1) a mutual fund has $50 million in assets at the beginning of the year and 1 million
shares outstanding throughout the year. throughout the year assets grow at 12%. the
fund imposes a 12b-1 fee on all shares equal to 1%. the fee is imposed on year-end asset
values. if there are no distributions, what is the end-of-year nav for the fund?
a.$50
b.$55.44
c.$56.12
d.$54.55
2) $1,000 par value zero-coupon bonds (ignore liquidity premiums)
the expected 1-year interest rate 1 year from now should be about _________.
a.6%
b.7.5 %
c.9.02%
d.10.08%
3) in creating the p* portfolio, one mixes the original portfolio p and t-bills to match the
_________ of the market.
a.alpha
b.beta
c.excess return
d.standard deviation
4) which one of the following is largely based on forecasts of macroeconomic factors?
a.security selection
b.passive investing
c.market efficiency
d.market timing
5) on may 21, 2012, you could have purchased a futures contract from intrade for a
price of $5.70 that would pay you $10 if barack obama won the 2012 presidential
election. this tells you _____.
a.that the market believed that obama had a 57% chance of winning
b.that the market believed that obama would not win the election
c.nothing about the market’s belief concerning the odds of obama winning
d.that the market believed obama’s chances of winning were about 43%
6) a __________ is a private investment pool open only to wealthy or institutional
investors that is exempt from sec regulation and can therefore pursue more speculative
policies than mutual funds.
a.commingled pool
b.unit trust
c.hedge fund
d.money market fund
7) one method of forecasting the risk premium is to use the _______.
a.coefficient of variation of analysts’ earnings forecasts
b.variations in the risk-free rate over time
c.average historical excess returns for the asset under consideration
d.average abnormal return on the index portfolio
8) in a 1953 study of stock prices, maurice kendall found that ________.
a.there were no predictable patterns in stock prices
b.stock prices exhibited strong serial autocorrelation
c.day-to-day stock prices followed consistent trends
d.fundamental analysis could be used to generate abnormal returns
9) at contract maturity the value of a call option is ___________, where x equals the
option’s strike price and st is the stock price at contract expiration.
a.max (0, st – x)
b.min (0, st – x)
c.max (0, x – st)
d.min (0, x – st)
10) a dollar-denominated deposit at a london bank is called _____.
a.eurodollars
b.libor
c.fed funds
d.bankers’ acceptance
11) if you know that a call option will be profitably exercised, then the black-scholes
model price will simplify to _______.
a.s0 – x
b.x – s0
c.s0 – pv(x)
d.pv(x) – s0
12) the success of common stock investments depends on the success of _________.
a.derivative securities
b.fixed-income securities
c.the firm and its real assets
d.government methods of allocating capital
13) the social security system _______________.
a.is financed in a regressive way
b.is regressive in the way it allocates benefits
c.is progressive in the way it is financed
d.is fully funded for the foreseeable future
14) you are thinking of investing in one of two assets. asset a has higher systematic risk
than asset b. you can be sure that asset a’s _______ return will be higher than asset b’s,
but you can’t be sure if asset a’s _______ return will be higher than asset b’s.
a.realized; expected
b.real; nominal
c.expected; realized
d.nominal; expected
15) which of the following statements is most accurate about advanced economies?
a.economies experience a positive growth trend over the short run, but experience
significant variability in the long run.
b.economies experience a positive growth trend over the long run, but experience
significant variability in the short run.
c.economies experience positive and stable growth over both the long run and short run.
d.economies experience little long-run growth in output, but can experience significant
growth in the short run.
16) a farmer sells futures contracts at a price of $2.75 per bushel. the spot price of corn
is $2.55 at contract expiration. the farmer harvested 12,500 bushels of corn and sold
futures contracts on 10,000 bushels of corn.
what are the farmer’s proceeds from the sale of corn?
a.$27,500
b.$31,875
c.$33,875
d.$35,950
17) according to 1968 research by ball and brown, securities markets fully adjust to
earnings announcements _______.
a.instantly
b.in 1 day
c.in 1 week
d.gradually over time
18) the financial statements of burnaby mountain trading company are shown below.
note: the common shares are trading in the stock market for $27 each.
refer to the financial statements of burnaby mountain trading company. the firm’s
return-on-equity ratio for 2012 is _________. (please keep in mind that when a ratio
involves both income statement and balance sheet numbers, the balance sheet numbers
for the beginning and end of the year must be averaged.)
a..0409
b..0429
c..0462
d..0923
19) the margin requirement on a stock purchase is 25%. you fully use the margin
allowed to purchase 100 shares of msft at $25. if the price drops to $22, what is your
percentage loss?
a.9%
b.15%
c.48%
d.57%