1) a corporation will be issuing bonds in 6 months, and the treasurer is concerned about
unfavorable interest rate moves in the interim. the best way for her to hedge the risk is
to _________________.
a.buy t-bond futures
b.sell t-bond futures
c.buy stock-index futures
d.sell stock-index futures
2) the __________ of a bond is computed as the ratio of the annual coupon payment to
the market price.
a.nominal yield
b.current yield
c.yield to maturity
d.yield to call
3) the two most important factors in describing an individual’s or organization’s
investment objectives are ________________.
a.income level and age
b.income level and risk tolerance
c.age and risk tolerance
d.return requirement and risk tolerance
4) the nyse acquired the ecn _______, and nasdaq recently acquired the ecn ________.
a.archipelago; instinet
b.instinet; archipelago
c.island; instinet
d.lse; euronext
5) assume the risk-free interest rate is 10% and is equal to the fund’s benchmark, the
portfolio’s net asset value is $100, and the fund’s standard deviation is 20%. also assume
a time horizon of 1 year.
assuming a 2% management fee and a 20% incentive bonus, what is the expected
management compensation per share if the fund’s net asset value exceeds the stated
benchmark?
a.$4.24
b.$4
c.$3.84
d.$2.20
6) the sec requires funds to disclose:
i. after-tax returns for the past year
ii. after-tax returns for the last 5-year period
iii. the tax impact of portfolio turnover
a.i only
b.i and ii only
c.i and iii only
d.i, ii, and iii
7) the correct measure of timing ability is ____________ for a portfolio manager who
correctly forecasts 55% of bull markets and 55% of bear markets.
a.-5%
b.5%
c.10%
d.95%
8) you are currently long in a futures contract. you instruct a broker to enter the short
side of a futures contract to close your position. this is called __________.
a.a cross-hedge
b.a reversing trade
c.a speculation
d.marking to market
9) the 32 “developed” countries with the largest equity capitalization made up about
_____ of the world gdp in 2011.
a.22%
b.44%
c.68%
d.85%
10) which risk can be partially or fully diversified away as additional securities are
added to a portfolio?
i. total risk
ii. systematic risk
iii. firm-specific risk
a.i only
b.i and ii only
c.i, ii, and iii
d.i and iii
11) value stocks may provide investors with better returns than growth stocks if:
i. value stocks are out of favor with investors.
ii. prices of growth stocks include premiums for overly optimistic growth levels.
iii. value stocks are likely to generate positive-earnings surprises.
a.i only
b.ii only
c.i and iii only
d.i, ii, and iii
12) the comparison universe is __________.
a.the bogey portfolio
b.a set of mutual funds with similar risk characteristics to your mutual fund
c.the set of all mutual funds in the united states
d.the set of all mutual funds in the world
13) the table presents the actual return of each sector of the manager’s portfolio in
column (1), the fraction of the portfolio allocated to each sector in column (2), the
benchmark or neutral sector allocations in column (3), and the returns of sector indexes
in column 4.
what is the contribution of security selection to relative performance?
a.-.15%
b..15%
c.-.3%
d..3%
14) you invest in a mutual fund that charges a 3% front-end load, 1% total annual fees,
and a 0% back-end load on class a shares. the same fund charges a 0% front-end load,
1% total annual fees, and a 2% back-end load on class b shares. what are the total fees
in year 1 on a class a investment of $20,000 with no growth in value?
a.$658
b.$794
c.$885
d.$902
15) a stock has an intrinsic value of $15 and an actual stock price of $50. you know that
this stock ________.
a.has a tobin’s q value < 1
b.will generate a positive alpha
c.has an expected return less than its required return
d.has a beta > 1
16) if the quote for a treasury bond is listed in the newspaper as 99:08 bid, 99:11 ask,
the actual price at which you can sell this bond given a $10,000 par value is
_____________.
a.$9,828.12
b.$9,925
c.$9,934.37
d.$9,955.43
17) the market capitalization rate on the stock of aberdeen wholesale company is 10%.
its expected roe is 12%, and its expected eps is $5. if the firm’s plowback ratio is 50%,
its p/e ratio will be _________.
a.8.33
b.12.5
c.19.23
d.24.15
18) withdrawals after retirement from a traditional retirement plan are __________, and
withdrawals after retirement from a roth retirement plan are ____________.
a.taxable; not taxable
b.not taxable; taxable
c.tax deductible; not tax deductible
d.not tax deductible; tax deductible
19) many observers believe that firms “manage” their income statements to _______.
a.minimize taxes over time
b.maximize expenditures
c.smooth their earnings over time
d.generate level sales