1) adding additional risky assets to the investment opportunity set will generally move
the efficient frontier _____ and to the ______.
a.up; right
b.up; left
c.down; right
d.down; left
2) a firm has an roe equal to the industry average, but its price-to-book ratio is below
the industry average. you know that the firm’s _________.
a.earnings yield is above the industry average
b.p/e ratio is above the industry average
c.dividend payout ratio is too high
d.interest burden must be below the industry average
3) active trading in markets and competition among securities analysts helps ensure
that:
i. security prices approach informational efficiency
ii. riskier securities are priced to offer higher potential returns
iii. investors are unlikely to be able to consistently find under- or overvalued securities
a.i only
b.i and ii only
c.ii and iii only
d.i, ii, and iii
4) your sister, an avid outdoors person, works in the airline industry, and she has come
to you (the financial guru) for investment advice. she is looking into purchasing stocks
she knows something about. she is considering purchasing stock in boeing, lockheed
martin, united technologies (maker of aircraft engines), and cabela’s sporting goods.
based only on the information given, which stock should you recommend for her?
a.boeing
b.lockheed martin
c.united technologies
d.cabela’s
5) the may 17, 2012, price quotation for a boeing call option with a strike price of $50
due to expire in november is $20.80, while the stock price of boeing is $69.80. the
premium on one boeing november 50 call contract is _________.
a.$1,980
b.$4,900
c.$5,000
d.$2,080
6) the use of leverage is practiced in the futures markets due to the existence of
_________.
a.banks
b.brokers
c.clearinghouses
d.margin
7) strike prices of options are adjusted for ____________ but not for ____________.
a.dividends; stock splits
b.stock splits; cash dividends
c.exercise of warrants; stock splits
d.stock price movements; stock dividends
8) in the prs country composite risk ratings, a score of ______ represents the least risky
and a score of _____ represents the most risky.
a.0; 100
b.0; 50
c.50; 0
d.100; 0
9) the nominal interest rate is 6%. the inflation rate is 3%. the exact real interest rate
must be _________.
a.2.91%
b.3.85%
c.1.45%
d.2.12%
10) _____ has the highest market capitalization of listed corporations among developed
markets.
a.the united states
b.japan
c.the united kingdom
d.switzerland
11) you write a put option on a stock. the profit at contract maturity of the option
position is ___________, where x equals the option’s strike price, st is the stock price at
contract expiration, and p0 is the original premium of the put option.
a.max (p0, x – st – p0)
b.min (-p0, x – st – p0)
c.min (p0, st – x + p0)
d.max (0, st – x – p0)
12) the bonds of elbow grease dishwashing company have received a rating of c by
moody’s. the c rating indicates that the bonds are _________.
a.high grade
b.intermediate grade
c.investment grade
d.junk bonds
13) a portfolio consists of three index funds: an equity index, a bond index, and an
international index. the portfolio manager changes the weights periodically according to
forecasts for each sector. this is an example of __________.
a.a passively managed core with an actively managed component
b.a totally passively managed fund
c.passive asset allocation with active security selection
d.active asset allocation with passive security selection