Which one of the following terms is used to describe a stock price that moves over time
creating no discernible pattern?
A. deviated pattern
B. dispersed flow
C. efficient movement
D. overreaction and correction
E. random walk
Employee stock options grant an employee which one of the following rights?
A. right to sell shares in an S&P 500 index fund
B. right to buy shares in an S&P 500 index fund
C. right to sell shares of the employer’s stock
D. right to buy shares of the employer’s stock
E. right to buy shares in the employer’s retirement plan
Which one of the following is most apt to create an environment that increases
mortgage prepayments?
A. home mortgage rates remain relatively steady
B. home mortgage rates decline significantly
C. number of homeowner’s defaulting on their mortgages rises
D. homeowner’s have steady, secure employment at their current jobs
E. number of employees being transferred for employment purposes declines
You own six November crude oil futures contracts. What is the settlement value of
those contracts at the end of this trading day?
A. $736,200
B. $736,260
C. $746,400
D. $746,500
E. $747,000
Which one of the following would best reveal how stock prices react when competitive
firms merge?
A. financial analysis
B. field testing
C. risk analysis
D. event study
E. market survey
The so-called “M1” money supply includes which of the following?
A. currency and checking deposits
B. currency and money markets
C. currency and time deposits
D. currency, time deposits and money markets
E. checking and time deposits
What is the expected return on this stock given the following information?
A. -8.07 percent
B. -7.69 percent
C. -6.80 percent
D. -5.70 percent
E. -5.22 percent
Which of the following is correct regarding the compensation paid to private equity
fund managers?
A. Managers typically receive 20% of fund profits but no separate management fee.
B. Managers typically receive a high percentage management fee but no portion of fund
profits.
C. Management compensation is usually subject to a “clawback” provision to limit the
performance fees.
D. “Carried interest” refers to the interest fund managers earn on performance fees.
E. Fees paid to fund managers do not reduce the net return of the fund.
Christine owns a stock that dropped in price from $38.70 to $34.10 over the past year.
The dividend yield on that stock is 1.4 percent. What is her total return on this
investment for the year?
A. -11.31 percent
B. -10.49 percent
C. -9.91 percent
D. -9.59 percent
E. -8.51 percent
Lester is considering a municipal bond yielding 5.5 percent and a corporate bond
yielding 8.2 percent. His marginal tax rate is 28 percent. He should invest in the _____
bond because the critical marginal tax rate is _____ percent.
A. corporate; 26
B. corporate; 29
C. corporate; 33
D. municipal; 35
E. municipal; 37
The rate of return earned on a U.S. Treasury bill is frequently used as a proxy for the:
A. risk premium.
B. deflated rate of return.
C. risk-free rate.
D. expected rate of return.
E. market rate of return.
Which one of the following statements related to stock indexes is correct?
A. The index divisor increases in value whenever a stock in the index undergoes a stock
split.
B. A value-weighted index includes both dividends and capital gains.
C. The S&P 500 index is value-weighted.
D. The DJIA is value-weighted.
E. Index staleness is more apt to be a problem for the DJIA than for the Wilshire 5000.
A mortgage pool is divided into A, B, C, and Z-tranches as discussed in the textbook.
What happens to the initial interest payment for the Z tranche?
A. It is immediately passed through to holders of Z tranche securities.
B. It is accumulated and held until the Z tranche securities mature.
C. It is exchanged for principal from the A tranche.
D. It is exchanged for principal from the B tranche.
E. It is exchanged for principal from the C tranche.
According to Malkiel’s theorems, bond prices and bond yields are:
A. inversely related.
B. uncorrelated.
C. positively related.
D. directly related.
E. independent of each other.
Which of the following have the same meaning as the term “economic value added”?
I. abnormal earnings
II. residual income
III. value created by a firm in period t
IV. EPSt – Bt-1 k
A. I and II only
B. III and IV only
C. I, II, and III only
D. II, III, and IV only
E. I, II, III, and IV
Which one of the following rates is the rate that banks charge each other for overnight
loans of $1 million or more?
A. institutional
B. financial overnight
C. Federal funds
D. monetary
E. daily
What is the Treynor ratio of a portfolio comprised of 25 percent portfolio A, 35 percent
portfolio B, and 40 percent portfolio C?
The risk-free rate is 3.6 percent and the market risk premium is 8.2 percent.
A. .054
B. .062
C. .070
D. .081
E. .102
Which of the following are current assets?
I. inventory
II. goodwill
III. fixed assets
IV. cash
A. III only
B. IV only
C. II and III only
D. I and IV only
E. I, II, and IV only
Which one of the following is a contract managed by an organized exchange that allows
a buyer and seller to agree on a price today for an exchange of goods that will occur
sometime in the future?
A. futures contract
B. spot market
C. cash market
D. forward contract
E. discounted contract
A 6-month call option on ABC stock is priced at $3.60. The call option delta is 0.76.
How will the approximate call option price be computed if the underlying stock price
increases by $1?
A. $3.60
B. $3.60 – $0.76
C. $3.60 + $0.76
D. $3.60 .76
E. $3.60 (1 + .76)
City Bank needs a one-day reserve loan of $2.6 million from Country Bank. Which one
of the following interest rates will be charged on this loan?
A. money market
B. Federal funds
C. discount
D. prime
E. Treasury bill
An analyst gathered the following year-end price level data for an economy. What is the
economy’s annual inflation rate for 2012?
A. 3.22%
B. 3.42%
C. 3.68%
D. 3.87%
E. 3.92%
Which one of the following is defined as the yield to maturity for a mortgage-backed
security computed on an assumed prepayment pattern?
A. payment yield
B. assumed yield
C. current yield
D. cash flow yield
E. amortized yield
Better Products just filed its quarterly report with the SEC. This report is referred to as
which one of the following?
A. 10F
B. 10K
C. 10Q
D. EDGAR 10
E. 10FD
A STRIPS has a yield to maturity of 6.2 percent, a par value of $25,000, and a time to
maturity of 10 years. What is the price?
A. $4,100.87
B. $5,792.80
C. $9,967.50
D. $10,698.08
E. $13,575.84
If the prepayment schedule for a mortgage pool increases to 100 PSA from 50 PSA, the
related interest-only strips will _____ in value and the related principal-only strips will
_____ in value.
A. decrease; decrease
B. decrease; increase
C. increase; decrease
D. increase; increase
E. remain constant; remain constant
Which one of the following is an intangible fixed asset?
A. accounts receivable
B. patent
C. inventory
D. equipment
E. building
Pure discount bonds which are created by separating the interest and principal payments
from U.S. Treasury bonds are called U.S. Treasury:
A. notes.
B. bills.
C. STRIPS.
D. SWAPS.
E. tax-exempts.
Which one of the following identifies a new bond issue as being a private placement?
A. The proceeds of the issue are used for a single project.
B. The issue is marketed through a sole brokerage house.
C. The issue is sold only to individuals rather than to institutional investors.
D. The issue is not made available to the public.
E. The issue names a private individual as the bond trustee.
Laura has one risk-free asset and one risky stock in her portfolio. The risk-free asset has
an expected return of 3.2 percent. The risky asset has a beta of 1.3 and an expected
return of 14.9 percent. What is the expected return on the portfolio if the portfolio beta
is .975?
A. 7.65 percent
B. 9.83 percent
C. 10.73 percent
D. 11.98 percent
E. 12.37 percent