1) when technical analysts say a stock has good “relative strength,” they mean that in
the recent past __________.
a.it has performed well compared to its closest competitors
b.it has exceeded its own historical high
c.trading volume in the stock has exceeded the normal trading volume
d.it has outperformed the market index
2) if a firm has a free cash flow equal to $50 million and that cash flow is expected to
grow at 3% forever, what is the total firm value given a wacc of 9.5%?
a.$679.81 million
b.$715.54 million
c.$769.23 million
d.$803.03 million
3) generally speaking, the higher a firm’s roa, the _________ the dividend payout ratio
and the _________ the firm’s growth rate of earnings.
a.higher; lower
b.higher; higher
c.lower; lower
d.lower; higher
4) bond prices are _______ sensitive to changes in yield when the bond is selling at a
_______ initial yield to maturity.
a.more; lower
b.more; higher
c.less; lower
d.equally; higher or lower
5) interest rate futures contracts exist for all of the following except __________.
a.federal funds
b.eurodollars
c.banker’s acceptances
d.repurchase agreements
6) between 1999 and 2010, the purchasing power of the u.s. dollar increased relative to
the purchasing power of _______.
a.the united kingdom
b.the euro
c.switzerland
d.canada
7) you want to minimize your current tax bill by maximizing your contributions to your
_____________.
a.taxable bond portfolio
b.roth retirement plan
c.401k or 403b plan
d.taxable savings account
8) investor a bought a call option, and investor b bought a put option. all else equal, if
the underlying stock price volatility increases, the value of investor a’s position will
______ and the value of investor b’s position will _______.
a.increase; increase
b.increase; decrease
c.decrease; increase
d.decrease; decrease
9) in situations of sticky prices and negative demand shocks we would expect firms to:
a.deplete inventories before increasing production.
b.reduce production before building up inventories.
c.build up inventories before reducing production.
d.lower prices before reducing production or building up inventories.
10) market risk is also called __________ and _________.
a.systematic risk; diversifiable risk
b.systematic risk; nondiversifiable risk
c.unique risk; nondiversifiable risk
d.unique risk; diversifiable risk
11) you sell short 300 shares of microsoft that are currently selling at $30 per share. you
post the 50% margin required on the short sale. if you earn no interest on the funds in
your margin account, what will be your rate of return after 1 year if microsoft is selling
at $27? (ignore any dividends.)
a.10%
b.20%
c.6.67%
d.15%