1) which of the following is (are) true about hedge funds?
i. they are open to institutional investors.
ii. they are open to wealthy individuals.
iii. they are more likely than mutual funds to pursue simple strategies.
a.i and ii only
b.i and iii only
c.ii and iii only
d.i, ii, and iii
2) t-bills are issued with initial maturities of:
i. 4 weeks
ii. 16 weeks
iii. 26 weeks
iv. 32 weeks
a.i and ii only
b.i and iii only
c.i, ii, and iii only
d.i, ii, iii, and iv
3) weyerhaeuser incorporated has a balance sheet that lists $70 million in assets, $45
million in liabilities, and $25 million in common shareholders’ equity. it has 1 million
common shares outstanding. the replacement cost of its assets is $85 million. its share
price in the market is $49. its book value per share is _________.
a.$16.67
b.$25
c.$37.50
d.$40.83
4) if the simple capm is valid and all portfolios are priced correctly, which of the
situations below is possible? consider each situation independently, and assume the
risk-free rate is 5%.
a.option a
b.option b
c.option c
d.option d
a) not possibletwo portfolios with different betas cannot have the same expected return.
b) not possibleunder capm market portfolio must yield highest cal.
c) not possibleportfolio a and the market have different excess returns per unit of risk.
d) possible
5) you invest $1,000 in a complete portfolio. the complete portfolio is composed of a
risky asset with an expected rate of return of 16% and a standard deviation of 20% and
a treasury bill with a rate of return of 6%. a portfolio that has an expected value in 1
year of $1,100 could be formed if you _________.
a.place 40% of your money in the risky portfolio and the rest in the risk-free asset
b.place 55% of your money in the risky portfolio and the rest in the risk-free asset
c.place 60% of your money in the risky portfolio and the rest in the risk-free asset
d.place 75% of your money in the risky portfolio and the rest in the risk-free asset
6) which of the following result in a taxable event for investors?
i. short-term capital gain distributions from the fund
ii. dividend distributions from the fund
iii. long-term capital gain distributions from the fund
a.i only
b.ii only
c.i and ii only
d.i, ii, and iii
7) the major participants who directly purchase securities in the capital markets of other
countries are predominantly ____________.
a.large institutional investors
b.individual investors
c.government agencies
d.central banks
8) when a pass-through mortgage security is issued, what does the issuing agency
expect to receive?
a.the amount of the original loan plus a servicing fee
b.the principal and interest that are paid by the homeowner
c.the principal and interest that are paid by the homeowner, minus a servicing fee
d.the interest paid by the homeowner, plus a servicing fee
9) according to elliot’s wave theory, stock market behavior can be explained as
_________________.
a.a series of medium-term wave cycles with no short-term trend
b.a series of long-term wave cycles with no short-term trend
c.a series of superimposed long-term and short-term wave cycles
d.sine and cosine functions
10) in a study conducted by jagannathan and wang, it was found that the performance
of beta in explaining security returns could be considerably enhanced by:
i. including the unsystematic risk of a stock
ii. including human capital in the market portfolio
iii. allowing for changes in beta over time
a.i and ii only
b.ii and iii only
c.i and iii only
d.i, ii, and iii
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 p/e
ratio for 2012 is _________.
a.2.8
b.3.6
c.6
d.11.11
12) you sell one ibm july 90 call contract for a premium of $4 and two puts for a
premium of $3 each. you hold the position until the expiration date, when ibm stock
sells for $95 per share. you will realize a ______ on this strip.
a.$300 profit
b.$100 loss
c.$500 profit
d.$200 profit
13) after considering current market conditions, an investor decides to place 60% of her
funds in equities and the rest in bonds. this is an example of _____.
a.asset allocation
b.security analysis
c.top-down portfolio management
d.passive management
14) endowment funds are held by __________.
a.financial intermediaries
b.individuals
c.profit-oriented firms
d.nonprofit institutions
15) if you believe in the __________ form of the emh, you believe that stock prices
reflect all publicly available information but not information that is available only to
insiders.
a.semistrong
b.strong
c.weak
d.perfect
16) you have calculated the historical dollar-weighted return, annual geometric average
return, and annual arithmetic average return. if you desire to forecast performance for
next year, the best forecast will be given by the ________.
a.dollar-weighted return
b.geometric average return
c.arithmetic average return
d.index return
17) in the united states in 2011, there were approximately _______ mutual funds
offered by fewer than _______ fund families.
a.12,000; 600
b.7,000; 100
c.8,000; 700
d.9,000; 300
18) an investor purchases one municipal bond and one corporate bond that pay rates of
return of 5% and 6.4%, respectively. if the investor is in the 15% tax bracket, his
after-tax rates of return on the municipal and corporate bonds would be, respectively,
_____.
a.5% and 6.4%
b.5% and 5.44%
c.4.25% and 6.4%
d.5.75% and 5.44%
19) you want to earn a return of 11% on each of two stocks, a and b. stock a is expected
to pay a dividend of $3 in the upcoming year, while stock b is expected to pay a
dividend of $2 in the upcoming year. the expected growth rate of dividends for both
stocks is 4%. using the constant-growth ddm, the intrinsic value of stock a _________.
a.will be higher than the intrinsic value of stock b
b.will be the same as the intrinsic value of stock b
c.will be less than the intrinsic value of stock b
d.the answer cannot be determined from the information given.
20) higher portfolio turnover:
i. results in greater tax liability for investors
ii. results in greater trading costs for the fund, which investors have to pay for
iii. is a characteristic of asset allocation funds
a.i only
b.ii only
c.i and ii only
d.i, ii, and iii