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1) All of the following are characteristics of a dealer market except:
a.Also referred to as a quote-driven market
b.NASDAQ market is a dealer market
c.Individual dealers buy and sell shares for themselves
d.Centralized trading location
e.All of the above are characteristics of a dealer market
2) Which of the following is not considered in the price-earnings ratio technique?
a. Firm's required rate of return on equity (k)
b. Firm's dividend payout ratio (D/E)
c. Firm's expected growth rate of dividends (g)
d. All of the above are components of P/E ratio
e. None of the above are components of P/E ratio
3) The offering price of a load fund equals the NAV of the fund
a. Less an initial requirement.
b. Plus a sales charge.
c. Plus a sales charge and an administrative fee.
d. Less a negotiated discount.
e. At its stated value.
4) Exhibit 20.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
On the last day of October, Bruce Springsteen is considering the purchase of 100 shares
of Olivia Corporation common stock selling at $37 1/2 per share and also considering
an Olivia option.
If Bruce buys a March put option with an exercise price of 40, what is his dollar gain
(loss) if he closes his position when the stock is selling at 43 1/2?
a. $825.00 loss
b. $475.00 loss
c. $350.00 loss
d. $25.00 loss
e. He has a gain
5) When ____ of stocks are trading above the 200-day moving average, the market is
considered ____, and subject to a ____.
a. 20%, oversold, negative correction
b. 80%, overbought, negative correction
c. 80%, oversold, positive correction
d. 20%, overbought, positive correction
e. None of the above
6) Exhibit 22.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
If you establish a long strap using the options with a 95 exercise price, what is your
dollar gain or loss if at expiration XYZ is still trading at 101 11/16?
a. $81.25 loss
b. $1,606.25 gain
c. $1,606.25 loss
d. $268.75 loss
e. $268.75 gain
7) Exhibit 4.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
You decide to sell 100 shares of Topgun Enterprises Inc. short when it is selling at its
yearly high of $42.25. Your broker tells you that your margin requirement is 60 percent
and that the commission on the sale is $20. While you are short, Topgun pays a $0.85
per share dividend. At the end of one year you buy your Topgun shares (cover your
short sale) at $44 and are charged a commission of $20 and a 5 percent interest rate.
Refer to Exhibit 4.5. What is your dollar return on the investment?
a.$384.50
b.$432.88
c.-$432.88
d.-$384.50
e.-$950.55
8) A tax swap involves swapping out of a
a. Bond to realize capital losses, into a comparable bond.
b. Low coupon bond, into a comparable high coupon bond.
c. High coupon bond, into a comparable low coupon bond.
d. Bond that is underpriced, into a comparable bond that is overpriced.
e. Bond that is overpriced, into a comparable bond that is underpriced.
9) Which of the following is not a reason given for why forecaster are so often
incorrect?
a. There is a temptation for economic forecasters to stay fairly close to the "norm," that
is, "group think."
b. Many analysts are simply too short-sighted.
c. Economists and economic forecaster often suffer from information overload.
d. Some economic forecasters are too broad-minded, trying to include a number of
ideas in their forecasts.
e. None of the above (that is, all are reasons cited for why forecasters are often
incorrect)
10) Exhibit 19.7
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider two bonds, both pay semiannual interest. Bond A has a coupon of 8% per
year, maturity of 30 years, yield to maturity of 9% per year, and a face value of $1000.
Bond B has a coupon of 8% per year, maturity of 30 years, yield to maturity of 9.5%
per year, and a face value of $1000.
Calculate the value of swap out of Bond A into Bond B.
a. 0.41%
b. 1.73%
c. 0.23%
d. 0.00%
e. 0.51%
11) Exhibit 18.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A $1000 par value bond with 4 years to maturity and a 5% coupon has a yield to
maturity of 6%. Interest is paid annually.
Calculate the modified duration for the bond.
a. 3.51 years
b. 3.61 years
c. 3.72 years
d. 4.38 years
e. 7.44 years
12) Since the market portfolio is reasonable in theory, it is easy to implement when
testing or using the CAPM.
13) The Eurodollar futures contract is a popular hedging vehicle because it is based on
the three-month LIBOR.
14) It is important to compare a firm's performance relative to: the aggregate economy,
its industry, its major competitors and its past performance.
15) Recent studies show that money supply changes have an important impact on stock
price movements.
16) In dividend discount models (DDM) with supernormal growth, supernormal growth
may continue indefinitely.
17) The price/cash flow ratio has grown in prominence and use for valuing firms
because many analysts contend that a firm's cash flow is less subject to manipulation
than the firm's earnings per share.
18) It is more important to estimate future earnings than the future earnings multiplier.
19) A support level is the price range at which the technician would expect an increase
in the supply of stock and a price reversal.
20) An equally weighted indicator series is also known as an unweighted indicator
series.
