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TIPS are ______.
A. Treasury bonds that pay no interest and are sold at a discount
B. U.K. bonds that protect investors from default risk
C. securities that trade on the Toronto stock index
D. Treasury bonds that protect investors from inflation
Which of the following is considered a sentiment indicator?
A. a 200-day moving average
B. short interest
C. credit balances in brokerage accounts
D. relative strength
_____ is a mechanism for mitigating potential agency problems.
A. Tying income of managers to success of the firm
B. Directors defending top management
C. Antitakeover strategies
D. All of the options.
Social Security is ____________.
A. a pension plan only
B. an insurance plan only
C. a combination of a pension and insurance plan
D. an involuntary intergenerational transfer
A firm that has an ROE of 12% is considering cutting its dividend payout. The
stockholders of the firm desire a dividend yield of 4% and a capital gain yield of 9%.
Given this information, which of the following statements is (are) correct?
I. All else equal, the firm's growth rate will accelerate after the payout change.
II. All else equal, the firm's stock price will go up after the payout change.
III. All else equal, the firm's P/E ratio will increase after the payout change.
A. I only
B. I and II only
C. II and III only
D. I, II, and III
Exchange-traded stock options expire on the _______________ of the expiration
month.
A. second Monday
B. third Wednesday
C. second Thursday
D. third Friday
As you lengthen the time horizon of your investment period and decide to invest for
multiple years, you will find that:
I. The average risk per year may be smaller over longer investment horizons.
II. The overall risk of your investment will compound over time.
III. Your overall risk on the investment will fall.
A. I only
B. I and II only
C. III only
D. I, II, and III
What is the term for the process used to assess portfolio manager performance?
A. active analysis
B. attribution analysis
C. passive analysis
D. Treynor-Black Analysis
Portfolio managers Martin and Krueger each manage $1 million funds. Martin has
perfect foresight, and the call option value of his perfect foresight is $150,000. Krueger
is an imperfect forecaster and correctly predicts 50% of all bull markets and 70% of all
bear markets. The correct measure of timing ability for Krueger is
__________.
A. 20%
B. 60%
C. 75%
D. 120%
The stock is
______ riskier
than the typical
stock.
A. 32%
B. 15.44%
C. 12%
D. 38%
______________ in interest rates are associated with stock market declines.
A. Anticipated increases
B. Unanticipated increases
C. Anticipated decreases
D. Unanticipated decreases
Empirical results estimated from historical data indicate that betas _________.
A. are always close to zero
B. are constant over time
C. of all securities are always between zero and 1
D. seem to regress toward 1 over time
The most significant conceptual difference between the arbitrage pricing theory (APT)
and the capital asset pricing model (CAPM) is that the CAPM _____________.
A. places less emphasis on market risk
B. recognizes multiple unsystematic risk factors
C. recognizes only one systematic risk factor
D. recognizes multiple systematic risk factors
According to SEC Rule 415 regarding shelf registration, firms can gradually sell
securities to the public for __________ following initial registration.
A. 1 year
B. 2 years
C. 3 years
D. 4 years
A firm has an ROE of 20% and a market-to-book ratio of 2.38. Its P/E ratio is
_________.
A. 8.4
B. 11.9
C. 17.62
D. 47.6
You write one MBI July 120 call contract (equaling 100 shares) for a premium of $4.
You hold the option until the expiration date, when MBI stock sells for $121 per share.
You will realize a ______ on the investment.
A. $300 profit
B. $200 loss
C. $600 loss
D. $200 profit
If an investor wants to invest 100% of her portfolio in safe assets but does not want to
manage her portfolio, she should invest in
__________.
A. a money market fund
B. a growth stock fund
C. several different money market instruments
D. several different stocks
An example of a highly cyclical industry is the _________.
A. automobile industry
B. tobacco industry
C. pharmaceutical industry
D. utility industry
All other things equal (YTM = 10%), which of the following has the shortest duration?
A. a 30-year bond with a 10% coupon
B. a 20-year bond with a 9% coupon
C. a 20-year bond with a 7% coupon
D. a 10-year zero-coupon bond
To become a CFA, you must do all of the following except which one?
A. Pass three exams designed to ensure that you have sufficient knowledge of
investments.
B. Obtain 3 years of work experience in money management.
C. Become a member of a local Society of the Financial Analysts Federation.
D. Divest all your own stock holdings to eliminate any potential conflicts of interest
with client recommendations.
You want to earn a return of 10% on each of two stocks, A and B. Each of the stocks is
expected to pay a dividend of $4 in the upcoming year. The expected growth rate of
dividends is 6% for stock A and 5% for stock B. Using the constant-growth DDM, the
intrinsic value of stock A _________.
A. will be higher than the intrinsic value of stock B
B. will be the same as the intrinsic value of stock B
C. will be less than the intrinsic value of stock B
D. The answer cannot be determined from the information given.
The delta of a call option on a stock is always __________.
A. negative and less than -1
B. between -1 and 1
C. positive
D. positive but less than 1
A portfolio generates an annual return of 17%, a beta of 1.2, and a standard deviation of
19%. The market index return is 12% and has a standard deviation of 16%. What is the
M2 measure of the portfolio if the risk-free rate is 4%?
A. 2.15%
B. 2.76%
C. 2.94%
D. 3.14%
Which of the following variables do Fama and French claim do a better job explaining
stock returns than beta?
I. Book-to-market ratio
II. Unexpected change in industrial production
III. Firm size
A. I only
B. I and II only
C. I and III only
D. I, II, and III
High P/E firms tend to be poor investments. This illustrates which of the following
information processing errors?
A. forecasting error
B. over-confidence
C. conservatism
D. sample-size neglect and representativeness
You are cautiously bullish on the common stock of the Wildwood Corporation over the
next several months. The current price of the stock is $50 per share. You want to
establish a bullish money spread to help limit the cost of your option position. You find
the following option quotes:
To establish a bull money spread with puts, you would _______________.
A. sell the 55 put and buy the 45 put
B. buy the 45 put and buy the 55 put
C. buy the 55 put and sell the 45 put
D. sell the 45 put and sell the 55 put
A bond pays annual interest. Its coupon rate is 9%. Its value at maturity is $1,000. It
matures in 4 years. Its yield to maturity is currently 6%.
The duration of this bond is _______ years.
A. 2.44
B. 3.23
C. 3.56
D. 4.1
From day 1
to day 4, the
confidence
index has _____. This is _____.
A. increased; bullish
B. decreased; bullish
C. increased; bearish
D. decreased; bearish
A tax free municipal bond provides a yield of 2.34%. What is the equivalent taxable
yield on the bond given a 28% tax bracket?
A. 2.34%
B. 2.68%
C. 3.25%
D. 4.92%
The financial statements of Flathead Lake Manufacturing Company are shown below.
Note: The common shares are trading in the stock market for $15 per share.
Refer to the financial statements of Flathead Lake Manufacturing Company. The firm's
cash flow from operating activities for 2015 was _______.
A. $810,000
B. $775,000
C. $755,000
D. $735,000
Some argue that abnormally high returns of hedge funds are tainted by __________,
which arises when unsuccessful funds cease operations, leaving only successful ones.
A. reporting bias
B. survivorship bias
C. backfill bias
D. incentive bias
