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1) which of the following is the least likely to be included in the portfolio management
process?
a.monitoring market conditions and relative values
b.monitoring investor circumstances
c.identifying investor constraints and preferences
d.organizing the investment management process itself
2) which of the following arguments supporting passive investment strategies is (are)
correct?
i. active trading strategies may not guarantee higher returns but guarantee higher costs.
ii. passive investors can free-ride on the activity of knowledge investors whose trades
force prices to reflect currently available information.
iii. passive investors are guaranteed to earn higher rates of return than active investors
over sufficiently long time horizons.
a.i only
b.i and ii only
c.ii and iii only
d.i, ii, and iii
3) you are considering acquiring a common share of sahali shopping center corporation
that you would like to hold for 1 year. you expect to receive both $1.25 in dividends and
$35 from the sale of the share at the end of the year. the maximum price you would pay
for a share today is __________ if you wanted to earn a 12% return.
a.$31.25
b.$32.37
c.$38.47
d.$41.32
4) the process of polling potential investors regarding their interest in a forthcoming
initial public offering (ipo) is called ________.
a.interest building
b.book building
c.market analysis
d.customer identification
5) at what point in the industry life cycle are inefficiencies in competitors most likely to
be removed?
a.start-up stage
b.consolidation stage
c.maturity stage
d.relative decline stage
6) depreciation expense is in what broad category of expenditures?
a.operating expenses
b.general and administrative expenses
c.debt interest expense
d.tax expenditures
7) a hedge fund owns a $15 million bond portfolio with a modified duration of 11 years
and needs to hedge risk, but t-bond futures are available only with a modified duration
of the deliverable instrument of 10 years. the futures are priced at $105,000. the proper
hedge ratio to use is ______.
a.143
b.157
c.196
d.218
8) a t-bill quote sheet has 90-day t-bill quotes with a 4.92 bid and a 4.86 ask. if the bill
has a $10,000 face value, an investor could buy this bill for _____.
a.$10,000
b.$9,878.50
c.$9,877
d.$9,880.16
9) if you plan for a bequest for your children, your grandchildren, their children, and so
on, your planning horizon becomes _____.
a.equal to the life span of your children
b.100 years, or your lifetime, whichever ends first
c.infinite
d.double what it would have been without the bequest
10) when the stock price falls below a moving average, a possible conclusion is that
_____.
a.market momentum has become positive
b.market momentum has become negative
c.there is no regular pattern for this stock's market momentum
d.professional analysts' opinions are invalid until the stock price rises again
11) bonds rated _____ or better by standard & poor's are considered investment grade.
a.aa
b.bbb
c.bb
d.ccc
12) if you believe the economy is about to go into a recession, you might change your
asset allocation by selling _______ and buying ______.
a.growth stocks; long-term bonds
b.long-term bonds; growth stocks
c.defensive stocks; growth stocks
d.defensive stocks; long-term bonds
13) a speculator will often prefer to buy a futures contract rather than the underlying
asset because:
i. gains in futures contracts can be larger due to leverage.
ii. transaction costs in futures are typically lower than those in spot markets.
iii. futures markets are often more liquid than the markets of the underlying
commodities.
a.i and ii only
b.ii and iii only
c.i and iii only
d.i, ii, and iii
14)
what is the alpha of a portfolio with a beta of 2 and actual return of 15%?
a.0%
b.13%
c.15%
d.17%
15) financial institutions that specialize in assisting corporations in primary market
transactions are called _______.
a.mutual funds
b.investment bankers
c.pension funds
d.globalization specialists
16) regulation nms:
i. supports the goal of integrating financial markets
ii. requires the use of specialists to execute trades
iii. requires that exchanges honor quotes of other exchanges when they can be executed
automatically
a.i only
b.i and ii only
c.i and iii only
d.i, ii, and iii
