A 12b-1 fee is a fee charged by a mutual fund:
A. at the time shares are issued.
B. if shares are sold within a stated period of time.
C. to cover trading costs.
D. to pay the fund’s managers.
E. to cover marketing costs.
A mortgage prepayment is similar to which one of the following features of a corporate
bond?
A. collateral provision
B. put provision
C. call provision
D. conversion provision
E. protective covenants provision
Which one of the following futures contracts is generally used to hedge a bond
portfolio?
A. S&P 500 index
B. Eurodollar
C. U.S. Treasury notes
D. gold
E. LIBOR rates
Efficient markets tend to exist:
A. only when all investors are rational.
B. anytime market volume exceeds the average trading volume.
C. only when market volatility is low.
D. when rational arbitrage traders dominate irrational traders.
E. when arbitrage trading is prohibited.
In 2007, the Chicago Mercantile Exchange merged with which one of the following
exchanges?
A. Intercontinental Exchange
B. New York Board of Trade
C. Chicago Board of Trade
D. Coffee, Sugar, and Cocoa Exchange
E. New York Futures Exchange
An owner of a trading license on the NYSE is called a:
A. broker.
B. shareholder.
C. member.
D. trader.
E. dealer.
Which one of the following statements related to the price-earnings (P/E) ratio is
correct?
A. The earnings yield is the inverse of the P/E ratio.
B. The P/E ratio is equal to the market price per share divided by total net income.
C. The P/E ratio shown in The Wall Street Journal is based on next year’s estimated
earnings per share.
D. The P/E ratio varies directly with earnings per share.
E. The earnings for the past twelve months is the method analysts prefer for computing
earnings for the P/E ratio.
The Asian stock market crash of 1990 was followed by a:
A. long bull market.
B. rapid recovery.
C. prolonged flat market.
D. short-term decline.
E. long bear market.
A $40,000 face value bond matures in 64 days and has a bank discount yield of 4.5
percent. What is the current value of the bond?
A. $39,392.19
B. $39,473.14
C. $39,486.47
D. $39,575.39
E. $39,680.00
Uptown Markets stock has a standard deviation of 16.8 percent and a covariance with
the market of .0178. The market has a standard deviation of 13.6 percent. What is the
correlation of this stock with the market?
A. .74
B. .78
C. .87
D. .89
E. .91
In an efficient market, stocks with similar risks will:
A. have the same market price.
B. pay similar dividends.
C. yield the market rate of return.
D. produce abnormal returns.
E. have similar rates of return.
The costs of materials used in the production of a product are recorded in which one of
the following accounts?
A. net sales
B. fixed costs
C. operating income
D. depreciation
E. cost of goods sold
The minimum price at which a security is expected to trade is called the:
A. stop value.
B. par value.
C. Elliott wave price.
D. resistance level.
E. support level.
Retail Specialties just announced that its Chief Operating Officer is retiring at the end
of this month. This announcement will cause the firm’s stock price to:
A. increase.
B. either increase or remain constant.
C. remain constant.
D. decrease.
E. either increase, decrease, or remain constant.
A bond has a face value of $1,000 and a coupon rate of 5.5 percent. What is your annual
interest payment if you own 8 of these bonds?
A. $110
B. $220
C. $330
D. $440
E. $880
Which of the following is NOT a primary goal of the Federal Reserve?
A. keep inflation in check
B. encourage consumer spending
C. generate full employment
D. moderate the business cycle
E. help achieve long-term economic growth
The price of a bond, net of accrued interest, is referred to as the bond’s:
A. dirty price.
B. par value.
C. clean price.
D. maturity value.
E. discount value.
You own a corporate bond which is yielding 8.2 percent. What is your after-tax yield if
your marginal tax rate is 28 percent?
A. 5.90 percent
B. 7.52 percent
C. 8.20 percent
D. 10.58 percent
E. 11.55 percent
A firm has total equity of $61,600 and total liabilities of $18,900. Current assets are
$44,700 and current liabilities are $15,200. What is the value of the net fixed assets?
A. $8,300
B. $10,600
C. $29,500
D. $35,800
E. $42,700
Which one of the following is NOT included in the fee table found in a mutual fund
prospectus?
A. 12b-1 fee
B. turnover rate
C. redemption fee percentage
D. management fee
E. front-end load
Uptown Jewelers purchased a futures contract on 200 ounces of gold to be exchanged
3-months from now. As the contract holder, Uptown Jewelers:
A. has the right, but not the obligation, to purchase 200 ounces of gold 3 months from
now.
B. has the obligation to purchase 200 ounces of gold at the market price three months
from now.
C. has an obligation to buy 200 ounces of gold but only if the price of gold increases
within the next 3 months.
D. is expecting the price of gold to decrease and thus is locking in a selling price.
E. will profit if the price of gold is higher three months from now.
A Treasury bond has a 3.4 percent coupon, a quoted price of 101:06, and 9 years to
maturity. What is the yield to maturity?
A. 3.25 percent
B. 3.93 percent
C. 4.03 percent
D. 4.90 percent
E. 5.92 percent
Which metric measures how volatile a fund’s returns are relative to its benchmark?
A. Jensen’s alpha
B. Information ratio
C. Tracking error
D. Sharpe ratio
E. Treynor ratio
Approximately how many years did it take for the stock market to recover from the bear
market of 1929 to 1932?
A. 5
B. 10
C. 15
D. 20
E. 25
The Country Inn has bonds outstanding with a par value of $1,000 each and a 6.6
percent coupon. The bonds mature in 7.5 years and pay interest semiannually. What is
the current value of each of these bonds if the yield to maturity is 6.8 percent?
A. $988.40
B. $1,003.29
C. $1,005.88
D. $1,008.36
E. $1,009.47
What is the financing cash flow, given the following information?
A. -$210
B. -$160
C. -$110
D. -$60
E. -$50
What is the investment cash flow?
A. -$220
B. -$140
C. -$120
D. -$20
E. -$10
Which one of the following statements describes an investment strategy that may lead
to profitable results based on current research findings?
A. selling stocks as soon as positive earnings surprises are announced
B. selling stocks on Mondays only
C. selling small-company stocks in December and repurchasing them in February
D. selling stocks on the 25th of the month and repurchasing them on the 5th of the
following month
E. buying stocks with relatively low P/E ratios
The 4-month futures price on a non-dividend-paying stock is $23.60. The risk-free rate
is 2.25 percent and the market rate is 10.45 percent. What is the spot rate for this stock
if spot-futures parity exists?
A. $23.39
B. $23.43
C. $23.51
D. $23.64
E. $23.78
Your portfolio has a beta of 1.17, a standard deviation of 14.3 percent, and an expected
return of 12.5 percent. The market return is 11.3 percent and the risk-free rate is 3.1
percent. What is the Treynor ratio?
A. .015
B. .080
C. .109
D. .482
E. .510
Young Industries has a 3-year bank loan of $85,000, a 6-month note payable of $6,000,
a $67,300 mortgage, and accounts payable of $22,500. What is the amount of the total
current liabilities? (Ignore the current portion of any long-term debt.)
A. $5,000
B. $16,200
C. $28,500
D. $64,200
E. $117,000
What is the maximum loss you can incur if you have a long position on a stock in a
cash account?
A. The initial investment
B. The initial margin
C. The margin loan plus interest
D. Zero
E. Unlimited
If you are a proponent of the Elliott wave theory, you are most apt to do which one of
the following?
A. sell on wave 2
B. sell on wave 3
C. buy on wave A
D. buy on wave 2
E. buy on wave 5
Which of the following are classified as equity accounts on a balance sheet?
I. goodwill
II. paid in capital
III. net income
IV. retained earnings
A. IV only
B. I and III only
C. II and IV only
D. I, II, and IV only
E. II, III, and IV only
Which one of the following is a notification to a futures contract holder that additional
margin funds are needed?
A. marking-to-market
B. deposit call
C. shortage notice
D. margin call
E. marking call