1) in 1980 the dollar-yen exchange rate was about $.0045. in 2012 the yen-dollar
exchange rate was about 80 yen per dollar. a japanese producer would have had to
increase the dollar price of a good sold in the united states by approximately _____ to
maintain the same yen price in 201
a.178%
b.79.5%
c.265.4%
d.36%
2) consider the theory of active portfolio management. stocks a and b have the same
beta and the same positive alpha. stock a has higher nonsystematic risk than stock b.
you should want __________ in your active portfolio.
a.equal proportions of stocks a and b
b.more of stock a than stock b
c.more of stock b than stock a
d.the answer cannot be determined from the information given.
3) economic value added (eva) is:
a.the difference between the return on assets and the opportunity cost of capital times
the capital base
b.roa roe
c.a measure of the firm’s abnormal return
d.largest for high-growth firms
4) which of the following statistics cannot be negative?
a.covariance
b.variance
c.e(r)
d.correlation coefficient
5) a big increase in government spending is an example of a _________.
a.positive demand shock
b.positive supply shock
c.negative demand shock
d.negative supply shock
6) you are considering purchasing a put option on a stock with a current price of $33.
the exercise price is $35, and the price of the corresponding call option is $2.25.
according to the put-call parity theorem, if the risk-free rate of interest is 4% and there
are 90 days until expiration, the value of the put should be ____________.
a.$2.25
b.$3.91
c.$4.05
d.$5.52
7) an investor can design a risky portfolio based on two stocks, a and b. stock a has an
expected return of 21% and a standard deviation of return of 39%. stock b has an
expected return of 14% and a standard deviation of return of 20%. the correlation
coefficient between the returns of a and b is .4. the risk-free rate of return is 5%. the
proportion of the optimal risky portfolio that should be invested in stock b is
approximately _________.
a.29%
b.44%
c.56%
d.71%
8) in a particular year, salmon arm mutual fund earned a return of 16% by making the
following investments in asset classes:
the return on a bogey portfolio was 12%, based on the following:
the contribution of asset allocation across markets to the total excess return was
__________.
a.1.5%
b.2%
c.2.5%
d.3.5%
9) the primary objective of fundamental analysis is to identify __________.
a.well-run firms
b.poorly run firms
c.mispriced stocks
d.high p/e stocks
10) a firm reports ebit of $100 million. the income statement shows depreciation of $20
million. if the tax rate is 35% and total capital expenditures and increases in working
capital total $10 million, what is the free cash flow to the firm?
a.$57
b.$65
c.$75
d.$95
11) the expected return of the risky-asset portfolio with minimum variance is
_________.
a.the market rate of return
b.zero
c.the risk-free rate
d.the answer cannot be determined from the information given.
12) the fastest-growing category of hedge funds is feeder funds. these funds invest in
________.
a.other hedge funds
b.convertible securities and preferred stock
c.equities and bonds
d.managed futures and options
13) the financial statements of flathead lake manufacturing company are shown below:
note: the common shares are trading in the stock market for $15 per share
refer to the financial statements of flathead lake manufacturing company. the firm’s
return on equity ratio for 2012 is _________. (please keep in mind that when a ratio
involves both income statement and balance sheet numbers, the balance sheet numbers
for the beginning and end of the year must be averaged.)
a.6.5%
b.26.5%
c.33.4%
d.38%