1) security selection refers to the ________.
a.allocation of the investment portfolio across broad asset classes
b.analysis of the value of securities
c.choice of specific securities within each asset class
d.top-down method of investing
2) the yield curve spread between the 10-year t-bond yield and the federal funds rate is
a _______ economic indicator.
a.leading
b.lagging
c.coincident
d.mixed
3) what is the term for the process used to assess portfolio manager performance?
a.active analysis
b.attribution analysis
c.passive analysis
d.treynor-black analysis
4) on monday morning you sell one june t-bond futures contract at 97:27, that is, for
$97,843.75. the contract’s face value is $100,000. the initial margin requirement is
$2,700, and the maintenance margin requirement is $2,000 per contract. use the
following price data to answer the following questions.
on which of the given days do you get a margin call?
a.monday
b.tuesday
c.wednesday
d.none of these options
5) many defined benefit pension plans have a target rate of return on investment that is
equal to the ____________.
a.firm’s return on equity
b.plan’s assumed actuarial rate of return
c.economic inflation rate because wages often increase with inflation
d.estimated stock market return
6) you have $500,000 available to invest. the risk-free rate, as well as your borrowing
rate, is 8%. the return on the risky portfolio is 16%. if you wish to earn a 22% return,
you should _________.
a.invest $125,000 in the risk-free asset
b.invest $375,000 in the risk-free asset
c.borrow $125,000
d.borrow $375,000
7) bill, jim, and shelly are all interested in buying the same stock that pays dividends.
bill plans on holding the stock for 1 year. jim plans on holding the stock for 3 years.
shelly plans on holding the stock until she retires in 10 years. which one of the
following statements is correct?
a.bill will be willing to pay the most for the stock because he will get his money back in
1 year when he sells.
b.jim should be willing to pay three times as much for the stock as bill will pay because
his expected holding period is three times as long as bill’s.
c.shelly should be willing to pay the most for the stock because she will hold it the
longest and hence will get the most dividends.
d.all three should be willing to pay the same amount for the stock regardless of their
holding period.
8) an investor in a t-bill earns interest by _________.
a.receiving interest payments every 90 days
b.receiving dividend payments every 30 days
c.converting the t-bill at maturity into a higher-valued t-note
d.buying the bill at a discount from the face value to be received at maturity
9) the current stock price of alcoa is $70, and the stock does not pay dividends. the
instantaneous risk-free rate of return is 6%. the instantaneous standard deviation of
alcoa’s stock is 40%. you want to purchase a call option on this stock with an exercise
price of $75 and an expiration date 30 days from now. based on the black-scholes opm,
the call option’s delta will be __________.
a..28
b..31
c..62
d..70
10) the difference between market-neutral and long-short hedges is that market-neutral
hedge funds _________.
a.establish long and short positions on both sides of the market to eliminate risk and to
benefit from security asset mispricing whereas long-short hedges establish positions
only on one side of the market
b.allocate money to several other funds while long-short funds do not
c.invest in relatively stable proportions of stocks and bonds while the proportions may
vary dramatically for long-short funds
d.invest only in equities and bonds while long-short funds use only derivatives
11) the cumulative tally of the number of advancing stocks minus declining stocks is
called the ______________.
a.market breadth
b.market volume
c.trin ratio
d.relative strength ratio
12) specialized-sector funds concentrate their investments in _________________.
a.bonds of a particular maturity
b.geographic segments of the real estate market
c.government securities
d.securities issued by firms in a particular industry
13) as a result of flash crashes, the sec is trying circuit breakers that will halt trading for
5 minutes if large stocks’ prices change by more than _____ in a 5-minute period.
a.10%
b.20%
c.30%
d.40%
14) the three statistics that are the main focus for those measuring the health of the
macroeconomy are:
a.real gdp, inflation, and unemployment.
b.real gdp, nominal gdp, and inflation.
c.nominal gdp, unemployment, and inflation.
d.nominal gdp, nominal gdp, and inflation.
15) harold has just taken his company public and owns a large quantity of restricted
stock. for purposes of diversification, what fund might he help create in order to
diversify his holdings?
a.commingled funds
b.hedge funds
c.etf
d.reits
16) what is the geometric average return of the following quarterly returns: 3%, 5%,
4%, and 7%?
a.3.72%
b.4.23%
c.4.74%
d.4.90%