1) all of the following ratios are related to efficiency except _______.
a.total asset turnover
b.fixed-asset turnover
c.average collection period
d.cash ratio
2) everything else equal, which variable is negatively related to the intrinsic value of a
company?
a.d1
b.d0
c.g
d.k
3) of the following, the investment time horizon is typically the shortest for
__________.
a.banks
b.endowment funds
c.life insurance companies
d.pension funds
4) what is the standard deviation of a portfolio of two stocks given the following data:
stock a has a standard deviation of 30%. stock b has a standard deviation of 18%. the
portfolio contains 60% of stock a, and the correlation coefficient between the two
stocks is -1.
a.0%
b.10.8%
c.18%
d.24%
5) a contingent deferred sales charge is commonly called a ____.
a.front-end load
b.back-end load
c.12b-1 charge
d.top-end sales commission
6) an investor can design a risky portfolio based on two stocks, a and b. stock a has an
expected return of 18% and a standard deviation of return of 20%. stock b has an
expected return of 14% and a standard deviation of return of 5%. the correlation
coefficient between the returns of a and b is .50. the risk-free rate of return is 10%. the
proportion of the optimal risky portfolio that should be invested in stock a is
_________.
a.0%
b.40%
c.60%
d.100%
7) ace frisbee corporation produces a good that is very mature in the firm’s product life
cycles. ace frisbee corporation is expected to pay a dividend in year 1 of $3, a dividend
in year 2 of $2, and a dividend in year 3 of $1. after year 3, dividends are expected to
decline at the rate of 2% per year. an appropriate required return for the stock is 8%.
using the multistage ddm, the stock should be worth __________ today.
a.$13.07
b.$13.58
c.$18.25
d.$18.78
8) commercial paper is a short-term security issued by __________ to raise funds.
a.the federal reserve
b.the new york stock exchange
c.large well-known companies
d.all of these options
9) an investor has her money segregated into checking, savings, and investments. the
allocation among the categories is subjective, yet the investor spends freely from the
checking account and not the others. this behavior can be explained as
_______________.
a.loss aversion
b.mental accounting
c.overreaction
d.winner’s curse
10) advantages of etfs over mutual funds include all but which one of the following?
a.etfs trade continuously, so investors can trade throughout the day.
b.etfs can be sold short or purchased on margin, unlike fund shares.
c.etf providers do not have to sell holdings to fund redemptions.
d.etf values can diverge from nav.
11) 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
leverage ratio for 2012 is _________.
a.1.3
b.1.5
c.1.69
d.2.83
12) if investors are too slow to update their beliefs about a stock’s future performance
when new evidence arises, they are exhibiting _______.
a.representativeness bias
b.framing error
c.conservatism
d.memory bias
13) what are business firms most likely to use derivative securities for?
a.hedging
b.speculating
c.doing calculus problems
d.market making
14) the financial statements of flathead lake manufacturing company are shown below:
note: the common shares are trading in the stock market for $15 per share
refer to the financial statements of flathead lake manufacturing company. the firm’s
compound leverage ratio 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.1.5
b.2
c.2.5
d.3