1) __________ funds stand ready to redeem or issue shares at their net asset value.
a.closed-end
b.index
c.open-end
d.hedge
2) a bond pays annual interest. its coupon rate is 9%. its value at maturity is $1,000. it
matures in 4 years. its yield to maturity is currently 6%.
the modified duration of this bond is ______ years.
a.4
b.3.56
c.3.36
d.3.05
3) an investor is looking at different retirement investment choices, and he is willing to
accept one with upside potential even if that means sacrificing certainty. which of the
following will he most likely select?
a.fixed annuity
b.defined benefit plan
c.defined contribution plan
d.bonds invested in a retirement plan
4) suppose that toyota buys a factory previous owned by chrysler motors. economists
would:
a.consider this to be an economic investment.
b.not consider this to be an economic investment because toyota is less efficient than
chrysler.
c.not consider this to be an economic investment because no new capital is created
through the purchase.
d.not consider this to be an economic investment because there is no way to know how
it will affect stock holdings in the two companies.
5) a top-down analysis of a firm’s prospects starts with an analysis of the ____.
a.firm’s position in its industry
b.u.s. economy or even the global economy
c.industry
d.specific firm under consideration
6) an option with a payoff that depends on the average price of the underlying asset
during at least some portion of the life of the option is called ______ option.
a.an american
b.a european
c.an asian
d.an australian
7) accounting scandals can often be attributed to a particular concept in the study of
finance known as the _____.
a.agency problem
b.risk-return trade-off
c.allocation of risk
d.securitization
8) 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
times-interest-earned ratio for 2012 is _________.
a.2.8
b.6
c.9
d.11.11
9) which of the following companies is the best example of a turnaround?
a.coca-cola
b.microsoft
c.exxonmobil
d.kmart
10) a u.s. hedge fund owns swiss franc bonds. the fund manager believes that if swiss
interest rates rise relative to u.s. interest rates, the value of the franc will rise. to limit
the risk to the fund’s dollar return, the fund manager should __________.
a.sell the swiss franc bonds now
b.sell the swiss franc forward
c.probably do nothing because the franc move will offset the lower bond price
d.enter into an interest rate swap to pay variable and receive fixed
11) a 20-year maturity bond pays interest of $90 once per year and has a face value of
$1,000. its yield to maturity is 10%. you expect that interest rates will decline over the
upcoming year and that the yield to maturity on this bond will be only 8% a year from
now. using horizon analysis, the return you expect to earn by holding this bond over the
upcoming year is _________.
a.10%
b.12%
c.21.6%
d.29.6%
12) in a defined contribution pension plan, the _____ bears all of the fund’s investment
performance risk.
a.employer
b.employee
c.fund manager
d.government
13) a hypothetical futures contract on a nondividend-paying stock with a current spot
price of $100 has a maturity of 1 year. if the t-bill rate is 5%, what should the futures
price be?
a.$95.24
b.$100
c.$105
d.$107