never correct in response to
D. ignore
E. adjust slowly to
Bay Marina, Inc. has net income of $53,700 and has 30,000 shares of stock outstanding.
Similar firms have a price-earnings ratio of 20. Given this, what should the market price
of Bay Marina, Inc. stock be per share?
A. $28.91
B. $29.29
C. $30.40
D. $33.91
E. $35.80
To be considered liquid, a security must:
A. be held in a cash account.
B. pay dividends.
C. be able to be sold on short notice.
D. be held for less than one year.
E. be able to be sold quickly with little, if any, price concession.
Tim purchased 5 put option contracts on Western Fields stock. The strike price was $35
and the option premium was $0.55. At expiration, the stock was selling for $35.75.
What is the payoff on the option contracts?
A. -$60
B. -$30
C. $0
D. $30
E. $60
By definition, stock index options would include an option on which one of the
following underlying assets?
A. gold
B. corn
C. U.S. dollar
D. S&P 500
E. U.S. Treasury bill
Which one of the following is considered the best method of comparing the returns on
various-sized investments?
A. total dollar return
B. real dollar return
C. absolute dollar return
D. percentage return
E. variance return
Which one of the following is defined as U.S. dollar-denominated deposits held in a
foreign bank?
A. Eurodollars
B. foreign funds
C. certificates of deposits
D. banker’s acceptances
E. T-bills
A stock has an average historical risk premium of 5.6 percent. The expected risk-free
rate for next year is 2.4 percent. What is the expected rate of return on this stock for
next year?
A. 6.50 percent
B. 7.53 percent
C. 8.00 percent
D. 9.34 percent
E. 11.70 percent
A short sale:
A. creates a long position in a stock.
B. involves the borrowing of securities.
C. is the purchase of less than 100 shares of a stock.
D. is a bullish outlook towards a security.
E. is the resale of a security within four hours of purchase.
Which one of the following represents the amounts owed by a firm to other parties?
A. assets
B. cash inflows
C. equities
D. liabilities
E. expenses
A portfolio consists of the following two funds.
What is the expected return on fund A?
A. 12.0 percent
B. 13.3 percent
C. 13.7 percent
D. 14.5 percent
E. 15.7 percent
What is the 4-day simple moving average as of day 7, given the following information?
A. $42.88
B. $43.13
C. $43.22
D. $43.31
E. $44.61
A stock’s price has been relatively constant for an extended period of time. In this
instance, the Bollinger bands are:
A. relatively close to each other.
B. non-existent.
C. vertical.
D. steeply upsloping.
E. steeply downsloping.
While reviewing mutual fund reports, Alex noticed that a fund was reported as “closed”.
What is the primary reason for closing a fund?
A. all issued shares have been sold
B. the fund is suffering a loss
C. the NAV has declined noticeably
D. the fund has grown too large in size
E. the fund is underperforming its peers
Which one of the following is generally true concerning securities held in street name?
A. The securities are registered under your mailing address rather than your name.
B. There is a greater likelihood the security may be stolen.
C. All dividend checks are mailed to your street address.
D. The annual stock report is mailed directly to your street address.
E. The brokerage firm is the owner of record.
Which one of the following is an accounting statement that provides information on a
firm’s revenues and expenses?
A. balance sheet
B. cash budget
C. pro-forma balance sheet
D. income statement
E. cash flow statement
Which one of the following had the narrowest bell curve for the period 1926-2012?
A. large-company stocks
B. long-term corporate bonds
C. long-term government bonds
D. small-company stocks
E. U.S. Treasury bills
Which one of the following statements regarding PAC bonds is correct?
A. The cash flows from a PAC bond are less certain than those from a Z-tranche bond
from a sequential CMO.
B. PAC bondholders receive the residual cash flows from the underlying mortgage pool.
C. PAC bonds are defined by the specific rules which created them.
D. PAC bonds have bounds based on market interest rates.
E. PAC bond cash flows are unaffected by mortgage prepayments.
Peter hesitates when it comes to picking an individual stock to purchase as he feels that
he will later realize that a different stock would have been a better investment. Peter is
suffering from:
A. money illusion.
B. frame dependence.
C. regret aversion.
D. risk-taking.
E. mental accounting.
You own twelve (12) 6.25 percent coupon bonds with a total maturity value of $12,000.
How much will you receive every six months as an interest payment?
A. $213.50
B. $375.00
C. $427.00
D. $540.00
E. $750.00
An investment company:
A. specializes in investing funds on behalf of a financial institution.
B. is a closed-end fund that invests in real estate.
C. pools funds from individual investors.
D. is a specific type of a bank.
E. is a specialized form of a joint stock company.
Which of the following factors contributed to the Crash of 1987?
I. irrational investors
II. program trading
III. panic selling
IV. price uncertainty
A. II and IV only
B. I, II, and III only
C. I, II, and IV only
D. II, III, and IV only
E. I, II, III, and IV
The yield value of a 32nd is the change needed in which one of the following to cause a
bond’s price to change by 1/32nd?
A. current yield
B. yield to maturity
C. coupon rate
D. call premium
E. call date
The common stock of Blasco Books has a standard deviation of 16.4 percent as
compared to the market standard deviation of 12.7 percent. The covariance of this stock
with the market is .0217. What is the beta of Blasco Books’ stock?
A. .96
B. 1.05
C. 1.07
D. 1.35
E. 1.42
Which one of the following applies to a naked call?
A. unlimited potential profits
B. unlimited potential losses
C. sale of a put on a stock you do not own
D. sale of a call on a stock you currently own
E. purchase of a call on a stock you do not own
Contingent deferred sales charges:
A. are applied at the time fund shares are purchased.
B. are applied only to front-end load funds.
C. are charged on an annual basis to cover distribution and marketing costs.
D. are no longer permissible.
E. can be avoided.
The risk-free rate is 3.4 percent and the expected return on the market is 10.8 percent.
Stock A has a beta of 1.18. For a given year, stock A returned 13.6 percent while the
market returned 11.8 percent. The systematic portion of the unexpected return was
_____ percent and the unsystematic portion was _____ percent.
A. 1.045; 0.207
B. 1.145; 0.126
C. 1.180; 0.288
D. 1.344; 1.443
E. 1.500; 1.449
Dennison Lumber announced last week that its unpopular CEO had resigned. In
response to this announcement, the firm’s stock price increased from $17 a share to $23
a share. The following day the price declined to $21 a share and has remained constant
at that level. This is an example of a(n):
A. over-reaction and correction.
B. underpricing.
C. delayed reaction.
D. pre-activity action.
E. efficient market reaction.