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1) in the treynor-black model, security analysts __________.
a.analyze the entire universe of stocks
b.assume that markets are inefficient
c.treat market index as a baseline portfolio from which an active portfolio is constructed
d.focus on selecting the best-performing bogey
2) investors gravitate toward the latest hot stock even though it has never paid a
dividend. even though net income is projected to fall over the current and next several
years, the price of the stock continues to rise. what behavioral concept may explain this
price pattern?
a.overconfidence
b.loss aversion
c.mental accounting
d.calendar bias
3) three stocks have share prices of $12, $75, and $30 with total market values of $400
million, $350 million, and $150 million, respectively. if you were to construct a
price-weighted index of the three stocks, what would be the index value?
a.300
b.39
c.43
d.30
4) analysis of bond returns over a multiyear horizon based on forecasts of the bond's
yield to maturity and reinvestment rate of coupons is called ______.
a.multiyear analysis
b.horizon analysis
c.maturity analysis
d.reinvestment analysis
5) the ted spread refers to
a.the difference between the treasury bond rate and the treasury bill rate.
b.the difference between the treasury note rate and the treasury bill rate.
c.the difference between the libor rate and the treasury bill rate.
d.the difference between the libor rate and the treasury bond rate.
6) a firm has a p/e ratio of 24 and an roe of 12%. its market-to-book-value ratio is
_________.
a.2.88
b.2
c.1.75
d..69
7) duration is a concept that is useful in assessing a bond's _________.
a.credit risk
b.liquidity risk
c.price volatility
d.convexity risk
8) assuming positive basis and negligible borrowing cost, which of the following
transactions could yield positive arbitrage profits if pursued by a hedge fund?
a.buy gold in the spot market, and sell the futures contract.
b.buy the futures contract, and sell the gold spot and invest the money earned.
c.buy gold spot with borrowed money, and buy the futures contract.
d.buy the futures contract, and buy the gold spot using borrowed money.
9) the wildwood fund sells class a shares with a front-end load of 5% and class b shares
with a 12b-1 fee of 1% annually. if you plan to sell the fund after 4 years, are class a or
class b shares the better choice? assume a 10% annual return net of expenses before the
12b-1 fee is applied.
a.class a.
b.class b.
c.there is no difference.
d.the answer cannot be determined from the information given.
assume $100 is invested.
class a: investment after load = $100 - .05($100) = $95
after four years = $95(1.104) = $95 1.4641 = $139.09
class b: rate of return after 12b-1 fee = 10% - 1% = 9%
after four years = $100(1.094) = $100 1.4116 = $141.16
class b is the better choice.
10) the _________ price is the price at which a dealer is willing to purchase a security.
a.bid
b.ask
c.clearing
d.settlement
11) when used in the context of investment decision making, the term liquidity refers to
_____________.
a.the ease and speed with which an asset can be sold at any value possible
b.the ease and speed with which an asset can be sold without having to discount the
value
c.an aspect of monetary policy
d.the proportion of short-term to long-term investments held in an investor's portfolio
12) __________ portfolio management calls for holding diversified portfolios without
spending effort or resources attempting to improve investment performance through
security analysis.
a.active
b.momentum
c.passive
d.market-timing
13) an example of a highly cyclical industry is the _________.
a.automobile industry
b.tobacco industry
c.pharmaceutical industry
d.utility industry
14) which of the following industries would most analysts classify as mature?
a.internet service providers
b.biotechnology
c.wireless communication
d.auto manufacturing
