1) which one of the following would be considered a “cash equivalent” investment?
a.treasury bills
b.common stock
c.corporate bonds
d.real estate
2) on january 1, you sold one april s&p 500 index futures contract at a futures price of
1,300. if the april futures price is 1,250 on february 1, your profit would be __________
if you close your position. (the contract multiplier is 250.)
a.-$12,500
b.-$15,000
c.$15,000
d.$12,500
3) a mutual fund has total assets outstanding of $69 million. during the year the fund
bought and sold assets equal to $17.25 million. this fund’s turnover rate was _____.
a.25%
b.28.5%
c.18.63%
d.33.4%
4) countercyclical fiscal policy is best described by which of the following statements?
a.government surpluses are planned during economic booms, and deficits are planned
during economic recessions.
b.the annual budget should always be balanced.
c.deficits should always equal surpluses.
d.government deficits are planned during economic booms, and surpluses are planned
during economic recessions.
5) the term complete portfolio refers to a portfolio consisting of _________________.
a.the risk-free asset combined with at least one risky asset
b.the market portfolio combined with the minimum-variance portfolio
c.securities from domestic markets combined with securities from foreign markets
d.common stocks combined with bonds
6) the yield on a 1-year bill in the united kingdom is 6%, and the present exchange rate
is 1 pound = us$2. if you expect the exchange rate to be 1 pound = us$1.95 a year from
now, the return a u.s. investor can expect to earn by investing in u.k. bills is
approximately __________.
a.-3%
b.3%
c.3.35%
d.8.72%
7) even though indexing is growing in popularity, only about _____ of equity in the
mutual fund industry is held in indexed funds. this may be a sign that investors and
managers __________.
a.5%; are excessively conservative
b.15%; overestimate their ability
c.20%; suffer from framing biases
d.25%; engage in mental accounting
8) which of the following is a false statement regarding open-end mutual funds?
a.they offer investors a guaranteed rate of return.
b.they offer investors a well-diversified portfolio.
c.they redeem shares at their net asset value.
d.they offer low-cost diversification.
9) according to kondratieff, the macro economy moves in a series of waves that recur at
intervals of approximately _________________.
a.18 months
b.4 years
c.8 years
d.50 years
10) you can earn abnormal returns on your investments via macro forecasting ______.
a.if you can forecast the economy at all
b.if you can forecast the economy as well as the average forecaster
c.if you can forecast the economy better than the average forecaster
d.only if you can forecast the economy with perfect accuracy
11) the risk-free interest rate in the united states is 4%, while the risk-free interest rate
in the united kingdom is 9%. if the british pound is worth $2 in the spot market, a
1-year futures rate on the british pound should be worth __________.
a.$1.83
b.$1.91
c.$2.08
d.$2.18
12) what happened to the effective spread on trades when the sec allowed the minimum
tick size to move from one-eighth of a dollar to one-sixteenth of a dollar in 1997 and
from one-sixteenth of a dollar to one cent in 2001?
a.the tick size increased in 1997 but decreased in 2001.
b.the tick size increased in both cases.
c.the tick size decreased in 1997 but increased in 2001.
d.the tick size decreased in both cases.
13) consider the expectations theory of the term structure of interest rates. if the yield
curve is downward-sloping, this indicates that investors expect short-term interest rates
to __________ in the future.
a.increase
b.decrease
c.not change
d.change in an unpredictable manner
14) based on the example used in the book, a perfect market timer would have made
_______ by 2008 on a $1 investment made in 1926.
a.$100
b.$1,626
c.$1.5 million
d.$36.7 billion
15) the ________ and the _______ have the lowest correlations with the large-cap
indexes.
a.nasdaq composite; russell 2000
b.nyse; djia
c.s&p 500; djia
d.russell 2000; s&p 500
16) the market value weighted-average beta of firms included in the market index will
always be _____________.
a.0
b.between 0 and 1
c.1
d.none of these options (there is no particular rule concerning the average beta of firms
included in the market index.)
17) the ______ measure of returns ignores compounding.
a.geometric average
b.arithmetic average
c.irr
d.dollar-weighted
18) in 2011 real assets represented approximately __________ of the total asset
holdings of american households.
a.32%
b.42%
c.48%
d.55%