1) for which of the following goods are services are prices least sticky?
a.taxi fares
b.haircuts
c.microwave ovens
d.airlines tickets
2) an important characteristic of market equilibrium is _______________.
a.the presence of many opportunities for creating zero-investment portfolios
b.all investors exhibit the same degree of risk aversion
c.the absence of arbitrage opportunities
d.the lack of liquidity in the market
3) the arithmetic average of -11%, 15%, and 20% is ________.
a.15.67%
b.8%
c.11.22%
d.6.45%
4) portfolio a has a beta of .2 and an expected return of 14%. portfolio b has a beta of .5
and an expected return of 16%. the risk-free rate of return is 10%. if you manage a
long-short equity fund and want to take advantage of an arbitrage opportunity, you
should take a short position in portfolio ______ and a long position in portfolio
__________.
a.a; a
b.a; b
c.b; a
d.b; b
5) a firm has an earnings retention ratio of 40%. the stock has a market capitalization
rate of 15% and an roe of 18%. what is the stock’s p/e ratio?
a.12.82
b.7.69
c.8.33
d.9.46
6) to earn a high rating from the bond rating agencies, a company would want to have:
i. a low times-interest-earned ratio
ii. a low debt-to-equity ratio
iii. a high quick ratio
a.i only
b.ii and iii only
c.i and iii only
d.i, ii, and iii
7) a 45 call option on a stock priced at $50 is priced at $6.50. this call has an intrinsic
value of ______ and a time value of _____.
a.$6.50; $0
b.$6.50; $0
c.$5; $1.50
d.$5; $1.50
e.$1.50; $5
f.$1.50; $5
g.$0; $6.50
h.$0; $6.50
8) you find the option prices for three june call options on the same stock. the 95 call
has an implied volatility of 25%, the 100 call has an implied volatility of 25%, and the
105 call has an implied volatility of 30%. if you believe this represents a mispricing
situation. you may want to ____________________________.
a.buy the 105 call and write the 100 call
b.buy the 105 call and write the 95 call
c.buy either the 95 or the 100 call and write the 105 call
d.write the 105 call and write either the 95 or the 100 call
9) tax shelters __________________.
a.postpone payment of tax liabilities
b.decrease investment risk
c.increase the pretax rate of return earned
d.benefit the government more than the investor
10) maintenance requirements for margin accounts are set by ____.
a.brokerage firms
b.the sec
c.the federal reserve system’s board of governors
d.the supreme court
11) single stock futures, as opposed to stock index futures, are _______________.
a.not yet being offered by any exchanges
b.offered overseas but not in the united states
c.currently trading on one chicago, a joint venture of several exchanges
d.scheduled to begin trading in 2015 on several exchanges
12) the material wealth of society is determined by the economy’s _________, which is
a function of the economy’s _________.
a.investment bankers; financial assets
b.investment bankers; real assets
c.productive capacity; financial assets
d.productive capacity; real assets
13) cash cows are typically found in the _________ stage of the industry life cycle.
a.start-up
b.consolidation
c.maturity
d.relative decline
14) historically, the best asset for the long-term investor wanting to fend off the threats
of inflation and taxes while making his money grow has been ____.
a.stocks
b.bonds
c.money market funds
d.treasury bills
15) which of the following statements best describes price flexibility in the economy?
a.prices tend to be sticky in the short run and stuck in the long run.
b.prices tend to be just as sticky in the short run as in the long run.
c.prices tend to be sticky in the short run, but become more flexible over time.
d.prices tend to be flexible in the short run, but become more sticky over time.