1) the u.s. income tax code is generally _____.
a.regressive
b.progressive
c.flat
d.peaked
2) the fama and french evidence that high book-to-market firms outperform low
book-to-market firms even after adjusting for beta means that _________.
a.high book-to-market firms are underpriced or the book-to-market ratio is a proxy for a
unique risk factor
b.low book-to-market firms are underpriced or the book-to-market ratio is a proxy for a
systematic risk factor
c.either high book-to-market firms are underpriced or the book-to-market ratio is a
proxy for a systematic risk factor
d.high book-to-market firms have more post-earnings drift
3) a longer time to maturity will unambiguously increase the value of a call option
because:
i. the longer maturity time reduces the effect of a dividend on call price.
ii. with a longer time to maturity the present value of the exercise price falls.
iii. with a longer time to maturity the range of possible stock prices at expiration
increases.
a.i only
b.i and ii only
c.ii and iii only
d.i, ii, and iii
4) moving to higher-yield bonds, usually with longer maturities, is called ________.
a.a substitution swap
b.an intermarket spread swap
c.a rate anticipation swap
d.a pure yield pickup swap
5) the expected return on the market portfolio is 15%. the risk-free rate is 8%. the
expected return on sda corp. common stock is 16%. the beta of sda corp. common stock
is 1.25. within the context of the capital asset pricing model, _________.
a.sda corp. stock is underpriced
b.sda corp. stock is fairly priced
c.sda corp. stock’s alpha is -.75%
d.sda corp. stock alpha is .75%
6) for which one of the following institutions is liquidity usually the most important?
a.mutual funds
b.pension funds
c.life insurers
d.banks
7) next year’s earnings are estimated to be $6. the company plans to reinvest 33% of its
earnings at 12%. if the cost of equity is 8%, what is the present value of growth
opportunities?
a.$6
b.$24.50
c.$44.44
d.$75
8) the offer price of an open-end fund is $18 and the fund is sold with a front-end load
of 5%. what is the fund’s nav?
a.$18.74
b.$17.10
c.$15.40
d.$16.57
9) tilting your retirement savings plan toward your later years should only be done by
investors _____________.
a.who are sufficiently risk averse
b.who are more tolerant of risk
c.who are unsure if their income growth will keep up with inflation
d.who want to retire early
10) warrants differ from listed options in that:
i. exercise of warrants results in dilution of a firm’s earnings per share.
ii. when warrants are exercised, new shares of stock must be created.
iii. warrant exercise results in cash flows to the firm, whereas exercise of listed options
does not.
a.i only
b.i and ii only
c.ii and iii only
d.i, ii, and iii
11) the fact that american put values may not equal the price implied by put-call parity
is attributable to the possibility of what event?
a.changes in the dividend
b.early exercise
c.interest rate declines
d.interest rate rises
12) the figures below show plots of monthly excess returns for two stocks plotted
against excess returns for a market index.
which stock is likely to further reduce risk for an investor currently holding her
portfolio in a well-diversified portfolio of common stock?
a.stock a
b.stock b
c.there is no difference between a or b.
d.the answer cannot be determined from the information given.
13) use the following cash flow data of haven hardware for the year ended december
31, 2012.
what is the net increase or decrease in cash for haven hardware for 2012?
a.-$94,000
b.-$88,000
c.$88,000
d.$188,000
14) in a 2011 study, agarwal, daniel, and naik documented that hedge funds tend to
report average returns in ____________ that are __________ than their average returns
in other months.
a.september; lower
b.january; higher
c.january; lower
d.december; higher