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1) the advantage that standardization of futures contracts brings is that _____ is
improved because ____________________.
a.liquidity; all traders must trade a small set of identical contracts
b.credit risk; all traders understand the risk of the contracts
c.pricing; convergence is more likely to take place with fewer contracts
d.trading cost; trading volume is reduced
2)
refer to the figure above. assuming this market is representative of the economy as a
whole, this economy:
a.is highly susceptible to recessions and high unemployment.
b.faces regularly fluctuating output levels in response to demand shocks.
c.is capable of always producing at its optimal capacity.
d.can only lessen the impacts of business cycles through active government policy.
3) stock market analysts have tended to be ___________ in their recommendations to
investors.
a.slightly overly optimistic
b.overwhelmingly optimistic
c.slightly overly pessimistic
d.overwhelmingly pessimistic
4)
refer to the above figures. in terms of representing the economy:
a.neither figure a nor figure b consistently represent either the very short run or longer
run.
b.demand shocks affect levels of output and employment in figure a; demand shocks
have no effect in figure b.
c.figure a represents the very short run, where output is fixed, and figure b represents
the longer run.
d.figure b represents the very short run, where prices are stuck, and figure a represents
the longer run.
5) an investor must decide between putting $2,000 into a regular retirement plan or
putting $1,440 into a roth retirement plan. if the investor's tax rate is 28% now and in
retirement, and she expects to earn 12% per year over the next 20 years, which will
produce more cash in the end?
a.the investment in the regular retirement plan.
b.the investment in the roth retirement plan.
c.both investments will have the same future value after taxes.
d.the answer cannot be determined from the information given.
6) according to markowitz and other proponents of modern portfolio theory, which of
the following activities would not be expected to produce any benefits?
a.diversifying
b.investing in treasury bills
c.investing in stocks of utility companies
d.engaging in active portfolio management to enhance returns
7) in the black-scholes model, as the stock's price increases, the values of n(d1) and
n(d2) will _______ for a call and _______ for a put option.
a.increase; decrease
b.increase; increase
c.decrease; increase
d.decrease; decrease
8) the holding-period return on a stock was 25%. its ending price was $18, and its
beginning price was $16. its cash dividend must have been _________.
a.$.25
b.$1
c.$2
d.$4
9) bonds issued in the currency of the issuer's country but sold in other national markets
are called _____________.
a.eurobonds
b.yankee bonds
c.samurai bonds
d.foreign bonds
10) the sarbanes-oxley act tightened corporate governance rules by requiring all but
which one of the following?
a.required that corporations have more independent directors
b.required that the cfo personally vouch for the corporation's financial statements
c.required that firms could no longer employ investment bankers to sell securities to the
public
d.required the creation of a new board to oversee the auditing of public companies
11) you hold 5,000 shares of the 1 million outstanding shares of wealthy wranglers
common stock. you've just learned that the company plans to issue more shares, so that
2 million shares will be outstanding. this is called _____.
a.an advanced equity offering
b.a weathered equity offering
c.a seasoned equity offering
d.a veteran equity offering
12) which of the following possible provisions of a bond indenture is designed to ease
the burden of principal repayment by spreading it out over several years?
a.callable feature
b.convertible feature
c.subordination clause
d.sinking fund
13) what combination of puts and calls can simulate a long stock investment?
a.long call and short put
b.long call and long put
c.short call and short put
d.short call and long put
14) which of the following would not be considered a supply shock?
a.a change in the price of imported oil
b.frost damage to the orange crop
c.a change in the level of education of the average worker
d.an increase in the level of government spending
15) generally speaking, as a firm progresses through the industry life cycle, you would
expect the pvgo to ________ as a percentage of share price.
a.increase
b.decrease
c.stay the same
d.no typical pattern can be expected.
16) consider the one-factor apt. the standard deviation of return on a well-diversified
portfolio is 20%. the standard deviation on the factor portfolio is 12%. the beta of the
well-diversified portfolio is approximately _________.
a..60
b.1
c.1.67
d.3.20
17) which of the following stock price observations would appear to contradict the
weak form of the efficient market hypothesis?
a.the average rate of return is significantly greater than zero.
b.the correlation between the market return one week and the return the following week
is zero.
c.you could have consistently made superior returns by buying stock after a 10% rise in
price and selling after a 10% fall.
d.you could have consistently made superior returns by forecasting future earnings
performance with your new crystal ball forecast methodology.
18) during the 1985-2010 period the sharpe ratio was lowest for which of the following
asset classes?
a.small u.s. stocks
b.large u.s. stocks
c.long-term u.s. treasury bonds
d.equity world portfolio in u.s. dollars
