Under-pricing of new stock issues helps ensure the investment banker that the issue will
be fully subscribed to at the initial market price.
Stock index futures contracts are limited to the Dow Jones Industrial Average.
If an investor needs to increase the quality of his portfolio during the low-confidence
periods of a recession, he can enjoy usually high returns on lower-grade instruments
relative to higher grades.
At the end of 2005, North America, Asia Pacific, and Europe each accounted for
one-third of the world’s markets capitalization.
The composite index of leading indicators has shown little variation in its ability to
predict.
The pharmaceutical industry is dominated by international companies.
Points along the capital market line represent a combination of a risk-free asset and M
(the market portfolio) with the possibility of borrowing beyond point M.
Investors can buy put and call options on stock indexes, such as the Dow Jones
Industrial Average and the Standard & Poor’s 500.
Private placements refer exclusively to stock issues sold to insurance companies or
individuals.
The term structure of interest rates depicts the relationship between maturity and
interest rates.
The Securities and Exchange Commission publishes a list of approved securities that
may be borrowed against.
When analyzing an industry, individual companies seem to stand out for their superior
performance.
Based on all recessions since 1945, contractions of economic cycles lasted an average
of two years.
REITs are very similar to mutual funds or investment companies.
An assumption of the capital asset pricing model is that investors can borrow or lend an
unlimited amount of funds at a given risk-free rate.
The U.S. government has had only ten years between 1977 and 2007 where a surplus
occurred because government revenues were greater than expenditures.
An investor in a mutual fund can incur capital gains even if no shares are sold.
The liquidity ratios measure how quickly a firm can dispose of inventory.
The capital asset pricing model (CAPM) takes off where the efficient frontier
concludes, with the introduction of a new investment outlet, the risk-free asset (RF).
An aggressive portfolio might include real assets.
Options generally allow for a more efficient hedge than futures.
A warrant with an intrinsic value of zero cannot sell at a premium.
The use of the NASDAQ Automated Quotation System has increased the number of
equity trades on the American Stock Exchange.
Sharpe uses beta as a measure of risk.
If you short a stock and the price goes up, your net equity value will go up.
The maximum possible loss on a strategy of buying put options is limited to the options
premium under all circumstances.
Conversion ratio is the face value divided by the conversion price.
A variable-rate mortgage allows the borrower to select a different rate of interest
depending on economic conditions.
The fact that many studies have found a significant relationship between the money
supply and stock prices has been quite helpful to investors.
Duration will not help international bond managers choose bonds for their portfolios
because of the foreign exchange risk.
Pension funds represent a declining segment of the institutional market.
All option contracts are adjusted for stock splits, stock dividends, or other distributions.
All markets must have a physical central trading location.
Prices in the cash market are somewhat dependent on prices in the futures market.
Under terminal wealth analysis, the greater the period to maturity,
A.the greater the shift in interest rates.
B.the greater the effect of a decrease in interest rates.
C.the greater the effect of any shift in interest rates.
D.None of the above
Dividends on the underlying common stock will affect the option price.
An investor earns a profit on a put option when:
A.the increase in the index is greater than the premium paid.
B.the index decreases.
C.the decrease in the index is greater than the premium paid.
D.None of the above
Market neutral funds are:
A.neither long nor short in their strategy.
B.only long in their strategy.
C.only short in their strategy.
D.follow a 45Market Line.
At the time of expiration, the premium (price) on a call option:
A. reflects risk in addition to intrinsic value.
B. will be equal to the intrinsic value.
C. may be above or below the intrinsic value.
D. None of the above
The primary purpose of fundamental stock valuation is:
A.to eliminate stocks of those companies that are potential losers from the portfolio.
B.to identify for purchase those companies that are fundamentally undervalued.
C.to learn to identify peaks and troughs of the business cycle.
D.Two of the above.
In what city are the two largest commodities exchanges?
A.Chicago
B.New York
C.Kansas City
D.Minneapolis
If the portfolio return is 10%, and the U.S. T-bill rate is 5.75%, what is the Treynor
measure of excess returns?
A..4250
B..0425
C..7391
D.There is not enough information to tell
Which of the following statements about a convertible security is not true?
A.It may be either a bond or share of preferred stock
B.It provides level interest payments
C.The best time to buy is when both bond and stock prices are low
D.All of the statements are true
Which of the following is not an Asset-utilization ratio:
A.Receivable turnover
B.Fixed-asset turnover
C.Quick ratio
D.Total assets turnover
E.All of the above are Asset-utilization ratios
When the bond investor believes interest rates are going to fall, the best strategy would
be to:
A.take a bearish position in the market by selling long-term bonds.
B.take a bullish position in the market by buying long-term bonds.
C.move out of bonds completely.
D.keep his portfolio unchanged.
The primary difference between options and futures is that:
A.the option premium is the full liability of the purchaser, while a futures contract may
call for additional margin to hold the position.
B.options are more speculative than futures.
C.futures require the physical transfer of goods, while options do not.
D.More than one of the above
Hedging through futures contracts:
A.increases risk of loss if prices fall.
B.eliminates profit maximization potential.
C.is considered to be speculative in nature.
D.All of the above
According to the Dow Theory, daily fluctuations and secondary movements in the
market are used to help identify:
A.a key indicator.
B.a primary trend.
C.shifts in demand and supply.
D.More than one of the above
The risk/return trade-off with hedge funds over time has been:
A.negative.
B.positive.
C.neutral.
D.undetermined.
The NASDAQ 100 includes high tech firms such as:
A.IBM, Oracle, and Cisco Systems.
B.Microsoft, Intel, and Cisco Systems.
C.Hewlett Packard, Cisco Systems, and Compaq.
D.All of the above
A point and figure chart is used to demonstrate:
A.advances and declines of stock prices.
B.high, low, and closing price on a daily basis.
C.changes of two points or more.
D.More than one of the above
Expiration dates in the option market:
A. were expanded by the introduction of LEAPS.
B. are variable depending on the company.
C. are limited to a maximum of 9 months.
D. occur every month on a 12-month calendar basis for each equity option traded.
Bringing private companies public for the first time is called:
A.a private placement.
B.an initial public offering (IPO).
C.a secondary offering.
D.a founders sale.
E.a shelf registration.
One can purchase shares in a closed-end mutual fund
A.from shareholders.
B.directly from the fund at all times.
C.directly from the fund at inception.
D.A and C
An individual investor could rely on earnings forecasts from any of the following,
except:
A. Standard and Poor’s earnings forecaster.
B. a firm’s annual report.
C. Value Line Investment Survey.
D. Zacks, I/B/E/S, or other professional consensus reporting firms.
In the __________ market, existing assets are exchanged between investors, while in
the ___________ market, participants buy their assets directly from the source of the
asset.
A.primary; secondary
B.secondary; primary
C.tertiary; primary
D.primary; OTC
E.prime; subprime
The upward slope of the yield curve is caused by investors’ recognition of the relative
difficulty of converting long-term securities to cash. This is the:
A.expectations hypothesis.
B.liquidity preference theory.
C.market segmentation theory.
D.More than one of the above
A strategy that buys a convertible security for the income and then sells the common
stock short is called:
A.convertible arbitrage.
B.no-bias arbitrage.
C.long/short bias.
D.merger arbitrage.
A corporate bond quoted at 108.25 is selling for:
A.$108.25.
B.$1,082.50.
C.$10,825.
D.None of the above
The Securities and Exchange Commission was created by the:
A.Securities Act of 1933.
B.Securities Exchange Act of 1934.
C.Investment Advisor Act of 1940.
D.None of the above
When ranking security returns, the data shows that the annualized returns are as follows
(ranked from highest return to lowest return):
A.Large stocks, small stocks, long-term corporate bonds, long-term government bonds,
treasury bills.
B.Small stocks, large stocks, long-term corporate bonds, long-term government bonds,
treasury bills.
C.Small stocks, large stocks, treasury bills, long-term government bonds, long-term
corporate bonds.
D.Treasury bills, long-term government bonds, long-term corporate bonds, large stocks,
small stocks.
E.Large stocks, small stocks, long-term government bonds, long-term corporate bonds,
treasury bills.
When is the best time to convert a convertible bond to common stock?
A.When the call price exceeds the conversion value
B.After the conversion ratio decreases
C.When the conversion value is below the pure bond value
D.None of the above
Reliable sources of information about mutual funds include all of the following, except:
A.Forbes.
B.Lipper.
C.Morningstar.
D.All of the above are good sources
The following are all characteristics of money market funds, except:
A.they invest in short-term securities.
B.they are no-load.
C.they have check writing privileges.
D.they do not require minimum deposits.
When should an investor in OTC stock approved for listing sell the stock, if the
objective is to maximize profit?
A.Immediately prior to approval
B.When the approval is published
C.On the date of listing
D.Four to six weeks after the date of listing