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1) which one of the following statements correctly describes the weights used in the
macaulay duration calculation? the weight in year t is equal to ____________.
a.the dollar amount of the investment received in year t
b.the percentage of the future value of the investment received in year t
c.the present value of the dollar amount of the investment received in year t
d.the percentage of the total present value of the investment received in year t
2) empirical tests to date show ______________.
a.that many investors have earned large rewards by market timing
b.little evidence of market-timing ability
c.clear-cut evidence of substantial market-timing ability
d.evidence that absolutely no market-timing ability exists
3) initial margin requirements on stocks are set by _________.
a.the federal deposit insurance corporation
b.the federal reserve
c.the new york stock exchange
d.the securities and exchange commission
4) if an investor uses the full amount of margin available, the equity in a margin
account used for a stock purchase can be found as ________.
a.market value of the stock - amount owed on the margin loan
b.market value of the stock + amount owed on the margin loan
c.market value of the stock margin loan
d.margin loan market value of the stock
5) as of 2011, approximately _____ of mutual fund assets were invested in equity funds.
a.5%
b.54%
c.30%
d.12%
6) the price on a treasury bond is 104:21, with a yield to maturity of 3.45%. the price on
a comparable maturity corporate bond is 103:11, with a yield to maturity of 4.59%.
what is the approximate percentage value of the credit risk of the corporate bond?
a.1.14%
b.3.45%
c.4.59%
d.8.04%
7) the type of mutual fund that primarily engages in market timing is called _______.
a.a sector fund
b.an index fund
c.an etf
d.an asset allocation fund
8) macroeconomics is mostly focused on:
a.the individual markets within an economy.
b.only the largest industries in the economy.
c.the economy as a whole.
d.why businesses fail.
9) according to the black-scholes option-pricing model, two options on the same stock
but with different exercise prices should always have the same _________________.
a.price
b.expected return
c.implied volatility
d.maximum loss
10) which of the following is not a money market instrument?
a.treasury bill
b.commercial paper
c.preferred stock
d.bankers' acceptance
11) transactions that do not involve the original issue of securities take place in
_________.
a.primary markets
b.secondary markets
c.over-the-counter markets
d.institutional markets
12) suppose that the pretax holding-period returns on two stocks are the same. stock a
has a high dividend payout policy and stock b has a low dividend payout policy. if you
are a high-tax rate individual and do not intend to sell the stocks during the holding
period, __________.
a.stock a will have a higher after-tax holding-period return than stock b
b.the after-tax holding period returns on stocks a and b will be the same
c.stock b will have a higher after-tax holding-period return than stock a
d.the answer cannot be determined from the information given.
13) suppose you pay $9,800 for a $10,000 par treasury bill maturing in 2 months. what
is the annual percentage rate of return for this investment?
a.2.04%
b.12 %
c.12.24%
d.12.89%
14) consider the capital asset pricing model. the market degree of risk aversion, a, is 3.
the variance of return on the market portfolio is .0225. if the risk-free rate of return is
4%, the expected return on the market portfolio is _________.
a.6.75%
b.9%
c.10.75%
d.12%
15) you find that the confidence index is down, the market breadth is up, and the trin
ratio is down. in total, how many bullish signs do you have?
a.0
b.1
c.2
d.3
16) an employee has an average wage of $60,000 and has worked for the firm for 25
years. the defined benefit pension plan pays retirees 2.5% of the average wage times the
years of service. the employee can expect to receive _______ per year upon retirement.
a.$18,000
b.$37,500
c.$45,325
d.$55,250
17) consider two stocks, a and b. stock a has an expected return of 10% and a beta of
1.2. stock b has an expected return of 14% and a beta of 1.8. the expected market rate of
return is 9% and the risk-free rate is 5%. security __________ would be considered the
better buy because _________.
a.a; it offers an expected excess return of .2%
b.a; it offers an expected excess return of 2.2%
c.b; it offers an expected excess return of 1.8%
d.b; it offers an expected return of 2.4%
18) management fees for open-end and closed-end funds typically range between _____
and _____.
a..2%; 1.5%
b..5%; 5%
c.2%; 5%
d.3%; 8%
19) which one of the following provides the best example of securitization?
a.convertible bond
b.call option
c.mortgage pass-through security
d.preferred stock
20) one type of passive portfolio management is ________.
a.investing in a well-diversified portfolio without attempting to search out mispriced
securities
b.investing in a well-diversified portfolio while only seeking out passively mispriced
securities
c.investing an equal dollar amount in index stocks
d.investing in an equal amount of shares in each of the index stocks
