The _________ is a plot of __________.
a. CML . . . individual stocks and efficient portfolios
b. CML . . . both efficient and inefficient portfolios, only
c. SML . . . individual securities and efficient portfolios
d. SML . . . individual securities, inefficient portfolios, and efficient portfolios.
According to Markowitz, an efficient portfolio is one that has the
a. largest expected return for the smallest level of risk
b. largest expected return and zero risk
c. largest expected return for a given level of risk
d. smallest level of risk
U.S. investors can buy equities from companies that comprise more than what fraction
of the world’s market capitalization and what fraction of the world’s GDP.
a. 1/5th world market cap, 1/4th world GDP
b. 1/4th world market cap, 1/3rd world GDP
c. 1/3rd world market cap, 1/2 world GDP
d. 1/2 world market cap, 2/3rds world GDP
Which of the following statements regarding common stocks is true?
a. The par value of common stock is usually $100
b. The market value of common stock is equal to its book value
c. Dividends on common stock are at the discretion of the company
d. Common stock has a senior claim on company assets
Investment professionals who take companies public, arrange mergers and acquisitions,
and participate in municipal bond issues are :
a. registered representatives
b. security analysts
c. investment bankers
d. portfolio managers
All of the following are interchangeable terms except for:
a. discount rate
b. coupon rate
c. required rate of return
d. capitalization rate
Assume that the dividend payout ratio on the S&P 500 will be 40 percent when the rate
on long-term government bonds falls to 9 percent. Investors being risk averse demand
an equity risk premium of 8 percent. If the growth rate of dividends is expected to be 10
percent, what will be the price of the market index if the earnings expectation is $30?
a. $384.00
b. $213.44
c. $266.56
d. $171.43
The price/sales ratio indicates:
a. the amount of risk in the firm’s operations.
b. what the market is willing to pay for a firm’s revenues.
c. the price advantage a company has for its brand names.
d. what the analysts see as the breakup value of the firm.
Some OTC stocks are traded through the:
a. Blue Sheets.
b. Red Sheets.
c. Pink Sheets
d. Green Sheets.
Multinational companies often follow the U.S. lead in restructuring processes and
adopting new technologies. As a consequence,
a. foreign equities markets are driven by earnings growth and political considerations,
like U.S. equities markets.
b. foreign equities markets are driven by earnings growth and political considerations,
unlike U.S. equities markets.
c. foreign equities markets are driven by earnings growth and interest rate changes, like
U.S. equities markets.
d. foreign equities markets are driven by earnings growth and interest rate changes,
unlike U.S. equities markets.
Total return is equal to:
a. capital gain + price change.
b. yield + income.
c. capital gain – loss.
d. yield + price change.
A stock is at $68. A two-month put (strike price = $70) is available at a $6 premium..
The intrinsic value is ___ and the time value is ____.
a. $0 . . . $4.
b. $3 . . . $5.
c. $2 . . . $4.
d. $2 . . . $3.
The following information is to be used to answer questions
SD_ Beta alpha R 2
_
Fund 1 1.97 1.0 1.3 0.95
Fund 2 2.94 0.8 0.6* 0.80
Fund 3 3.82 1.2 -3.5 0.90
Fund 4 4.70 1.4 4.2 0.65
*Significant at the 5 percent level
Which of the funds’ returns are best explained by the market’s returns?
a. Fund 1
b. Fund 2
c. Fund 3
d. Fund 4
*Significant at the 5 percent levelConsider the five funds shown below:
Fund _a_ _b_ R 2
_ 1 4.0
0.9 0.90 2 -1.6* 1.2 0.95 3
2.5 0.9 0.90 4 1.2 0.8 0.89
5 0.9* 1.3 0.90
a. Which fund’s returns are best explained by the market’s returns?
b. Which fund had the largest total risk?c. Which fund had the lowest market risk? The
highest?
d. Which fund(s), according to Jensen’s alpha, outperformed the market?
NASDAQ stocks:
a. are generally foreign stocks.
b. trade via the Blue Sheets.
c. are not generally listed on organized exchanges.
d. represent less than 1,000 companies.
Which of the following is a market anomaly?
a. A relationship between money supply growth and stock prices.
b. A relationship between P/E ratios and subsequent stock returns.
c. Independence of stock price changes.
d. Adjustment of stock prices due to accounting changes.
With a discrete probability distribution:
a. a probability is assigned to each possible outcome
b. possible outcomes are constantly changing
c. an infinite number of possible outcomes exist
d. there is no variance
Industry analysis is important because:
a. companies can only do as well as their industry.
b. industries often have an inverse relationship to the market.
c. industries perform very differently over time.
d. companies in declining industries lose money.
Zero-coupon bonds are similar to Treasury bills in that both:
a. are issued exclusively by the U.S. Treasury
b. are money-market securities
c. are capital-market securities
d. are sold at less than par
A major difference between a closed-end investment company and an open-end
investment company is that:
closed-end investment companies are generally much riskier.their security portfolios are
substantially different.closed-end investment companies are passive investments and
open-ends are not.closed-end companies have a more fixed capitalization.
A loading fee is a:
type of income tax.management fee.origination fee.sales charge.
Why are upward sloping yield curves more consistent with the usual risk-return tradeoff
than downward sloping yield curves?
Mr. Whiner bought 1,000 shares of Sure-Fire, Inc., common stock at 85 and sold three
months later at 73. He lost $12,000 plus commissions on this ill-fated stock purchase.
He then contacted the SIPC saying that he wanted to file a claim for his investment
losses. Is this loss covered by SIPC? What losses are covered?
What are some of the career opportunities in the investment industry?
Three theories have been proposed to explain the term structure of interest rates. They
are: ________________________, ______________________, and
____________________.