Upon graduating from college this year, you expect to earn $25,000 per year. If you get
your MBA, in one year you can expect to start at $35,000 per year. Over the year,
inflation is expected to be 5 percent. In today’s dollars, how much additional (less)
money will you make from getting your MBA (to the nearest dollar) in your first year?
A.$10,000
B.$8,750
C.$8,333
D.-$2,462
E.$9,524
(35,000/1.05) – 25,000
An individual actually earned a 4 percent nominal return last year. Prices went up by 3
percent over the year. Given that the investment income was subject to a federal tax rate
of 28 percent and a state and local tax rate of 6 percent, what was the investor’s actual
real after-tax rate of return?
A.-0.36 percent
B.0.66 percent
C.2.64 percent
D.0.72 percent
E.1.45 percent
A Swiss bank converted 1 million Swiss francs to euros to make a euro loan to a
customer when the exchange rate was 1.85 francs per euro. The borrower agreed to
repay the principal plus 3.75 percent interest in one year. The borrower repaid euros at
loan maturity and when the loan was repaid the exchange rate was 1.98 francs per
dollar. What was the bank’s franc rate of return?
A.7.75 percent
B.11.04 percent
C.9.94 percent
D.-2.82 percent
E.5.71 percent
HMOs have dollar limits on their coverage.
a.True
b.False
YIELD CURVE FOR ZERO COUPON BONDS RATED AA
Assume that there are no liquidity premiums.
To the nearest basis point, what is the expected interest rate on a four-year maturity AA
zero coupon bond purchased six years from today?
A.9.96 percent
B.10.41 percent
C.10.05 percent
D.10.56 percent
E.9.16 percent
((1.094710/1.08856))(1/4) -1
Refer to Figure 10-2. After the Todd€s insurance company pays for the damages Frank
caused Todd and his wife, what will Todd€s insurance company probably do?
a.Subrogate the damages against the at-fault driver
b.Assign a claims adjuster to the case
c.Change Todd’s policy to a named-perils policy
d.Consider the case closed
Fernando Bank has interest expense of $150 million, earning assets of $1,400 million
and a NIM of 5.00 percent. The bank also has interest-bearing liabilities of $1,100
million. Fernando Bank’s spread is
A.1.10 percent.
B.1.65 percent.
C.1.94 percent.
D.2.08 percent.
E.2.16 percent.
The largest type of municipal bonds outstanding is _______________.
A.revenue bonds
B.industrial development bonds
C.Treasury STRIPS
D.convertible bonds
E.general obligation bonds
The act of recommending someone to another for possible employment is called a(n)
a.internship.
b.mentor.
c.cover letter.
d.referral.
A Japanese investor can earn a 1 percent annual interest rate in Japan or about 3.5
percent per year in the United States. If the spot exchange rate is 101 yen to the dollar,
at what one-year forward rate would an investor be indifferent between the U.S. and
Japanese investments?
A.¥100.58
B.¥98.56
C.¥101.68
D.¥97.42
E.¥103.50
The _____________ is a network linking over 9,000 banks with the Federal Reserve
that is used to transfer deposits and make loan payments between participants.
A.Fedwire
B.ACH
C.CHIPS
D.NASDAQ
E.SWIFT
Which type of investor in mutual funds would be least likely to be concerned about
back-end loads?
a.someone about to retire who is moving money from their employer-based retirement
plan into an IRA they will manage themselves.
b.the parent of a 15-year old who is investing for the child€s college expenses.
c.young to middle-age workers investing through their employer-based retirement plan.
d.any investor who plans on selling their recently purchased shares in the next three
years.
A U.S. bank borrowed dollars, converted them to euros, and invested in
euro-denominated CDs to take advantage of interest rate differentials. To cover the
currency risk the investor should
A.sell dollars forward.
B.sell euros forward.
C.buy euros forward.
D.sell euros spot.
E.none of the options