__________ is the amount of money per common share that could be realized by
breaking up the firm, selling its assets, repaying its debt, and distributing the remainder
to shareholders.
A. Book value per share
B. Liquidation value per share
C. Market value per share
D. Tobin’s q
Identify the support level stock price.
A. $40
B. $42
C. $44
D. $46
Semitool Corp. has an expected excess return of 6% for next year. However, for every
unexpected 1% change in the market, Semitool’s return responds by a factor of 1.2.
Suppose it turns out that the economy and the stock market do better than expected by
1.5% and Semitool’s products experience more rapid growth than anticipated, pushing
up the stock price by another 1%. Based on this information, what was Semitool’s
actual excess return?
A. 7%
B. 8.5%
C. 8.8%
D. 9.25%
Items that are ____________ and product purchases for which ________ is not
important tend to be less cyclical in nature.
A. necessities; income
B. luxuries; leverage
C. discretionary goods; time of purchase
D. produced with high fixed costs; entertainment
Which of the following is typically concerned with their investment assets having
relatively fixed returns and their liabilities having relative variable returns?
A. banks
B. insurance companies
C. mutual funds
D. pension funds
An investor would want to __________ to exploit an expected fall in interest rates.
A. sell S&P 500 Index futures
B. sell Treasury-bond futures
C. buy Treasury-bond futures
D. buy wheat futures
The portfolio that contains the benchmark asset allocation against which a manager will
be measured is often called _____________.
A. the bogey portfolio
B. the Vanguard Index
C. Jensen’s alpha
D. the Treynor measure
The collapse of the Long Term Capital Management hedge fund in 1998 was a case of
an extremely unlikely statistical event called ________.
A. statistical arbitrage
B. an unhedged play
C. a tail event
D. a liquidity trap
An investor has her money segregated into checking, savings, and investments. The
allocation among the categories is subjective, yet the investor spends freely from the
checking account and not the others. This behavior can be explained as
_______________.
A. loss aversion
B. mental accounting
C. overreaction
D. winner’s curse
A _____ investment strategy takes market prices of securities as set fairly.
A. passive
B. active
C. interest rate focused
D. convex
New manufacturers continue to enter the market.
Which of the characteristics would be typical of an industry that is in the maturity
stage?
A. 1, 2, and 3
B. 4 and 5
C. 6, 7, and 8
D. all of these options
The choice of an active portfolio management strategy rather than a passive strategy
assumes ___________.
A. the ability to continuously adjust the portfolio to provide superior returns
B. asset allocation involving only domestic securities
C. stable economic conditions over the short term
D. the ability to minimize trading costs
When issued, most convertible bonds are issued _____________.
A. deep in the money
B. deep out of the money
C. slightly out of the money
D. slightly in the money
Of the following, the most flexible type of life insurance policy from the policyholder’s
perspective is probably a ___________ policy.
A. term life
B. whole life
C. variable life
D. universal life
According to the liquidity preference theory of the term structure of interest rates, an
increase in the yield on long-term corporate bonds versus short-term bonds could be
due to _______.
A. declining liquidity premiums
B. an expectation of an upcoming recession
C. a decline in future inflation expectations
D. an increase in expected interest rate volatility
If you are going to earn abnormal returns based on your macroeconomic analysis, it will
most likely have to be because __________.
A. you have more information than others
B. you are a better analyst than others
C. you have the same information as others
D. you are an equally good analyst as others
Part B of a mutual fund prospectus contains information about:
I. Fund holdings by directors and officers
II. Front-end and back-end loads
III. Securities held by the fund at the end of the fiscal year
A. I only
B. I and II only
C. I and III only
D. I, II, and III
You are considering investing $1,000 in a complete portfolio. The complete portfolio is
composed of Treasury bills that pay 5% and a risky portfolio, P, constructed with two
risky securities, X and Y. The optimal weights of X and Y in P are 60% and 40%
respectively. X has an expected rate of return of 14%, and Y has an expected rate of
return of 10%. To form a complete portfolio with an expected rate of return of 8%, you
should invest approximately __________ in the risky portfolio. This will mean you will
also invest approximately __________ and
__________ of your complete portfolio in security X and Y, respectively.
A. 0%; 60%; 40%
B. 25%; 45%; 30%
C. 40%; 24%; 16%
D. 50%; 30%; 20%
59. Consider the following $1,000 par value zero-coupon bonds:
The expected 1-year interest rate 4 years from now should be _________.
A. 16%
B. 18%
C. 20%
D. 22%
Research indicates that exchange risk of the major currencies has been _________ so
far in this century.
A. relatively high
B. relatively low
C. declining slightly
D. declining rapidly
The price of a corn futures contract is $2.65 per bushel when the contract is issued, and
the commodity spot price is $2.55. When the contract expires, the two prices are
identical. What principle is represented by this price behavior?
A. convergence
B. margin
C. basis
D. volatility
In the Black-Scholes model, if an option is not likely to be exercised, both N(d1) and
N(d2) will be close to ______. If the option is definitely likely to be exercised, N(d1)
and N(d2) will be close to ______.
A. 1; 0
B. 0; 1
C. -1; 1
D. 1; -1
You have a 25-year maturity, 10% coupon, 10% yield bond with a duration of 10 years
and a convexity of 135.5. If the interest rate were to fall 125 basis points, your predicted
new price for the bond (including convexity) is _________.
A. $1,098.45
B. $1,104.56
C. $1,113.41
D. $1,124.22
ART has come out with a new and improved product. As a result, the firm projects an
ROE of 25%, and it will maintain a plowback ratio of .20. Its earnings this year will be
$3 per share. Investors expect a 12% rate of return on the stock.
What is the present value of growth opportunities for ART?
A. $8.57
B. $9.29
C. $14.29
D. $16.29
_______ is a life insurance policy that provides a death benefit and a fixed-rate
tax-deferred savings plan.
A. Term life
B. Whole life
C. Variable life
D. Universal life
You short-sell 200 shares of Tuckerton Trading Co., now selling for $50 per share.
What is your maximum possible gain, ignoring transactions cost?
A. $50
B. $150
C. $10,000
D. unlimited
A bond swap made in response to forecasts of interest rate changes is called ______.
A. a substitution swap
B. an intermarket spread swap
C. a rate anticipation swap
D. a pure yield pickup swap
Your great aunt Zella invested $100 in 1925 in a portfolio of large U.S. stocks that
earned a compound return of 10% annually.If she left that money to you, how much
would be in the account 90 years later in 2015?
A. $1,000
B. $9,900
C. $531,302
D. $5,843,325
Commodity and derivative markets allow firms to adjust their _________.
A. management styles
B. focus from their main line of business to their investment portfolios
C. ways of doing business so that they”ll always have positive returns
D. exposure to various business risks
ART has come out with a new and improved product. As a result, the firm projects an
ROE of 25%, and it will maintain a plowback ratio of .20. Its earnings this year will be
$3 per share. Investors expect a 12% rate of return on the stock.
What price do you expect ART shares to sell for in 4 years?
A. $53.96
B. $44.95
C. $41.68
D. $39.76