An investment will make one payment of $22,500 nine years from now. What is the
current value of this investment if the nominal rate of return is 4.8 percent?
A. $11,980.86
B. $12,124.29
C. $12,390.08
D. $13,515.46
E. $14,754.72
What is the put option premium given the following information?
A. $7.49
B. $7.98
C. $8.28
D. $8.76
E. $9.64
A firm has net sales of $65,000, operating expenses of $21,300, depreciation of $5,000,
cost of goods sold of $36,500, and interest expense of $4,500. What is the operating
margin?
A. -2.8 percent
B. 2.6 percent
C. 3.4 percent
D. 9.2 percent
E. 10.3 percent
Which one of the following market sentiment index (MSI) values represents the best
buying opportunity?
A. 0.16
B. 0.29
C. 0.48
D. 0.61
E. 0.82
Money market instruments issued by a corporation:
A. are default-free.
B. are less liquid than those issued by the government.
C. must be held by the original purchaser until maturity.
D. can only be resold to the original issuer.
E. are risk-free.
Which one of the following is an example of mental accounting?
A. associating a security’s gains or losses based on its purchase price
B. calculating the gain or loss on a security on a daily basis
C. computing the amount of tax due on the gain from a stock sale
D. considering the gain realized when a stock pays a dividend
E. comparing the gains and losses on a portfolio to those of the overall market
Jasmine purchased one call option with a strike price of $35 when the call premium was
$1.10. What is the break-even stock price?
A. $.00
B. $33.90
C. $34.45
D. $35.00
E. $36.10
A decrease in which one of the following will increase the return on assets?
A. long-term debt
B. sales
C. inventory
D. retained earnings
E. dividends paid
The Brown Jug has paid annual dividends of $0.61, $0.64, $0.71, $0.82, and $0.88 per
share over the past 5 years, respectively. What is the geometric average dividend
growth rate for this period?
A. 8.51 percent
B. 8.97 percent
C. 9.10 percent
D. 9.59 percent
E. 10.21 percent
A corporate bond is yielding 6.8 percent and a municipal bond is yielding 4.75 percent.
What is the critical marginal tax rate?
A. 28 percent
B. 30 percent
C. 33 percent
D. 35 percent
E. 38 percent
Which of the following are reasons why commodities may have a negative basis?
I. storage costs
II. seasonal price fluctuations
III. transportation costs
IV. interest costs
A. I only
B. IV only
C. I and III only
D. I, II, and III only
E. I, II, III, and IV
The model used to value the stock of a firm which has a short-term growth rate that
varies from its long-term growth rate is called the _____ dividend growth model.
A. flexible
B. increasing
C. two-stage
D. stepped up
E. geometric
You have a portfolio which is comprised of 65 percent of stock A and 35 percent of
stock B. What is the expected rate of return on this portfolio?
A. 5.45 percent
B. 6.62 percent
C. 7.14 percent
D. 7.60 percent
E. 8.22 percent
Quality Home Made Ice Cream has plans to pay decreasing annual dividends of $1.50,
$1.25, and $1.00 over the next three years, respectively. After that, the firm will
increase the dividend by 4 percent each year. What is the value of this stock today at a
discount rate of 9 percent?
A. $19.26
B. $19.54
C. $19.69
D. $19.93
E. $20.48
The Aggressive Eastern Fund sold $167 million of assets during the year and purchased
$162 million of new assets. The average daily assets of the fund were $248 million.
What is the turnover rate?
A. .62
B. .65
C. .67
D. .97
E. 1.03
Some technical analysts use Fibonacci numbers to predict:
A. primary trend breakthroughs.
B. market turnarounds.
C. secondary market trend lines.
D. relative performance values.
E. resistance and support levels.
If you multiply the number of shares of outstanding stock for a firm by the price per
share, you are computing the firm’s:
A. equity ratio.
B. total book value.
C. market share.
D. market capitalization.
E. time value.
Mike’s portfolio has a two-year expected return of 21.70 percent. What is the expected
return for one year?
A. 10.85 percent
B. 12.50 percent
C. 13.33 percent
D. 14.22 percent
E. 15.34 percent
Which one of the following is most apt to vary directly with sales?
A. current assets
B. long-term debt
C. shareholders’ equity
D. paid-in capital
E. retained earnings
Stock A is a risky asset that has a beta of 1.4 and an expected return of 13.2 percent.
Stock B is also a risky asset and has a beta of 1.25. The risk-free rate is 5.5 percent.
Assuming both stocks are correctly priced, what is the expected return on stock B?
A. 11.90 percent
B. 12.11 percent
C. 12.29 percent
D. 12.38 percent
E. 12.46 percent
A Treasury bill has 21 days to maturity and a bank discount yield of 1.89 percent. What
is the bond equivalent yield?
A. 1.89 percent
B. 1.90 percent
C. 1.92 percent
D. 1.94 percent
E. 1.96 percent
The average time it takes for a mortgage in a pool to be paid off is referred to as which
one of the following?
A. average amortized period
B. seasoned period
C. maturity life
D. average life
E. normal pool life
The primary purpose of the NYSE circuit breakers is to:
A. halt short selling.
B. encourage program trading.
C. limit trading by specialists.
D. minimize institutional trading.
E. slow a market decline.
An annualized return:
A. is less than a holding period return when the holding period is less than one year.
B. is expressed as the summation of the capital gains yield and the dividend yield on an
investment.
C. is expressed as the capital gains yield that would have been realized if an investment
had been held for a twelve-month period.
D. is computed as (1 + holding period percentage return)m, where m is the number of
holding periods in a year.
E. is computed as (1 + holding period percentage return)m, where m is the number of
months in the holding period.
Use these option quotes to answer this question:
You would like to have the right to purchase 200 shares of ZZ Industries stock at a price
of $32.50 a share. How much will it cost you to buy options to meet this objective?
A. $103.11
B. $12.90
C. $374.00
D. $430.00
E. $561.00
Which one of the following is defined as a forward rate?
A. rate agreed upon today for a long-term loan
B. interest rate quoted today which will apply to all loans made this week
C. interest rate on a loan made today that will vary as the market rate varies
D. interest rate adjusted for the anticipated rate of inflation
E. expected future interest rate implied by current interest rates
You recently heard a news announcer state that the market is approaching its support
level. Which one of the following is the best interpretation of that statement?
A. The market is approaching the lowest level that is reasonably expected.
B. The federal government will step in to help the market retain its value should the
market slip much further.
C. The market is almost at a peak and is expected to start declining in the near future.
D. The market is almost to the point where trading will be suspended temporarily.
E. The market is almost equivalent in value to the international markets so price
stabilization is expected.
In which city does the largest volume of futures trading in the United States occur?
A. Boston
B. New York
C. Chicago
D. Kansas City
E. Minneapolis
Which one of the following features applies to a U.S. Treasury bill?
A. U.S. agency debt
B. pure discount security
C. taxable at the state level
D. semi-annual interest payments
E. annual interest payments
Courtney purchased 5 call options with a $47.50 strike price and a call premium of
$1.10. On the expiration date, the underlying stock was priced at $50.60 per share.
What is her percentage return on this investment?
A. -100 percent
B. 70.45 percent
C. 181.82 percent
D. 267.38 percent
E. 909.10 percent
Suppose you want to convert U.S. dollars to Indian rupees. If you have $120,000 and
the exchange rate is $0.0159 per rupee, how many rupees (in millions) will you receive
in the conversion?
A. 6.28 million
B. 6.67 million
C. 7.12 million
D. 7.53 million
E. 7.88 million