1) sahali trading company has issued $100 million worth of long-term bonds at a fixed
rate of 9%. sahali trading company then enters into an interest rate swap where it will
pay libor and receive a fixed 8% on a notional principal of $100 million. after all these
transactions are considered, sahali’s cost of funds is __________.
a.17%
b.libor
c.libor + 1%
d.libor – 1%
2) trend analysts who follow bonds are most likely to monitor the ____________.
a.confidence index
b.odd-lot trading
c.short interest
d.trin statistic
3) which of the following set of conditions will result in a bond with the greatest price
volatility?
a.a high coupon and a short maturity
b.a high coupon and a long maturity
c.a low coupon and a short maturity
d.a low coupon and a long maturity
4) you purchased a 5-year annual-interest coupon bond 1 year ago. its coupon interest
rate was 6%, and its par value was $1,000. at the time you purchased the bond, the yield
to maturity was 4%. if you sold the bond after receiving the first interest payment and
the bond’s yield to maturity had changed to 3%, your annual total rate of return on
holding the bond for that year would have been approximately _________.
a.5%
b.5.5%
c.7.6%
d.8.9%
5) an investment earns 10% the first year, earns 15% the second year, and loses 12% the
third year. the total compound return over the 3 years was ______.
a.41.68%
b.11.32%
c.3.64%
d.13%
6) consider a 7-year bond with a 9% coupon and a yield to maturity of 12%. if interest
rates remain constant, 1 year from now the price of this bond will be _________.
a.higher
b.lower
c.the same
d.indeterminate
7) the beta of a security is equal to _________.
a.the covariance between the security and market returns divided by the variance of the
market’s returns
b.the covariance between the security and market returns divided by the standard
deviation of the market’s returns
c.the variance of the security’s returns divided by the covariance between the security
and market returns
d.the variance of the security’s returns divided by the variance of the market’s returns
8) which of the following is not a sentiment indicator?
a.confidence index
b.short interest
c.odd-lot trading
d.put/call ratio
9) large-growth companies generally emerge in the __________ stage.
a.start-up
b.consolidation
c.maturity
d.relative decline
10) an investor has an effective tax rate on all items of 30%, and he decides to put
$8,000 into a 401k. the future value of the investment that results from the deferral of
taxes over 30 years at an 8% return equals _____________.
a.$2,400
b.$8,000
c.$10,400
d.$24,150
11) you find that the exchange rate quote for the yen is 121 yen per dollar. this is an
example of ________ quote. you also find that the euro is worth $1.33. this second
quote is an example of _______ quote.
a.a direct; an indirect
b.an indirect; a direct
c.a foreign; a u.s.
d.a u.s.; a foreign
12) the price of your investment increases 20% one month after you buy it. you do not
believe that the stock’s prospects have changed. which one of the following actions
would indicate the lowest amount of risk aversion?
a.you hang on to the stock, anticipating that it will go higher.
b.you buy more stock, anticipating that it will go higher.
c.you sell all of your stock holdings immediately.
d.you sell half of your stock holdings and invest the proceeds in other areas of your
portfolio.
13) advantages of exchange-traded options over otc options include all but which one of
the following?
a.ease and low cost of trading
b.anonymity of participants
c.contracts that are tailored to meet the needs of market participants
d.no concerns about counterparty credit risk
14) you buy one hewlett packard august 50 call contract and one hewlett packard august
50 put contract. the call premium is $1.25, and the put premium is $4.50. your highest
potential loss from this position is _________.
a.$125
b.$450
c.$575
d.unlimited
15) a firm has an roa of 8% and a debt/equity ratio of .5; its roe is _________.
a.4%
b.6%
c.8%
d.12%