1) A firm that follows a differentiation strategy
a. Must heavily discount its prices.
b. Must command prices near the industry average.
c. Must focus on providing exceptional quality and service.
d. All of the above.
e. None of the above.
2) A number of factors affect the cash flow and risk prospects of different industries.
Which of the following is not such a factor?
a. Demographics
b. Life-styles
c. Technology
d. Politics
e. None of the above (that is, all are factors to be considered)
3) An expiration date payoff and profit diagram for forward positions illustrates
a. Gains and losses are usually small
b. The payoffs to both long and short positions in the forward contract are asymmetrical
around the contract price
c. Forward contracts are zero-sum games
d. Long positions benefit from falling prices
e. None of the above
4) In the Black-Scholes option pricing model, an increase in time to expiration (T) will
cause
a. An increase in call value and an increase in put value
b. An increase in call value and a decrease in put value
c. A decrease in call value and an increase in put value
d. A decrease in call value and a decrease in put value
e. An increase in call value and an increase or decrease in put value
5) Exhibit 19.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The following information is given concerning a pure yield pick-up swap: You currently
hold a 10 year, 7 percent coupon bond priced to yield 8 percent. As a swap candidate
you are considering a 10 year, 8 percent coupon bond priced to yield 9 percent. Assume
a reinvestment at 9 percent, semiannual compounding, and a one-year workout period.
The realized compound yield on the candidate bond is
a. 7.0%
b. 11.0%
c. 10.0%
d. 9.0%
e. 12.0%
6) Exhibit 12.6
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the following information that you propose to use to obtain an estimate of
year 2004 EPS for the MacLog Company.
In addition a regression analysis indicates the following relationship between growth in
sales per share for MacLog and GDP growth is
Calculate the firm’s EBT per share for the year 2004.
a. $13.29
b. $27.89
c. $18.75
d. $19.63
e. $22.91
7) A technical analyst would consider a put call ratio of ____ as a bearish indicator.
a. 30 percent
b. 40 percent
c. 50 percent
d. 60 percent
e. 70 percent
8) Refer to Exhibit 8.1. Compute the intercept of the characteristic line for RA
Computer.
a. -9.41
b. 11.63
c. 4.92
d. -4.92
e. -7.98
9) Exhibit 19.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The following information is given concerning a substitution swap. You currently hold
a 15 year, 7 percent coupon bond priced to yield 8 percent. As a swap candidate you are
considering a 15 year, 7 percent coupon bond priced to yield 8.5 percent. Assume a
reinvestment rate of 8.5 percent, semiannual compounding, and a one-year workout
period.
The dollar investment in the candidate bond is
a. $812.57
b. $803.22
c. $874.16
d. $746.83
e. $700.01
10) When a fixed income security is being traded at the price above its face value it is
trading
a. At a discount.
b. At par.
c. At a premium.
d. Flat.
e. No accrual.