1)
this stock has greater systematic risk than a stock with a beta of ___.
a..50
b.1.5
c.2
d.3
2) you are considering investing $1,000 in a complete portfolio. the complete portfolio
is composed of treasury bills that pay 5% and a risky portfolio, p, constructed with two
risky securities, x and y. the optimal weights of x and y in p are 60% and 40%,
respectively. x has an expected rate of return of 14%, and y has an expected rate of
return of 10%. the dollar values of your positions in x, y, and treasury bills would be
_________, __________, and __________, respectively, if you decide to hold a
complete portfolio that has an expected return of 8%.
a.$162; $595; $243
b.$243; $162; $595
c.$595; $162; $243
d.$595; $243; $162
3) a pension fund will owe $10 million to retirees in 6 years. an actuary assumes an 8%
rate of return on the funds invested in the pension plan. if the pension plan receives
annual contributions from the company sponsor, how much must the company pay each
year to fully fund the pension liability?
a.$1,212,587
b.$1,363,154
c.$1,533,333
d.$1,666,667
4) a bond was purchased at a premium and is now selling at a discount because of a
change in market interest rates. if the bond pays a 4% annual coupon, what is the likely
impact on the holding-period return if an investor decides to sell now?
a.increased
b.decreased
c.stayed the same
d.the answer cannot be determined from the information given.
5) you believe that the spread between the september s&p 500 future and the s&p 500
index is too large and will soon correct. this is an example of ______________.
a.pairs trading
b.convergence play
c.statistical arbitrage
d.a long-short equity hedge
6) corruption is _________ risk variable.
a.a firm-specific
b.a political
c.a financial
d.an economic
7) investors who want to liquidate their holdings in a closed-end fund may
___________________.
a.sell their shares back to the fund at a discount if they wish
b.sell their shares back to the fund at net asset value
c.sell their shares on the open market
d.sell their shares at a premium to net asset value if they wish
8) real assets represent about ____ of total assets for commercial banks.
a.1%
b.15%
c.25%
d.40%
9) a trin ratio of greater than 1 is considered a __________.
a.bearish signal
b.bullish signal
c.bearish signal by some technical analysts and a bullish signal by other technical
analysts
d.trend reversal signal
10) hedge fund managers receive incentive bonuses when they increase portfolio assets
beyond a stipulated benchmark but lose nothing when they fail to perform. this is
equivalent to __________.
a.writing a call option
b.receiving a free call option
c.writing a put option
d.receiving a free put option
11) the two principal types of reits are equity trusts, which _______________, and
mortgage trusts, which _______________.
a.invest directly in real estate; invest in mortgage and construction loans
b.invest in mortgage and construction loans; invest directly in real estate
c.use extensive leverage; distribute less than 95% of income to shareholders
d.distribute less than 95% of income to shareholders; use extensive leverage
12) the classification system used to classify firms into industries is now called the
_____ code.
a.sic
b.naics
c.iso 57
d.ism
13) the commission structure on a stock purchase is $50 plus $.03 per share. if you
purchase 600 shares of a stock selling for $65, what is your commission?
a.$35
b.$45
c.$53
d.$68
14) when assessing the sustainability of a firm’s cash flows, analysts will prefer to see
cash growth generated from which of the following sources?
a.cash flow from investment activities
b.cash flow from operating activities
c.cash flow from financing
d.cash flow from extraordinary events
15) the information ratio is equal to the stock’s ____ divided by its ______.
a.diversifiable risk; beta
b.beta; alpha
c.alpha; beta
d.alpha; diversifiable risk
16) a bank has made long-term fixed-rate mortgages and has financed them with
short-term deposits. to hedge out its interest rate risk, the bank could ________.
a.sell t-bond futures
b.buy t-bond futures
c.buy stock-index futures
d.sell stock-index futures
17) if enough investors decide to purchase stocks, they are likely to drive up stock
prices, thereby causing _____________ and ___________.
a.expected returns to fall; risk premiums to fall
b.expected returns to rise; risk premiums to fall
c.expected returns to rise; risk premiums to rise
d.expected returns to fall; risk premiums to rise
18) a mutual fund invests in large-capitalization stocks. its performance should be
measured against which one of the following?
a.russell 2000 index
b.s&p 500 index
c.wilshire 5000 index
d.dow jones industrial average
19) consider the following $1,000 par value zero-coupon bonds:
the expected 1-year interest rate 4 years from now should be _________.
a.16%
b.18%
c.20%
d.22%