1) The confidence index published by Barron’s is the ratio of the average yield on 10
top grade corporate bonds to the
a. Average yield on 30 blue chip corporate stocks.
b. Average yield on 40 convertible corporate bonds.
c. Yield on U.S. Treasury bills.
d. Yield on the Dow Jones average of 40 bonds.
e. Yield on the Shearson Lehman Hutton Corporate Bond Index
2) Exhibit 22.7
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
GE Corporation has a put option selling for $2.90 and a call option selling for $1.95,
both with a strike price of $29.00.
What would the net value of a short straddle position be if the stock price at expiration
is $35?
a. -36.15
b. -7.15
c. -$1.15
d. $1.15
e. $7.15
3) The best way to directly acquire the shares of a foreign company is through
a.International mutual funds.
b.Global mutual funds.
c.American Depository Receipts.
d.Investment in U.S. companies operating internationally.
e.Eurobonds.
4) Exhibit 25.11
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The last year’s performance for four mutual funds is presented below. The market return
was 10.70%, last year with a standard deviation of 13.1% and the risk-free rate of return
was 5%.
Based on the Treynor Measure which portfolio preformed best?
a. A
b. B
c. C
d. D
e. Market
5) Exhibit 10.8
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Zeco Company has the following financial statements for year ending 12/31/2008.
The Zeco Company’s industry averages are as follows:
Net Profit Margin = 4.5%; Total Asset Turnover = 0.8; Total Assets/Equity = 1.5
Calculate Zeco Company’s Total Assets/Equity ratio.
a. 5.1
b. 6.1
c. 6.4
d. 8.7
e. 25.5
6) Components of overall portfolio performance include
a. Selectivity.
b. Manager’s risk.
c. Security risk.
d. a and b.
e. a, b and c.
7) Exhibit 14.9
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The Rollerball Corporation’s industry averages are as follows:
Net Profit Margin = 7.5%; Total Asset Turnover = 2.2; Total Assets/Equity = 2.0
Rollerball Corporation has the following financial statements for year ending
12/31/2008. (000’s omitted)
Calculate the sustainable growth rate for Rollerball Corporation.
a. 19.1%
b. 22.7%
c. 27.5%
d. 52.5%
e. 62.5%
8) Suppose you consider investing $15,000 in a load fund from which a fee of 5% is
deducted and you expect the fund to earn 12% over the next year. Alternatively, you
could invest in a no load fund which is expected to earn 10% and which takes a 1/2
percent redemption fee. Which is better and by how much?
a. Load fund by $318.45
b. No load fund by $457.50
c. Funds are equal
d. Load fund by $415.10
e. No load fund by $211.51
9) Which term-structure hypothesis suggests that any long-term interest rate simply
represents the geometric mean of current and future on-year interest rates expected to
prevail over the maturity of the issue?
a. Expectations hypothesis
b. Liquidity preference hypothesis
c. Segmented market hypothesis
d. Preferred habitat hypothesis
e. Hedging pressure hypothesis
10) Exhibit 11.8
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Fast Grow Corporation is expecting dividends to grow at a 20% rate for the next two
years. The corporation just paid a $2 dividend and the next dividend will be paid one
year from now. After two years of rapid growth dividends are expected to grow at a
constant rate of 9% forever.
Assume that the annual dividend grows at a constant rate of 9% indefinitely instead of
the supernormal growth. How much is the stock worth if dividends grow annually at
9%?
a. $40.00
b. $43.60
c. $45.60
d. $47.80
e. $52.40
11) In backtesting, computers are used to examine the composition and returns of
portfolios based on historical data in order to determine if the investment strategy
would have worked in the past.
12) Short selling is practiced when an investor borrows part of the cost of the
investment, e.g., they are ‘short” on cash.
13) High-yield bonds are considered “investment” grade.
14) Technicians consider a high short interest ratio to be bearish.
15) Treasury bills are long-term investments that make regular interest and principal
payments.