Which of the following is not one of the main areas covered in the examinations that
must be taken in order to achieve the designation of Chartered Financial Analyst?
A. investment management ethics
B. securities analysis
C. securities marketing techniques
D. portfolio management
Moving to higher-yield bonds, usually with longer maturities, is called ________.
A. a substitution swap
B. an intermarket spread swap
C. a rate anticipation swap
D. a pure yield pickup swap
Asset allocation refers to _________.
A. the allocation of the investment portfolio across broad asset classes
B. the analysis of the value of securities
C. the choice of specific assets within each asset class
D. none of the options
Which of the following yield curves generally implies a normal healthy economy?
A. positive slope
B. negative slope
C. flat
D. hump-shaped curve
A call option on Brocklehurst Corp. has an exercise price of $30. The current stock
price of Brocklehurst Corp. is $32. The call option is _________.
A. at the money
B. in the money
C. out of the money
D. knocked in
What strategy could be considered insurance for an investment in a portfolio of stocks?
A. covered call
B. protective put
C. short put
D. straddle
Assume there is a fixed exchange rate between the Canadian and U.S. dollars. The
expected return and standard deviation of return on the U.S. stock market are 10% and
15%, respectively. The expected return and standard deviation of return on the
Canadian stock market are 12% and 16%, respectively. The covariance of returns
between the U.S. and Canadian stock markets is .012. If you invested 50% of your
money in the Canadian stock market and 50% in the U.S. stock market, the standard
deviation of return on your portfolio would be __________.
A. 10.96%
B. 12.25%
C. 13.42%
D. 15.5%
A fund has assets denominated in euros and liabilities in yen due in 6 months. The
6-month forward rate for the euro is $1.36 per euro, and the 6-month forward rate for
the yen is 121 yen per dollar. The 6-month forward rate for the euro versus the yen
should be ________ per euro.
A. 88.97
B. 145.34
C. 154.67
D. 164.56
______________ is an important characteristic of the relationship between bond prices
and yields.
A. Convexity
B. Concavity
C. Complexity
D. Linearity
The two-factor model on a stock provides a risk premium for exposure to market risk of
12%, a risk premium for exposure to silver commodity prices of 3.5%, and a risk-free
rate of 4%. The beta for exposure to market risk is 1, and the beta for exposure to
commodity prices is also 1. What is the expected return on the stock?
A. 11.6%
B. 13%
C. 15.3%
D. 19.5%
Which emerging country had the highest percentage growth in market capitalization
during the 2000-2011 period?
A. Brazil
B. China
C. Columbia
D. Turkey
Underwriting is one of the services provided by _____.
A. the SEC
B. investment bankers
C. publicly traded companies
D. FDIC
According to the Black-Scholes option-pricing model, two options on the same stock
but with different exercise prices should always have the same _________________.
A. price
B. expected return
C. implied volatility
D. maximum loss
Which one of the following allows you to purchase the stock of a specific foreign
company?
A. WEBS
B. MSCI
C. ADR
D. EAFE
What is the lowest grade a bond can receive and still be considered investment grade?
A. AAA
B. A
C. BBB
D. BB
When the market breaks through the moving average line from below, a technical
analyst would probably suggest that it is a good time to
___________.
A. buy the stock
B. hold the stock
C. sell the stock
D. short the stock
Which of the following is not a money market instrument?
A. Treasury bill
B. commercial paper
C. preferred stock
D. bankers’ acceptance
If you are holding a premium bond, you must expect a _______ each year until
maturity. If you are holding a discount bond, you must expect a
_______ each year until maturity. (In each case assume that the yield to maturity
remains stable over time.)
A. capital gain; capital loss
B. capital gain; capital gain
C. capital loss; capital gain
D. capital loss; capital loss
If economic conditions are such that very slow growth is expected in the foreseeable
future, one would want to invest in industries with __________ sensitivity to economic
conditions.
A. below-average
B. average
C. above-average
D. Since growth is expected to be slow, sensitivity to economic conditions is not an
issue.
The risk-free rate, average returns, standard deviations, and betas for three funds and
the S&P 500 are given below.
What is the
Treynor
measure for
portfolio A?
A. 12.38%
B. 2.38%
C. .91%
D. 3.64%
Convexity of a bond is ___________.
A. the same as horizon analysis
B. the rate of change of the slope of the price-yield curve divided by the bond price
C. a measure of bond duration
D. none of these options
Which of the following are financial assets?
I. Debt securities
II. Equity securities
III. Derivative securities
A. I only
B. I and II only
C. II and III only
D. I, II, and III
Cache Creek Manufacturing Company is expected to pay a dividend of $4.20 in the
upcoming year. Dividends are expected to grow at the rate of 8% per year. The risk-free
rate of return is 4%, and the expected return on the market portfolio is 14%. Investors
use the CAPM to compute the market capitalization rate on the stock and use the
constant-growth DDM to determine the intrinsic value of the stock. The stock is trading
in the market today at $84. Using the constant-growth DDM and the CAPM, the beta of
the stock is
_________.
A. 1.4
B. .9
C. .8
D. .5
The hedge ratio is often called the option’s _______.
A. delta
B. gamma
C. theta
D. beta
If you place an order to buy or sell a share of a mutual fund during the trading day, the
order will be executed at _____.
A. the NAV calculated at the market close at 4 pm New York time
B. the real time NAV
C. the NAV delayed 15 minutes
D. the NAV calculated at the opening of the next day’s trading
Consider the expectations theory of the term structure of interest rates. If the yield curve
is downward-sloping, this indicates that investors expect short-term interest rates to
__________ in the future.
A. increase
B. decrease
C. not change
D. change in an unpredictable manner
You take a long position in a futures contract of one maturity and a short position in a
contract of a different maturity, both on the same commodity. This is called a
__________.
A. cross-hedge
B. reversing trade
C. spread position
D. straddle
To construct a riskless portfolio using two risky stocks, one would need to find two
stocks with a correlation coefficient of ________.
A. 1
B. .5
C. 0
D. -1
The invoice price of a bond is the ______.
A. stated or flat price in a quote sheet plus accrued interest
B. stated or flat price in a quote sheet minus accrued interest
C. bid price
D. average of the bid and ask price
Which one of the following contracts requires no cash to change hands when initiated?
A. listed put option
B. short futures contract
C. forward contract
D. listed call option
Which of the following industries would most analysts classify as mature?
A. internet service providers
B. biotechnology
C. wireless communication
D. auto manufacturing
You invest $1,000 in a complete portfolio. The complete portfolio is composed of a
risky asset with an expected rate of return of 16% and a standard deviation of 20% and
a Treasury bill with a rate of return of 6%. The slope of the capital allocation line
formed with the risky asset and the risk-free asset is approximately _________.
A. 1.040
B. .80
C. .50
D. .25
Which one of the following stock return statistics fluctuates the most over time?
A. covariance of returns
B. variance of returns
C. average return
D. correlation coefficient