Julie purchased four (4) S&P 500 index futures at a price of 1392. The contract size is
$250 times the index value. The futures are maturing today at a price of 1387.50. What
is the amount of her profit or loss?
A. -$3,125
B. -$4,500
C. -$5,625
D. -$13,575
E. -$15,625
Bond trades are reported:
A. on a weekly basis only.
B. only when originally sold.
C. on TRACE.
D. by the SEC.
E. only on government issues.
You own 100 shares of Deltona stock which is currently worth $43 a share. You just
paid an option premium of $0.85 to buy one put contract on this stock with a strike
price of $40. What is the maximum loss per share you are avoiding by purchasing the
option contract?
A. $40.00
B. $40.85
C. $42.15
D. $43.00
E. $43.85
Which one of the following defines an in-the-money bond?
A. secured bond with collateral value that exceeds the bond’s price
B. callable bond with a call price that exceeds the current market price
C. put bond with a put price that exceeds the current market price
D. convertible bond with a call price that exceeds its conversion value
E. convertible bond with a conversion value that exceeds its call price
You currently own a stock portfolio that has a beta of 1.2. If you fully hedge your stock
portfolio you will effectively change the portfolio’s beta to which one of the following?
A. 0
B. 1
C. 1/1.2
D. 1.2
E. 1.22
What is a bond called if it can be converted into shares of stock of a firm other than the
bond issuer?
A. swap bond
B. alternate bond
C. exchangeable bond
D. convertible bond
E. callable bond
Which one of the following statements concerning option prices is correct?
A. There is a relatively linear direct relationship between the volatility of the underlying
stock price and option prices.
B. Call option prices decrease and put option prices increase as the time to expiration
increases.
C. Put option prices are directly related to the price of the underlying stock.
D. The relationship between option prices and stock prices is a linear relationship.
E. Delta measures the effect that the underlying stock’s dividend yield has on option
prices.
You own 700 shares of a stock that you purchased on margin at a price per share of
$20.12. The stock is currently valued at $23 a share. Your broker advised you today that
your minimum equity position for this purchase is $5,635 as of today. What is the
maintenance margin percentage?
A. 25 percent
B. 30 percent
C. 35 percent
D. 40 percent
E. 50 percent
A firm has $4,200 of cash, equipment worth $46,300, inventory of $38,400, a building
worth $130,500, and $21,500 of accounts receivable. What is the value of the total fixed
assets?
A. $176,800
B. $203,500
C. $196,400
D. $223,100
E. $226,900
Which one of the following terms best describes the information you know about a
company that will have a significant effect on the price of the company’s stock once that
information is released?
A. material public information
B. public information
C. abnormal information
D. private, non-material information
E. material non-public information
Assume a semi-annual coupon bond matures in 3 years, has a face value of $1,000, a
current market price of $989, and a 5 percent coupon. Which one of the following
statements is correct concerning this bond?
A. The current coupon rate is greater than 5 percent.
B. The bond is a money market instrument.
C. The bond will pay less annual interest now than when it was originally issued.
D. The current yield exceeds the coupon rate.
E. The bond will pay semi-annual payments of $50 each.
Which one of the following best describes the term “initial margin”?
A. Amount of money that must be deposited to open a margin account with a broker
B. Amount of cash that must be paid to purchase a security on margin
C. Amount of cash that must be paid when a broker issues a margin call
D. Amount of money borrowed when a security is purchased
E. Total loan amount offered to a customer by a brokerage firm to cover future
purchases
Which of the following are affected by the probability of a state of the economy
occurring?
I. expected return of an individual security
II. expected return of a portfolio
III. standard deviation of an individual security
IV. standard deviation of a portfolio
A. I and III only
B. I and II only
C. II and IV only
D. III and IV only
E. I, II, III, and IV
An analysis of which of the following are commonly included as part of fundamental
analysis?
I. sales
II. book value
III. earnings per share
IV. cash flow
A. I and II only
B. I and IV only
C. II, III, and IV only
D. I, II, and IV only
E. I, II, III, and IV
An analyst gathered the following year-end price level data for an economy. What is the
economy’s annual inflation rate for 2012?
A. 3.07%
B. 3.32%
C. 3.58%
D. 3.87%
E. 3.92%
A STRIPS matures in 6 years, has a face value of $17,000, and has a yield to maturity
of 4.8 percent. What is the price?
A. $10,854.59
B. $11,010.43
C. $11,284.75
D. $11,322.01
E. $12,789.38
Banks are most apt to quote short-term loan rates as:
A. prime plus a spread.
B. prime plus inflation.
C. prime minus inflation.
D. Federal funds plus prime.
E. prime minus the discount.
Recently, you sold 1,000 shares of stock for $21,400. The sale was a short sale with an
initial margin requirement of 60 percent. The maintenance margin is 30 percent. The
stock is currently trading at $27.50 a share. What is your current margin position in this
stock?
A. 24.51 percent
B. 28.11 percent
C. 32.09 percent
D. 43.98 percent
E. 46.69 percent
After 30 months, what is the 100 PSA benchmark conditional prepayment rate per year?
A. 3 percent
B. 5 percent
C. 6 percent
D. 8 percent
E. 12 percent
You notice that the interest rate on your credit card is set at LIBOR plus 8.9 percent.
Given this, the rate you will pay is primarily influenced by the money market rates in
which one of the following?
A. Lisbon, Portugal
B. New York, USA
C. Frankfort, Germany
D. London, England
E. Chicago, USA
Jennifer purchased 4 put option contracts on Winslow Mfg. stock. The option premium
was $0.25 and the strike price was $17.50. On the expiration date, the stock was selling
for $17.75 a share. What is the total payoff on the option contracts?
A. -$100
B. -$50
C. $0
D. $50
E. $150
Mason Materials is offering 800 shares in a Dutch auction IPO. The following bids have
been received:
How many shares will be allocated to Bidder A?
A. 0
B. 80
C. 125
D. 145
E. 200
The amount of common stock held in short positions is referred to as the short:
A. margin.
B. shares.
C. proceeds.
D. sale.
E. interest.
Which of the following are ineffective strategies for producing excess returns if the
market is semistrong-form efficient?
I. graphing past prices searching for patterns
II. watching the daily market movements
III. studying the latest analyst’s reports
IV. analyzing a firm’s financial statements
A. I and III only
B. I and IV only
C. I, II, and III only
D. II, III, and IV only
E. I, II, III, and IV
High Mountain Homes has an expected annual return of 16.1 percent and a standard
deviation of 20.3 percent. What is the smallest expected loss over the next month given
a probability of 2.5 percent?
A. -6.64 percent
B. -8.67 percent
C. -10.14 percent
D. -12.12 percent
E. -15.13 percent
A 3-month put has a strike price of $47.50 and an option premium of $1.40. The
underlying stock is selling for $46.70 per share. What is the time value of the put?
A. $0.00
B. $0.60
C. $0.70
D. $1.20
E. $1.40
One year ago, you purchased 400 shares of stock at a cost of $8,650. The stock paid an
annual dividend of $1.10 per share. Today, you sold those shares for $23.90 each. What
is the capital gains yield on this investment?
A. 9.96 percent
B. 10.52 percent
C. 12.49 percent
D. 13.33 percent
E. 14.75 percent
A bond has a par value of $1,000 and a market value of $833.40. The conversion price
is $45.45. What is the conversion ratio?
A. 21
B. 22
C. 23
D. 24
E. 25
Which one of the following is the definition of maintenance margin?
A. initial amount required when a futures contract is either bought or sold
B. maximum amount of margin permitted for a futures account
C. minimum margin required in a futures account at all times
D. the additional amount requested in a margin call
E. the minimum amount needed to reverse a futures position
Which one of the following refers to selling an option contract?
A. calling
B. writing
C. exercising
D. striking
E. spotting
Which of the following has the obligation to purchase stock at the strike price when an
option is exercised?
A. call holder
B. call writer
C. put holder
D. put writer
E. call writer and put holder
The overnight repurchase rate is the rate charged on overnight loans which are
collateralized by which one of the following securities?
A. Treasury securities
B. Municipal bonds
C. commercial paper
D. banker’s acceptances
E. Eurodollar deposits