1)
from day 1 to day 4, the confidence index has _____. this is _____.
a.increased; bullish
b.decreased; bullish
c.increased; bearish
d.decreased; bearish
2) when dividend-paying assets are involved, the spot-futures parity relationship can be
stated as _________________.
a.f1 = s0(1 + rf)
b.f0 = s0(1 + rf – d)t
c.f0 = s0(1 + rf + d)t
d.f0 = s0(1 + rf)t
3) a bond issued by the state of alabama is priced to yield 6.25%. if you are in the 28%
tax bracket, this bond would provide you with an equivalent taxable yield of
_________.
a.4.5%
b.7.25%
c.8.68%
d.none of these options
4) the effect of liquidity on stock returns might be related to:
i. the small-firm effect
ii the book-to-market effect
iii the neglected-firm effect
iv. the p/e effect
a.i and ii only
b.i and iii only
c.ii and iv only
d.i, ii, and iii only
5) a firm purchases goods on credit worth $150. the same firm pays off $100 in old
credit purchases. an investment is made via the purchase of a new facility, and equity is
issued in the amount of $300 to pay for the purchase. what is the change in net cash
provided by operations?
a.$50 increase
b.$100 increase
c.$150 increase
d.$250 increase
6) the current stock price of international paper is $69, and the stock does not pay
dividends. the instantaneous risk-free rate of return is 10%. the instantaneous standard
deviation of international paper’s stock is 25%. you want to purchase a call option on
this stock with an exercise price of $70 and an expiration date 73 days from now.
using the black-scholes opm, the put option should be worth __________ today.
a.$1.50
b.$2.88
c.$2.55
d.$3.00
7) when the market risk premium rises, stock prices will ________.
a.rise
b.fall
c.recover
d.have excess volatility
8) the financial statements of burnaby mountain trading company are shown below.
note: the common shares are trading in the stock market for $27 each.
refer to the financial statements of burnaby mountain trading company. the firm’s asset
turnover ratio for 2012 is _________. (please keep in mind that when a ratio involves
both income statement and balance sheet numbers, the balance sheet numbers for the
beginning and end of the year must be averaged.)
a.1.3
b.1.5
c.1.69
d.2.83
9) as the typical investor ages, the composition of his wealth usually switches from
primarily _______ to primarily _______.
a.human capital; financial capital
b.financial capital; human capital
c.intellectual capital; physical capital
d.investable capital;noninvestable capital
10) you purchase one ibm july 125 call contract for a premium of $5. you hold the
option until the expiration date, when ibm stock sells for $123 per share. you will
realize a ______ on the investment.
a.$200 profit
b.$200 loss
c.$500 profit
d.$500 loss
11) the risk-free rate, average returns, standard deviations, and betas for three funds and
the s&p 500 are given below.
what is the treynor measure for portfolio a?
a.12.38%
b.2.38%
c..91%
d.3.64%
12) the financial statements of flathead lake manufacturing company are shown below:
note: the common shares are trading in the stock market for $15 per share
refer to the financial statements of flathead lake manufacturing company. the firm’s
inventory turnover ratio is _________. (please keep in mind that when a ratio involves
both income statement and balance sheet numbers, the balance sheet numbers for the
beginning and end of the year must be averaged.)
a.11.6
b.10.2
c.9.5
d.7.7
13) the financial statements of flathead lake manufacturing company are shown below:
note: the common shares are trading in the stock market for $15 per share
refer to the financial statements of flathead lake manufacturing company. the industry
average acp is 32 days. how is flathead doing in its collections relative to the industry?
(please keep in mind that when a ratio involves both income statement and balance
sheet numbers, the balance sheet numbers for the beginning and end of the year must be
averaged.)
a.flathead’s receivables are outstanding about 9 fewer days than the industry average.
b.flathead’s receivables are outstanding about 15 fewer days than the industry average.
c.flathead’s receivables are outstanding about 12 more days than the industry average.
d.flathead’s receivables are outstanding about 6 more days than the industry average.
14) a farmer sells futures contracts at a price of $2.75 per bushel. the spot price of corn
is $2.55 at contract expiration. the farmer harvested 12,500 bushels of corn and sold
futures contracts on 10,000 bushels of corn.
ignoring the transaction costs, how much did the farmer improve his cash flow by
hedging sales with the futures contracts?
a.$0
b.$2,000
c.$31,875
d.$33,875
15) the value of internet companies is based primarily on _____.
a.current profits
b.tobin’s q
c.growth opportunities
d.replacement cost
16) art has come out with a new and improved product. as a result, the firm projects an
roe of 25%, and it will maintain a plowback ratio of .20. its earnings this year will be $3
per share. investors expect a 12% rate of return on the stock.
what is the present value of growth opportunities for art?
a.$8.57
b.$9.29
c.$14.29
d.$16.29
17) if you are holding a premium bond, you must expect a _______ each year until
maturity. if you are holding a discount bond, you must expect a _______ each year until
maturity. (in each case assume that the yield to maturity remains stable over time.)
a.capital gain; capital loss
b.capital gain; capital gain
c.capital loss; capital gain
d.capital loss; capital loss
18) assume there is a fixed exchange rate between the canadian and u.s. dollars. the
expected return and standard deviation of return on the u.s. stock market are 10% and
15%, respectively. the expected return and standard deviation of return on the canadian
stock market are 12% and 16%, respectively. the covariance of returns between the u.s.
and canadian stock markets is .012. if you invested 50% of your money in the canadian
stock market and 50% in the u.s. stock market, the standard deviation of return on your
portfolio would be __________.
a.10.96%
b.12.25%
c.13.42%
d.15.5%