Treasury bonds generally have maturities of:
a. 5 to 15 years
b. 5 to 30 years
c. 10 to 20 years
d. 10 to 30 years
Which of the following is the best definition of “realized compound yield”?
a) The yield an investor realizes on the bond coupons.
b) The total amount of the coupon and principal payments.
c) The ending wealth divided by the starting wealth.
d) The total amount of the coupon and principal payments, and the reinvestment of
these flows.
Which of the following is a limitation of the life cycle approach to security
analysis?
a. It focuses on sales rather than stock prices.
b. It focuses on the past more than the present.
c. It does not consider the risk in the different cycles.
d. It does not consider quantitative factors.
Bonds called in are likely to be:
a. bonds already in default
b. reissued as new bonds with a lower interest rate
c. reissued as new bonds with a higher interest rate
d. junk bonds
A stock is purchased for $50 on January 1 and sold on December 31 for $72. A $5.00
per share dividend is paid during the year. (a) Calculate the TR.
(b) Calculate the RR.
Owning two securities instead of one will not reduce the risk taken by an investor if the
two securities are
a. perfectly positively correlated with each other
b. perfectly independent of each other
c. perfectly negatively correlated with each other
d. of the same category, e.g. blue chips
Another name for stockbrokers is:
a. specialists
b. financial advisors
c. security analysts
d. portfolio managers
Listed below are the actual returns on two stocks X and Y, and on the market (RM),
along with their systematic risk measures (Betas) relative to the time period, t.
Stock Ri,t% RM,t % ai Beta
X 12.2 15.5 0 0.8
Y 9.7 6.0 0 1.2
(a) What is the abnormal return for stock X when you consider its systematic risk
measure?
(b) What is the abnormal return for stock Y when you consider its systematic risk
measure?
NYSE Specialists are required to
a. maintain a bid-ask spread no greater than 1 cent per share
b. maintain a fair and orderly market.
c. buy when most others are selling, or vice versa.
d. selling off inventory and maintaining strictly neutral positions
Normal stock exchange hours in the U.S. are 9:30
a.m. to 4 p.m.
How would you explain P/E ratio differences among companies? By investor
a. expectations about the future growth of the market.
b. estimates of the recent growth of earnings.
c. expectations about the future growth of earnings.
d. estimates about the recent growth of dividends.
Which of the following would not be considered a source of systematic risk?
a. a hostile takeover
b. a rise in inflation
c. a fall in GDP
d. a panic on Wall Street
We can expect that the U.S. stock markets will be efficient for all of the following
reasons EXCEPT:
a. A large number of rational, profit-maximizing investors exist who actively participate
in the U.S. market by analyzing, valuing, and trading stocks.
b. The U.S. economy is the largest in the world, with the most sophisticated investors.
c. Information is costless and widely available to market participants at approximately
the same time.
d. Investors react quickly and fully to the new information, causing stock prices to
adjust accordingly.
Individual investors consider the investment decision:
a. based on market and economic conditions as consisting of asset allocation.
b. based on market and economic conditions as consisting of asset allocation and
security selection.
c. based on objectives, constraints, and preferences, as consisting of asset allocation.
d. based on objectives, constraints, and preferences, as consisting of asset allocation and
security selection.
Estrella and Mishkin (1996) developed a somewhat successful model to predict whether
the economy is going into recession using what variable?
a. spread between the 10-year U.S. Treasury Inflation Protected Security and the 3-
month T-Bill.
b. spread between the 5-year U.S. Treasury Note and the 3-month T-Bill.
c. spread between the 10-year U.S. Treasury Note and the 3-month T-Bill.
d. spread between the 30-year U.S. Treasury Note and the 3-month T-Bill.
Which of the following is true regarding the expected return of a portfolio?
a. It is a weighted average only for stock portfolios
b. It can only be positive
c. It can never be above the highest individual asset return
d. It is always below the highest individual asset return
GIPS presentation standards require
a. a 5-year performance record, or since inception if the fund is less than 5-years old.
b. inclusion of terminated portfolios.
c. cash accounting.
d. exclusion of cash and cash equivalents.
According to its website, NYSE Euronext accounts for nearly what percent of the world
‘s publicly traded equity securities?
a. nearly 25%
b. nearly 33%
c. nearly 40%
d. nearly 50%
Debont and Thayler (1985)’s overreaction hypothesis tends to:
a. support the weak form of the EMH.
b. not support the weak form of the EMH.
c. support the semistrong form of the EMH.
d. not support the semistrong form of the EMH.
Which of the following typically contributes the greatest portion to the Total Dollar
Return?
a) The semi-annual coupon payments
b) The interest earned on reinvesting the coupon payments.
c) The principal paid at maturity.
d) The interest earned on reinvesting the principal.
Which of the following professionals would be considered an institutional investor?
a. Investment Banker
b. Security Analyst
c. Stockbroker
d. Portfolio Manager
Sector rotation is
a. one form of passive investing.
b. an active strategy similar to stock selection.
c. an attempt to earn excess returns by varying the percentage of assets in the
portfolio.
d. not dependent on an accurate assessment of current economic conditions.
Briefly explain the difference between expected returns and realized returns and
between ex ante returns an ex post returns.
How do you think the globalization of the securities markets will impact the NYSE and
the Nasdaq? What specific developments do you foresee happening soon for the global
marketplace?
Since extraordinary items affecting earnings are typically non-recurring, investors
should disregard their impact on earnings when evaluating the stock.
Which of the following portfolios has the least reduction of risk?
A portfolio with securities all having positive correlation with each otherA portfolio
with securities all having zero correlation with each otherA portfolio with securities all
having negative correlation with each otherA portfolio with securities all having skewed
correlation with each other
A positive earnings surprise occurs when the forecasted earnings are greater than the
actual earnings of a company.
Specialist trading on the NYSE now accounts for the majority of share volume on a
yearly basis.
The Dow Jones Industrial Average provides the best representation of the performance
of U.S. stocks.
The initial margin requirement on security trades is set by the:
a. SEC
b. FINRA
c. SIPC
d. Federal Reserve