1) withdrawals from a traditional retirement plan prior to age ___ are taxable and must
pay a ___ tax penalty.
a.59; 10%
b.62; 5%
c.65; 7 %
d.63; 5%
2) a bond has a par value of $1,000, a time to maturity of 10 years, and a coupon rate of
8% with interest paid annually. if the current market price is $750, what is the capital
gain yield of this bond over the next year?
a..72%
b.1.85%
c.2.58%
d.3.42%
3) a portfolio manager indexes part of a portfolio and actively manages the rest of the
portfolio. this is called a _________ strategy.
a.passive-aggressive
b.passive core
c.passively active
d.balanced fund
4) the market risk premium is defined as __________.
a.the difference between the return on an index fund and the return on treasury bills
b.the difference between the return on a small-firm mutual fund and the return on the
standard & poor’s 500 index
c.the difference between the return on the risky asset with the lowest returns and the
return on treasury bills
d.the difference between the return on the highest-yielding asset and the return on the
lowest-yielding asset
5) a coupon bond that pays interest annually has a par value of $1,000, matures in 5
years, and has a yield to maturity of 12%. if the coupon rate is 9%, the intrinsic value of
the bond today will be _________.
a.$856.04
b.$891.86
c.$926.47
d.$1,000
6) stockholders of dogs r us pet supply expect a 12% rate of return on their stock.
management has consistently been generating an roe of 15% over the last 5 years but
now believes that roe will be 12% for the next 5 years. given this, the firm’s optimal
dividend payout ratio is now ______.
a.0%
b.100%
c.between 0% and 50%
d.between 50% and 100%
7) what aspect of the time value of money does the factor of e represent in the
black-scholes option value formula?
a.annual compounding
b.compounding at the expiration time frame
c.continuous compounding
d.daily compounding
8) the term random walk is used in investments to refer to ______________.
a.stock price changes that are random but predictable
b.stock prices that respond slowly to both old and new information
c.stock price changes that are random and unpredictable
d.stock prices changes that follow the pattern of past price changes
9) according to the capm, what is the expected market return given an expected return
on a security of 15.8%, a stock beta of 1.2, and a risk-free interest rate of 5%?
a.5%
b.9%
c.13%
d.14%
10) management fees for hedge funds typically range between _____ and _____.
a..5%; 1.5%
b.1%; 2%
c.2%; 5%
d.5%; 8%
11) eurodollars are _________.
a.dollar-denominated deposits at any foreign bank or foreign branch of an american
bank
b.dollar-denominated bonds issued by firms outside their home market
c.currency issued by euro disney and traded in france
d.dollars that wind up in banks as a result of money-laundering activities
12) a short hedge is a simultaneous __________ position in the spot market and a
__________ position in the futures market.
a.long; long
b.long; short
c.short; long
d.short; short
13) an individual wants to have $95,000 per year to live on when she retires in 30 years.
the individual is planning on living for 20 years after retirement. if the investor can earn
6% during her retirement years and 10% during her working years, how much should
she be saving during her working life? (hint: treat all calculations as annuities.)
a.$9,872
b.$8,234
c.$7,908
d.$6,624