1) In the Black-Scholes option pricing model, an increase in security price (S) will
cause
a. An increase in call value and an increase in put value
b. An increase in call value and a decrease in put value
c. A decrease in call value and an increase in put value
d. A decrease in call value and a decrease in put value
e. An increase in call value and an increase or decrease in put value
2) Two common methods for constructing a bond index are
a. Full replication and stratified sampling
b. Partial replication and overall market approach
c. ETFs and High Yield sampling
d. Multiple discriminant analysis and bond swaps
e. None of the above
3) In the Characteristic Selectivity (CS) performance measure,
a. Portfolio performance is measured by assessing the quality of services provided by
money managers by looking at adjustments made to the content of their portfolios.
b. Portfolio performance is measured by examining both unsystematic and systematic
risk.
c. Portfolio performance is measured by comparing the returns of each stock in the
portfolio to the return of a benchmark portfolio. With the same aggregate investment
characteristics as the security in question.
d. Portfolio performance is measured on the basis of return per unit of risk.
e. Portfolio performance is measured on the basis of historic average differential return
per unit of historic variability of differential return.
4) Growth rates of the (1) labor force, (2) average number of hours worked and (3)
labor productivity are the main determinants of a foreign country’s
a. Dividend payout ratio.
b. Beta.
c. Real risk free rate.
d. Nominal risk free rate.
e. Risk premium.
5) The measure of performance which divides the portfolio’s risk premium by the
portfolio’s beta is the
a. Sharpe measure.
b. Jensen measure.
c. Fama measure.
d. Alternative components model (MCV).
e. Treynor measure.
6) Assume that you purchase a 3-year $1,000 par value bond, with a 8% coupon, and a
yield of 10%. After you purchase the bond, one-year interest rates are as follow, year 1
= 10%, year 2 = 8%, year 3 = 6% (these are the reinvestment rates). Calculate the
realized horizon yield if you hold the bond to maturity. Interest is paid annually.
a. 8.37%
b. 7.28%
c. 9.76%
d. 10.67%
e. 14.0%
7) Trading in the secondary markets for Corporate bonds
a.Takes place through a network of primary dealers
b.Takes place over the counter by dealers who buy and sell on their own account
c.Takes place on the NYSE bond annex
d.All of the above
e.None of the above
8) Exhibit 15.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Daily closings for the Dow Jones Industrial Average are given in the table below.
Calculate a 5-day moving average for day 6.
a. 10,102.3
b. 9905.6
c. 9875.4
d. 10,215.7
e. 10,157.6
9) A fundamental tenet of the contrarian investment strategy is the notion that
a. All stock returns are mean reverting.
b. Certain stocks outperform others during different stages of the business cycle.
c. Value stock investing is superior to growth stock investing.
d. Growth stock investing is superior to value stock investing.
e. None of the above.
10) Exhibit 15.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The table below provides five days of trade data.
Calculate the final value of the cumulative advance-decline line at the end of the fifth
day.
a. -3,883
b. 9,540
c. -2,354
d. 13,356
e. 7,953
11) Which of the following statements concerning asset allocation is false?
a. Diversification across international boundaries can improve risk-adjusted portfolio
returns.
b. Economies expected to grow at an above-average rate with above-average profit
growth should be considered as candidates to overweight in a global portfolio.
c. Severe currency blockages should not impact global diversification selections.
d. Portfolio allocation among asset classes may provide higher portfolio returns while
lowering portfolio risk levels.
e. None of the above (that is, all statements are true).
12) A style index created to track ethical funds is known as:
a.Green index
b.SRI index
c.EAFE index
d.Freedom index
e.Ethical index
13) In an investment company, the invested funds belong to many individuals.
14) The Chicago Board Options Exchange has the largest share of stock option trading.
15) The price at which the stock can be acquired or sold is the exercise price.
16) A Eurobond is an international bond denominated in a currency other than that of
the United States.
17) The price-yield curve is a concave curve representing the relationship of bond
prices and yields.
18) The income statement indicates the flow of sales, expenses, and earnings during a
period of time.
19) Management and advisory firms can advise clients on how to structure their own
portfolios.
20) Cyclical industries are attractive investments during the early stages of an economic
recovery.
21) Fundamentalists typically use the “Bottom-Up Approach” whereas technicians use
the “Top-Down Approach” to the valuation process.