1) if the economy is going into a recession, a good industry to invest in would be the
__________ industry.
a.automobile
b.banking
c.construction
d.medical services
2) it is difficult to test the kondratieff wave theory because _________.
a.it applies to only russian stocks
b.its main proponent found contrary research results
c.only two independent data points are generated each century
d.the stock market is too volatile to generate smooth waves
3) treasury bills are paying a 4% rate of return. a risk-averse investor with a risk
aversion of a = 3 should invest entirely in a risky portfolio with a standard deviation of
24% only if the risky portfolio’s expected return is at least ______.
a.8.67%
b.9.84%
c.21.28%
d.14.68%
4) __________ is the most risky transaction to undertake in the stock-index option
markets if the stock market is expected to fall substantially after the transaction is
completed.
a.writing an uncovered call option
b.writing an uncovered put option
c.buying a call option
d.buying a put option
5) cache creek manufacturing company is expected to pay a dividend of $4.20 in the
upcoming year. dividends are expected to grow at the rate of 8% per year. the risk-free
rate of return is 4%, and the expected return on the market portfolio is 14%. investors
use the capm to compute the market capitalization rate on the stock and use the
constant-growth ddm to determine the intrinsic value of the stock. the stock is trading in
the market today at $84. using the constant-growth ddm and the capm, the beta of the
stock is _________.
a.1.4
b..9
c..8
d..5
6) in 2008, the nasdaq stock market merged with _____.
a.euronext
b.omx, which operates seven nordic and baltic stock exchanges
c.the international securities exchange (ise)
d.bats
7) the expected rate of return of a portfolio of risky securities is _________.
a.the sum of the securities’ covariances
b.the sum of the securities’ variances
c.the weighted sum of the securities’ expected returns
d.the weighted sum of the securities’ variances
8) ownership of a put option entitles the owner to the __________ to ___________ a
specific stock, on or before a specific date, at a specific price.
a.right; buy
b.right; sell
c.obligation; buy
d.obligation; sell
9) the most marketable money market security is _____.
a.treasury bills
b.bankers’ acceptances
c.certificates of deposit
d.common stock
10) the primary measurement unit used for assessing the value of one’s stake in an
investment company is ___________________.
a.net asset value
b.average asset value
c.gross asset value
d.total asset value
11) which one of the following stock return statistics fluctuates the most over time?
a.covariance of returns
b.variance of returns
c.average return
d.correlation coefficient