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By the end of 2002, the AMEX Internet Index was at a level approximately equal to
_____ percent of the index high.
A. 75
B. 50
C. 25
D. 17
E. 9
A 5.5 percent coupon bond has a face value of $1,000 and a current yield of 5.64
percent. What is the current market price?
A. $975.18
B. $989.18
C. $1,011.82
D. $3,933.43
E. $4,067.47
A bond pays interest semiannually on February 1 and August 1. Assume today is
October 1. How many months of accrued interest are included in the clean price of this
bond?
A. zero
B. two
C. three
D. four
E. five
Which one of the following is required for the cash flows on a PAC bond to be
predictable?
A. market interest rates must remain constant
B. market interest rates must steadily decline
C. mortgage prepayments must remain within the PAC collar
D. PAC support bonds must be prepaid in a timely manner
E. mortgage prepayments must exceed the specified PSA schedule
All nonmilitary people employed and unemployed, but seeking employment make up
the ______.
A. labor force
B. labor population
C. employable population
D. work force participants
E. employable work force
Which one of the following statements is correct concerning a callable bond that is
currently selling below face value? Assume there is no risk of default. Also assume the
issuer only calls bonds when they can be refinanced at a lower rate of interest.
A. The bond will most likely be called while the bonds are selling at a discount.
B. The yield-to-maturity is presently more relevant to an investor than the yield-to-call.
C. The bond is likely going to be called due to the low current interest rates.
D. The bond is currently paying a premium.
E. The bond issue will most likely be replaced with a new bond issue.
You recently purchased 1,300 shares of stock at a cost per share of $54.10. The initial
margin requirement on this stock is 60 percent and the maintenance margin is 30
percent. The stock is currently valued at $42.30 a share. What is your current margin
position? Ignore margin interest.
A. 46.91 percent
B. 48.84 percent
C. 63.05 percent
D. 65.28 percent
E. 78.18 percent
Which one of the following is used as an indicator that a firm has good-quality
earnings?
A. declining price-earnings ratios
B. constant price-earnings ratios
C. cash flow per share that exceeds earnings per share
D. earnings per share that exceed cash flow per share
E. positive earnings per share
Seasoned mortgages are defined as mortgages that are, or have been, which of the
following?
A. prepackaged
B. resold
C. being paid faster than scheduled
D. refinanced
E. over 30 months old
Which of the following are related to VaR analysis?
I. beta
II. standard deviation
III. expected return
IV. time
A. I and III only
B. II and IV only
C. I, III, and IV only
D. II, III, and IV only
E. I, II, III, and IV
Today, you are purchasing 100 shares of stock on margin. The purchase price per share
is $35. The initial margin requirement is 70 percent and the maintenance margin is 30
percent. The call money rate is 4.5 percent and you are charged 1.6 percent over that
rate. What will your rate of return be if you sell your shares one year from now for $37
a share? Ignore dividends.
A. 5.55 percent
B. 6.42 percent
C. 7.18 percent
D. 7.49 percent
E. 8.03 percent
Which of the following statements related to employee stock options (ESO) are
generally correct?
I. ESO vesting encourages long-term employment.
II. Most ESOs are issued at-the-money.
III. ESOs cannot be resold.
IV. ESOs that are in-the-money are frequently repriced.
A. I and II only
B. I and IV only
C. II and III only
D. I, II, and III only
E. I, II, III, and IV
Ten years ago, you borrowed $165,000 for 25 years at 7.5 percent interest. What is the
current principal balance, assuming payments are made monthly?
A. $112,200
B. $131,534
C. $138,314
D. $140,362
E. $147,414
An order book displays the following information:
You place an order to sell 100 shares. At what price will your order be executed?
A. $18.05
B. $18.06
C. $18.07
D. $18.11
E. $18.12
Non-diversifiable risk:
A. can be cut almost in half by simply investing in 10 stocks provided each stock is in a
different industry.
B. can almost be eliminated by investing in 35 diverse securities.
C. remains constant regardless of the number of securities held in a portfolio.
D. has little, if any, impact on the actual realized returns for a diversified portfolio.
E. should be ignored by investors.
If the market is semistrong-form efficient, then which one of the following statements is
true?
A. Neither technical nor fundamental analysis leads to abnormal profits.
B. Technical analysts have the ability to earn excess profits but fundamental analysts
cannot.
C. Fundamental analysts can earn excess profits but technical analysts cannot.
D. Both technical and fundamental analysts earn excess profits based on their research.
E. No answer can be determined as the form of market efficiency is unrelated to
abnormal, or excess returns.
What are the various provisions within a bond indenture that are designed to protect
bondholders by restricting the actions of the issuer called?
A. restrictive actions
B. prohibitions
C. negative conditions
D. protective covenants
E. restrictive amendments
Amy uses two approaches to trading stocks. First, she trades on what she believes is a
repetitive pattern as seen in Delta Co's historical prices. Secondly, she analyzes the
financial statements of The Atwater Co. to compute changes in the return on equity as a
predictor of future stock prices for that firm. She trades based on both strategies. Amy
earns excess profits on her return on equity strategy but not on her historical prices
strategy. This suggests that the market is at least _____ efficient but less than _____
efficient.
A. weak-form; mild-form
B. mild-form; semistrong-form
C. weak-form; semistrong-form
D. semistrong-form; full-form
E. semistrong-form; strong-form
Which one of the following terms is used to describe a sudden and significant collapse
in market prices?
A. dive
B. recession
C. crash
D. adjustment
E. rebound
Which one of the following is not one of the elements in the industry life cycle?
A. Start-up
B. Rapid growth
C. Consolidation
D. Maturity
E. relative decline
Which one of the following terms is defined as the strategy of monitoring the futures
price on a stock index in relation to the value of the underlying index to profit from any
parity deviations?
A. parity trading
B. index trading
C. program monitoring
D. inverted arbitrage
E. index arbitrage
Which one of the following costs can a mutual fund shareholder avoid by holding
shares for an extended period of time?
A. 12b-1 fee
B. front-end load
C. management fee
D. contingent deferred sales charge
E. trading costs
Which one of the following statements concerning venture capital is correct?
A. Venture capital is frequently provided in stages with each stage financed by a
different venture capitalist.
B. Most venture capitalists are passive investors.
C. The founders of a firm generally realize substantial payoffs as soon as the firm
receives venture financing.
D. Venture capitalists generally compete with banks to find projects to finance.
E. Well established firms tend to absorb most of the available venture capital.
Which one of the following best describes a broker?
A. intermediary who arranges trades between a buyer and a seller
B. trader who buys and sells from his or her inventory
C. firm which charges a commission for arranging a transaction
D. person who buys securities for his or her own account on an exchange floor
E. trader who transacts business on behalf of a securities issuer
A stock with which one of the following betas has an expected return that most
resembles the overall market expected rate of return?
A. .33
B. .74
C. .99
D. 1.06
E. 1.22
The SuperDOT system has lessened the role of which one of the following?
A. personal financial advisers
B. floor traders
C. specialists
D. floor brokers
E. underwriters
Staci just used $6,000 of cash plus a $3,000 margin loan to purchase $9,000 worth of
stock. This is the only transaction in her brokerage account. According to her account
balance sheet, she now has account equity of:
A. $3,000.
B. $6,000.
C. $9,000.
D. $12,000.
E. $15,000.
If spot-futures parity exists for an index future then the future price must equal the:
A. spot price.
B. present value of the spot price at the risk-free rate.
C. present value of the spot price at the market rate.
D. future value of the spot price at the risk-free rate.
E. future value of the spot price at the market rate.
A municipal bond is yielding 4.8 percent. Jeremy has a marginal tax rate of 24 percent.
What is his equivalent taxable yield?
A. 2.18 percent
B. 4.58 percent
C. 6.15 percent
D. 6.32 percent
E. 7.18 percent
Oak Supply has earnings per share of $1.22. The firm has $840,000 in equity and
60,000 shares of stock outstanding. What is the return on equity?
A. 7.92 percent
B. 8.71 percent
C. 9.09 percent
D. 9.47 percent
E. 10.36 percent
You will earn a profit as the owner of a call option if the price of the underlying asset:
A. decreases.
B. remains constant or decreases.
C. remains constant.
D. remains constant or increases.
E. increases.
