1) you put half of your money in a stock portfolio that has an expected return of 14%
and a standard deviation of 24%. you put the rest of your money in a risky bond
portfolio that has an expected return of 6% and a standard deviation of 12%. the stock
and bond portfolios have a correlation of .55. the standard deviation of the resulting
portfolio will be ________________.
a.more than 18% but less than 24%
b.equal to 18%
c.more than 12% but less than 18%
d.equal to 12%
2) the variance of the return on the market portfolio is .04 and the expected return on
the market portfolio is 20%. if the risk-free rate of return is 10%, the market degree of
risk aversion, a, is _________.
a..5
b.2.5
c.3.5
d.5
3) a security with normally distributed returns has an annual expected return of 18%
and standard deviation of 23%. the probability of getting a return between -28% and
64% in any one year is _____.
a.68.26%
b.95.44%
c.99.74%
d.100%
4) in macroeconomic terms, an increase in the price of imported oil or a decrease in the
availability of oil is an example of a _________.
a.demand shock
b.supply shock
c.monetary shock
d.refinery shock
5) a typical bond price quote includes all but which one of the following?
a.daily high price for the bond
b.closing bond price
c.yield to maturity
d.dividend yield
6) in a particular year, salmon arm mutual fund earned a return of 16% by making the
following investments in asset classes:
the return on a bogey portfolio was 12%, based on the following:
the contribution of security selection within asset classes to the total excess return was
__________.
a.1.5%
b.2%
c.2.5%
d.3.5%
7) value stocks are more likely to have a peg ratio _____.
a.less than 1
b.equal to 1
c.greater than 1
d.less than zero
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
return-on-sales ratio for 2012 is _________.
a..0409
b..0429
c..0475
d..0753
9) target date immunization would primarily be of interest to _________.
a.banks
b.mutual funds
c.pension funds
d.individual investors
10) which of the following funds invest specifically in stocks of fast-growing
companies?
a.balanced funds
b.growth equity funds
c.reits
d.equity income funds
11) which of the following does not approximate the performance of a buy-and-hold
portfolio strategy?
a.an equally weighted index
b.a price-weighted index
c.a value-weighted index
d.all of these options (weights are not a factor in this situation.)
12) firms with higher expected growth rates tend to have p/e ratios that are
___________ the p/e ratios of firms with lower expected growth rates.
a.higher than
b.equal to
c.lower than
d.there is not necessarily any linkage between risk and p/e ratios.
13) fama and french claim that after controlling for firm size and the ratio of the firm’s
book value to market value, beta is:
i. highly significant in predicting future stock returns
ii. relatively useless in predicting future stock returns
iii. a good predictor of the firm’s specific risk
a.i only
b.ii only
c.i and iii only
d.i, ii, and iii
14) serial bonds are associated with _________.
a.staggered maturity dates
b.collateral
c.coupon payment dates
d.conversion features
15) suppose that in 2012 the expected dividends of the stocks in a broad market index
equaled $240 million when the discount rate was 8% and the expected growth rate of
the dividends equaled 6%. using the constant-growth formula for valuation, if interest
rates increase to 9%, the value of the market will change by _____.
a.-10%
b.-20%
c.-25%
d.-33%
