Which one of the following assesses the ability of a money manager to balance high
returns with an acceptable level of risk?
A. probability analysis
B. raw return ratio
C. risk assessment
D. performance evaluation
E. market analysis
Which one of the following is the best indication that a security is correctly priced
according to the Capital Asset Pricing Model?
A. beta of zero
B. beta of 1.0
C. alpha of zero
D. alpha of 1.0
E. alpha of -1.0
The net income per share divided by the market price per share is called the:
A. profit margin.
B. profit yield.
C. market yield.
D. earnings yield.
E. income ratio.
You recently purchased a fund at a price of $39.97 per share. The NAV at the time of
purchase was $40.67. You must have purchased a(n) _____ fund.
A. closed-end
B. global
C. bond
D. index
E. asset allocation
Which one of the following values is discounted in the put-call parity formula?
A. call price
B. put price
C. stock price
D. strike price
E. option premium
The turnover for a mutual fund refers to:
A. the length of time an average investor holds fund shares.
B. a measure of trading activity.
C. replacing the fund’s investment manager.
D. the annual change in the number of shares outstanding.
E. the percentage change in the ownership of fund shares.
An investor with a long position in a security will make money:
A. if the price of the security increases.
B. if the price of the security declines.
C. if the price of the security remains stable.
D. only if the security has been purchased on margin.
E. only by shorting the security.
A bond has 6 years until it can be called, a 7 percent coupon, and a $1,000 face value.
The bond has a market value of $1,031.90 and a yield to call of 7.35 percent. What is
the call premium?
A. $45
B. $55
C. $65
D. $75
E. $85
Martin has an investment account with William, who is a broker with City Brokerage.
Martin believes that William has mishandled his account by churning it. If he files a
complaint against William seeking compensation, the case will most likely be decided
by:
A. the office manager of City Brokerage.
B. a civil suit judge.
C. a jury.
D. an arbitration panel.
E. the SEC Hearing Board.
The S&P 500 volatility index is the _____ while the NASDAQ 100 volatility index is
the _____.
A. VIX; VXO
B. VIX; VXN
C. VXO; VIX
D. VXO; VXN
E. VXN; VIX
What is the call option premium given the following information?
A. $1.86
B. $2.20
C. $2.36
D. $2.98
E. $3.30
Which one of the following statements is correct concerning discount bonds?
A. The current yield is less than the yield to maturity.
B. The bonds will be redeemed at maturity for less than face value.
C. The coupon rate is greater than the current yield.
D. The clean price is greater than the dirty price.
E. Only zero-coupon bonds sell at a discount.
On August 8 of this year, Brent sold 500 shares of ADO stock for $24 a share. On
September 6 of this year, he purchased 500 shares of ADO stock to cover his position.
The transaction on August 8:
A. was a short sale.
B. was a margin trade.
C. was a wrap transaction.
D. created a long transaction.
E. was a pooling transaction.
Which one of the following best defines a carrying-charge market?
A. market where interest is charged on the margin balance
B. cash price is less than the futures price
C. positive basis market
D. spot market price is greater than the cash price
E. spot market price exceeds the futures price
The Atlas Mutual Fund owns the following stocks:
The fund has no liabilities and has 65,000 shares outstanding. What is the NAV?
A. $6.32
B. $6.57
C. $6.71
D. $7.08
E. $7.19
After month 30, assuming that prepayments remain within the PAC collar, the holders
of a PAC bond will receive which one of the following payments?
A. a fixed principal payment only
B. a fixed interest payment only
C. a fixed principal payment plus a declining interest payment
D. a declining principal payment only
E. a declining principal payment and a declining interest payment
Which one of the following is a general characteristic of a tax-managed fund?
A. low turnover rate
B. concentration on income-producing securities
C. high level of realized capital gains
D. higher trading costs than average funds
E. matching of dividend income to capital gains
A company has the following account balances. How much cash does the firm have
assuming there are no other accounts?
A. $27,300
B. $27,900
C. $30,900
D. $47,300
E. $50,300
Which of the following will affect the beta value of an individual security?
I. interval of time frequency used for the data sample
II. length of the time period used for the data sample
III. particular time period selected for the sampling
IV. choice of index used as the measure of the market
A. I and II only
B. I and III only
C. II and IV only
D. II, III, and IV only
E. I, II, III, and IV
Use the following soybean futures quotes to answer this question:
Julie was lucky enough to purchase two September 08 futures contracts on soybeans
when the contracts were at the lowest price of the day. What is Julie’s total profit or loss
as of the end of the day?
A. $25.00
B. $50.00
C. $60.00
D. $250.00
E. $260.00
The stock of Healthy Eating, Inc., has a beta of .88. The risk-free rate is 3.8 percent and
the market return is 9.6 percent. What is the expected return on Healthy Eating’s stock?
A. 6.25 percent
B. 6.07 percent
C. 8.90 percent
D. 11.15 percent
E. 11.47 percent
Which one of the following is the primary purpose of a protective put?
A. profit from an expected future increase in the underlying stock’s value
B. guarantee a higher return than is possible from just owning the underlying security
C. offset the risk associated with a decrease in the value of the underlying asset
D. receipt of the option premium
E. increase in potential rate of return due to increase in risk
For the period 1926-2012, the annual return on large-company stocks:
A. was negative following every three-year period of positive returns.
B. was only negative for two or more consecutive years during the Great Depression.
C. remained negative for at least two consecutive years anytime that it was negative.
D. never exceeded a positive 30 percent nor lost more than 20 percent.
E. was unpredictable based on the prior year’s performance.
You currently have a long position in the 3-month futures market. Which one of the
following would be a reverse trade to this position?
A. short spot
B. long spot
C. short 3-month futures
D. long 3-month futures
E. short 6-month futures
Which one of the following is most apt to be constant given the percentage of sales
approach to creating pro forma statements?
A. book value per share
B. gross margin
C. earnings per share
D. return on equity
E. cash flow per share
Electronics Galore has historically had a P/E ratio of 23.4. This ratio is considered a
good estimate of the future ratio. The firm currently has EPS of $1.68. These earnings
are expected to increase by 4.2 percent next year. What is the expected price of this
stock one year from now?
A. $39.31
B. $40.96
C. $41.25
D. $42.78
E. $43.79
Scott purchased 200 shares of Frozen Foods stock for $48 a share. Four months later, he
received a dividend of $0.22 a share and also sold the shares for $42 each. What was his
annualized rate of return on this investment?
A. -44.69 percent
B. -40.14 percent
C. -33.00 percent
D. -31.95 percent
E. -28.07 percent
Adjustable-rate bonds are identified by which one of the following characteristics?
A. The coupon rate will increase should the credit rating of the bond decline.
B. Different bonds within the same issue have different coupon rates.
C. Bondholders can defer coupon payments at their discretion.
D. The amount of each coupon payment will depend on the free cash flow of the issuer.
E. The coupon rate changes in response to changes in current market rates.
In 2007, NYSE Holdings merged with which one of the following?
A. NASDAQ
B. AMEX
C. Chicago Stock Exchange
D. London Stock Exchange
E. Euronext, N.V.
Assume a mutual fund is a pure no-load fund. Which of the following costs should an
investor still expect to incur?
I. contingent deferred sales charge
II. management fee
III. trading costs
IV. redemption fee
A. I, II, and III only
B. II and III only
C. II, III, and IV only
D. I, II, III, and IV
E. none of the costs listed
Why would an investor prefer a TIPS which offers a lower coupon rate over a
comparable T-note with a higher coupon rate?
Briefly outline and discuss Porter’s Five Forces and their use.
Briefly discuss the difference between strategic and tactical asset allocation.
Identify and describe four of the six components of nominal interest rates as supported
by modern term structure theory.
You are the chief financial officer (CFO) of a major textile importer. Identify one of the
key risks your company faces and explain how you can hedge this risk using futures.
Briefly compare and contrast options and futures.
What are the advantages and the disadvantages of a homeowner selecting a 30-year
mortgage rather than a 20-year mortgage?
Explain the conditions under which an investor should place more reliance on the
yield-to-call than on the yield-to-maturity.
What are some of the key lessons to be learned from historical stock market crashes?
Briefly describe the NYSE up-tick rule, the rationale for it and the current status of the
rule.
Foreign securities are generally considered to be more risky than domestic securities.
Given this assumption, explain how adding foreign securities into a domestic portfolio
can affect the Markowitz efficient portfolios.
Explain what a put option is and describe the circumstances under which you would be
willing to sell a put.
What are the basic differences between a T-Bill and a T-Bond? Which security(ies) are
considered risk-free?
Draw a basic Elliott Wave Pattern. Identify each wave and indicate the waves that are
“corrective” and those that are “impulsive”.
Explain how options can be used to manage risk. Provide an example using a call
option and another example using a put option.
Explain the basics of prospect theory and provide an example that illustrates this theory.
The residual income model for valuing a stock suffers from some of the same
estimating errors as the dividend growth model. Identify and explain these estimating
errors.
Describe some of the recent changes in the structure and operations of the NYSE.