1) which of the following funds are usually most tax-efficient?
a.equity funds
b.bond funds
c.etfs
d.specialized-sector funds
2) all else the same, an american style option will be ______ valuable than a ______
style option.
a.more; european-
b.less; european-
c.more; canadian-
d.less; canadian-
3) compute the duration of an 8%, 5-year corporate bond with a par value of $1,000 and
yield to maturity of 10%.
a.3.92
b.4.28
c.4.55
d.5
4)
what is the expected return on the market?
a.0%
b.5%
c.10%
d.15%
5) earnings on variable life and universal life insurance policies are ___________.
a.never taxed
b.taxed only at the capital gains tax rate
c.not taxed until the money is withdrawn
d.not taxed at the federal level but are taxed at the state level
6) you have an ear of 9%. the equivalent apr with continuous compounding is _____.
a.8.47%
b.8.62%
c.8.88%
d.9.42%
7) exercise prices for listed stock options usually occur in increments of ____ and
bracket the current stock price.
a.$1
b.$5
c.$20
d.$25
8) stone harbor products takes out a bank loan. it receives $100,000 and signs a
promissory note to pay back the loan over 5 years. in this transaction, _____.
a.a new financial asset was created
b.a financial asset was traded for a real asset
c.a financial asset was destroyed
d.a real asset was created
9) an investor can design a risky portfolio based on two stocks, a and b. stock a has an
expected return of 21% and a standard deviation of return of 39%. stock b has an
expected return of 14% and a standard deviation of return of 20%. the correlation
coefficient between the returns of a and b is .4. the risk-free rate of return is 5%. the
expected return on the optimal risky portfolio is approximately _________. (hint: find
weights first.)
a.14%
b.16%
c.18%
d.19%
10) a 1-year gold futures contract is selling for $1,645. spot gold prices are $1,592 and
the 1-year risk-free rate is 3%.
based on the above data, which of the following set of transactions will yield positive
riskless arbitrage profits?
a.buy gold in the spot with borrowed money, and sell the futures contract.
b.buy the futures contract, and sell the gold spot and invest the money earned.
c.buy gold spot with borrowed money, and buy the futures contract.
d.buy the futures contract, and buy the gold spot using borrowed money.
11) todd mountain development corporation is expected to pay a dividend of $2.50 in
the upcoming year. dividends are expected to grow at the rate of 8% per year. the
risk-free rate of return is 5%, and the expected return on the market portfolio is 12%.
the stock of todd mountain development corporation has a beta of .75. using the capm,
the return you should require on the stock is _________.
a.7.25%
b.10.25%
c.14.75%
d.21%
12) the financial statements of flathead lake manufacturing company are shown below:
note: the common shares are trading in the stock market for $15 per share
refer to the financial statements of flathead lake manufacturing company. the firm’s cash
flow from operating activities for 2012 was _______.
a.$810,000
b.$775,000
c.$755,000
d.$735,000
13)
refer to the figure above. assuming this market is representative of the economy as a
whole, a positive demand shock will:
a.increase both the price level and the quantity of output produced.
b.increase output, but leave prices unchanged.
c.lower the price level, but leave output unchanged.
d. raise the price level, but leave output unchanged.
14) the expansion of the money supply at a rate that exceeds the increase in goods and
services will likely result in ___________.
a.expanding economy
b.increased inflation
c.interest rate declines
d.lower gdp
15) firm b produce gadgets. the price of gadgets is $2 each. firm b has total fixed costs
of $300,000 and variable costs of $1.40 per gadget. the corporate tax rate is 40%. what
is the breakeven number of gadgets b must sell to make a zero after-tax profit?
a.300,000
b.400,000
c.500,000
d.600,000