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1) everything else equal, the __________ the maturity of a bond and the __________
the coupon, the greater the sensitivity of the bond's price to interest rate changes.
a.longer; higher
b.longer; lower
c.shorter; higher
d.shorter; lower
2) which one of the following ratios is used to calculate the times-interest-earned ratio?
a.net profit/interest expense
b.pretax profit/ebit
c.ebit/sales
d.ebit/interest expense
3) approximately __________ of trades involving shares issued by firms listed on the
new york stock exchange actually take place on the new york stock exchange.
a.50%
b.25%
c.60%
d.75%
4) the __________ was established to protect investors from losses if their brokerage
firms fail.
a.cftc
b.sec
c.sipc
d.aimr
5) among the important characteristics of market efficiency is (are) that:
i. there are no arbitrage opportunities.
ii. security prices react quickly to new information.
iii. active trading strategies will not consistently outperform passive strategies.
a.i only
b.ii only
c.i and iii only
d.i, ii, and iii
6) the interest rate charged by large banks in london to lend money among themselves
is called _________.
a.the prime rate
b.the discount rate
c.the federal funds rate
d.libor
7) conventional finance theory assumes investors are _______, and behavioral finance
assumes investors are _______.
a.rational; irrational
b.irrational; rational
c.greedy; philanthropic
d.philanthropic; greedy
8) the value of a listed put option on a stock is lower when:
i. the exercise price is higher.
ii. the contract approaches maturity.
iii. the stock decreases in value.
iv. a stock split occurs.
a.ii only
b.ii and iv only
c.i, ii, and iii only
d.i, ii, iii, and iv
9) contrarian investors consider a high put/call ratio a __________.
a.bearish signal
b.bullish signal
c.trend confirmation signal
d.signal to enter the options market
10) an investor buys $8,000 worth of a stock priced at $40 per share using 50% initial
margin. the broker charges 6% on the margin loan and requires a 30% maintenance
margin. in 1 year the investor has interest payable and gets a margin call. at the time of
the margin call the stock's price must have been ____.
a.$20
b.$29.77
c.$30.29
d.$32.45
11) all major stock markets today are effectively _______________.
a.specialist trading systems
b.electronic trading systems
c.continuous auction markets
d.direct search markets
