Sugar Tree Cookies has current net income of $268,000 of which $110,000 was paid
out in dividends. The remaining $158,000 will be shown in which account on the firm’s
financial statements for next year?
A. long-term debt
B. common stock
C. net income
D. retained earnings
E. paid in surplus
Faith placed an order to sell 7,500 shares of stock she currently owned. As soon as the
order reached the trading floor, the shares were immediately sold. Which type of order
did Faith place?
A. limit
B. day
C. market
D. short
E. stop
Which one of the following is an analysis of a firm’s sources and uses of cash over a
period of time?
A. income statement
B. pro-forma income statement
C. cash flow statement
D. tax return
E. balance sheet
The average compound return earned per year over a multi-year period is called the:
A. total return
B. average capital gains yield
C. variance
D. arithmetic average return
E. geometric average return
An asset had annual returns of 17, -35, -18, 24, and 6 percent, respectively, over the
past five years. What is the arithmetic average return?
A. -1.2 percent
B. 0.8 percent
C. 1.2 percent
D. 1.6 percent
E. 2.3 percent
Which one of the following prices will an individual investor receive if he or she sells
shares of Microsoft?
A. bid
B. ask
C. issue
D. offer
E. Dutch
You invested $5,000 eight years ago. The arithmetic average return on your investment
is 10.6 percent and the geometric average return is 10.23 percent. What is the value of
your portfolio today?
A. $9,092
B. $10,623
C. $10,899
D. $10,947
E. $11,195
What is the expected return on this stock given the following information?
A. 6.40 percent
B. 6.57 percent
C. 8.99 percent
D. 13.40 percent
E. 14.25 percent
What is the monthly mortgage payment on a $255,000, 25-year loan if the interest rate
is 5.50 percent?
A. $1,034.07
B. $1,468.75
C. $1,565.92
D. $1,893.14
E. $2,622.47
You own a 6-month futures contract on U.S. Treasury notes. The underlying notes have
a duration of 3.87 years. What is the duration of the futures contract?
A. 3.37 years
B. 3.67 years
C. 3.87 years
D. 4.12 years
E. 4.37 years
The VIX is a measure of which one of the following?
A. changes in the daily trading volume of the NASDAQ 100
B. investor expectations of future market volatility of the S&P 500
C. minute-by-minute changes in the value of the NASDAQ 100
D. number of option contracts outstanding on the S&P 500
E. the opening and closing historical values of the S&P 500
The U.S. Treasury bill is yielding 3.0 percent and the market has an expected return of
11.6 percent. What is the Treynor ratio of a correctly-valued portfolio that has a beta of
1.02, and a standard deviation of 12.2 percent?
A. .074
B. .086
C. .102
D. .619
E. .628
Use these option quotes to answer this question:
What price will you receive (per underlying share) if you sell the 47.50 call option on
JL stock?
A. $4.80
B. $5.00
C. $5.90
D. $6.00
E. $6.10
Jesse is researching chemical companies in an effort to determine which company’s
stock he should purchase. This process is known as:
A. market timing.
B. purchase shorting.
C. marketing research.
D. asset allocation.
E. security selection.
HNW Manufacturing, Inc. has 255,000 shares of stock outstanding. The firm paid out
$255,000 in dividends, $195,000 in interest, and added $193,700 to retained earnings
for the year. What is the amount of the earnings per share?
A. $0.70
B. $0.78
C. $1.47
D. $1.63
E. $1.76
Leslie Apparel has a current book value per share of $5.15 and current earnings per
share of $1.13. The required return is 14 percent and the expected earnings growth rate
is 4.5 percent. What is one share of this stock worth today?
A. $7.44
B. $8.77
C. $9.99
D. $10.65
E. $11.13
A security has a zero covariance with the market. This means that:
A. the return on the security is always equal to that of the market.
B. the return on the security moves in the same direction as the market return.
C. the security is a risk-free security.
D. there is no identifiable relationship between the return on the security and that of the
market.
E. the return on the security must vary more than that of the market.
Which one of the following is the range defined by the upper and lower prepayment
schedules of a PAC bond?
A. PAC collar
B. PAC range
C. PAC space
D. PAC cup
E. PAC field
Which category(ies) of investments had an annual rate of return that exceeded 100
percent for at least one year during the period 1926-2012?
A. only large-company stocks
B. both large-company and small-company stocks
C. only small-company stocks
D. corporate bonds, large-company stocks, and small-company stocks
E. No category earned an annual return in excess of 100 percent for any given year
during the period
Which one of the following proposes that lenders must be financially rewarded for
loaning funds on a long-term versus a short-term basis?
A. expectations theory
B. forward rate theory
C. market hypothesis
D. maturity preference theory
E. Fisher hypothesis
What is the annual interest divided by the market price of a bond called?
A. coupon rate
B. effective annual yield
C. current yield
D. yield to maturity
E. yield to market
Which one of the following is defined as the relationship between the interest rate on
default-free, pure discount bonds and the time to maturity?
A. discount rate curve
B. Treasury yield curve
C. risk premium structure
D. term structure of interest rates
E. market interest rate curve
Which one of the following terms is used to identify the NYSE rules which slow or stop
trading when the DJIA declines by more than a specified amount during a trading
session?
A. order flows
B. market timers
C. crash helmets
D. circuit breakers
E. trade barriers
Tony purchased 100 shares of T-Rex stock for $43 a share. On the same day, Sam also
purchased 100 shares of T-Rex stock for $43 a share. Tony paid cash for his purchase
while Sam used margin. The initial margin requirement on this stock is 60 percent while
the maintenance margin is 40 percent. Both Tony and Sam sold their shares after eight
months at a price of $40 a share. The stock pays no dividends. Tony had a holding
period percentage return of _____ percent as compared to Sam’s _____ percent return.
Ignore margin interest and trading costs.
A. -4.19; -6.98
B. -4.19; -11.63
C. -6.98; -4.19
D. -6.98; -11.63
E. -11.63; -7.56
A recent survey indicates that 1,731 people are bearish on the market for every 1,000
that are bullish. What is the value of the market sentiment index based on this
information?
A. .36
B. .43
C. .57
D. .63
E. .75
Which one of the following distinguishes an option as an American style option?
A. option that grants its holder the right to purchase at the strike price
B. option that grants its holder the right to sell at the strike price
C. option that obligates its holder to sell at the strike price
D. option that can be exercised at any time prior to expiration
E. option that can only be exercised at expiration
Two weeks ago Ace Electronics announced that it had developed a new chip design
which was being considered by major companies for use in future smart phone
development. At the close of trading the day before the announcement, Ace common
stock closed at $20. On the day following the announcement, Ace closed at $21. Two
days after the announcement the stock closed at $22.50. Four days after the
announcement the stock traded at $23. Last week, Ace stock traded at $26, a level it has
maintained since then. This is an example of a(n):
A. over-reaction and correction.
B. underpricing.
C. delayed reaction.
D. pre-activity action.
E. efficient market reaction.
Which one of the following statements is correct according to Malkiel’s Theorems?
A. For a given change in a bond’s yield to maturity, the shorter the term to maturity, the
greater will be the magnitude of the change in the bond’s price.
B. The price of an outstanding bond is unaffected by changes in market interest rates.
C. The size of the change in a bond’s price increases at a constant rate given even
incremental increases in a bond’s yield-to-maturity even as the term to maturity
lengthens.
D. For a given change in a bond’s yield-to-maturity, the absolute magnitude of the
resulting change in the bond’s price is directly related to the bond’s coupon rate.
E. For a given absolute change in a bond’s yield-to-maturity, a decrease in yield will
cause a greater change in the bond’s price than will an increase in yield.
Which one of the following is a basis point?
A. 1 percent
B. 0.1 percent
C. 0.01 percent
D. 0.001 percent
E. 0.0001 percent
If you want the right, but not the obligation, to sell a stock at a specified price you
should:
A. buy a call.
B. sell a call.
C. buy a put.
D. sell a put.
E. either sell a call or buy a put.
What is the call option premium given the following information?
A. $4.63
B. $5.28
C. $6.39
D. $7.60
E. $8.66
Precision Engineering recently announced that its next annual dividend will be $1.20
per share with later dividends increasing by 2.5 percent annually. What is the current
value of this stock to you if you require a 12 percent rate of return?
A. $12.63
B. $12.95
C. $13.05
D. $13.37
E. $13.72
Currently, the term “hedge fund” refers to:
A. any registered fund with a stated investment objective.
B. any unregistered fund pursuing any type of investment style.
C. any fund that equally invests in long and short positions.
D. any fund that adheres to a “market-neutral” investment strategy.
E. any private fund that has a minimum investment requirement of $1 million or more.
Which one of the following is the strategy of earning risk-free profits by taking
advantage of any unusual differences between cash and futures prices?
A. cash-futures arbitrage
B. mark-to-market
C. margin calling
D. basis recognition
E. cash spotting
Which one of the following prices is equal to the present value of a bond’s future cash
flows and is paid when a bond is redeemed prior to maturity?
A. call protected
B. face value
C. make-whole call
D. tender-offer
E. deferred