You purchased a stock for $29.40 a share, received a dividend of $0.72 per share, and
sold the stock after one year for $31.30 a share. What was your dividend yield on this
investment?
A. 2.30 percent
B. 2.38 percent
C. 2.45 percent
D. 2.67 percent
E. 2.80 percent
Which of the following are considered in the computation of money flows?
I. last trade price
II. current trade price
III. volume of each trade
IV. time of each trade
A. I and IV only
B. II and III only
C. I, II, and III only
D. II, III, and IV only
E. I, II, III, and IV
Which one of the following can be assumed when the SEC approves an IPO
registration?
A. The securities offering will provide value to the shareholders.
B. The issuer is financially sound.
C. The issuer will remain solvent.
D. All rules have been followed to allow for full disclosure of information.
E. The stock price is set at a level which will allow shareholders to earn a positive rate
of return.
By definition, a put option grants its owner which one of the following?
A. right to buy
B. obligation to buy
C. right to sell
D. obligation to sell
E. choice to either buy or sell
A Treasury bill matures in 81 days and has a bond equivalent yield of 2.79 percent.
What is the effective annual rate?
A. 2.79 percent
B. 2.82 percent
C. 2.85 percent
D. 2.88 percent
E. 2.91 percent
If the number of Euros required to buy $1 (USD) decreases then the Euro has _______
versus the U.S. dollar.
A. depreciated
B. appreciated
C. declined
D. improved
E. increased
What is the covariance of security A to the market given the following information?
A. 75.0
B. 80.1
C. 83.8
D. 87.0
E. 91.1
How much option premium per share will you receive if you sell a September $34 put
on General Electric stock?
A. $1.64
B. $1.68
C. $1.77
D. $2.52
E. $2.56
Which one of the following rates is generally considered the bellwether rate for bank
loans to business firms?
A. money market
B. Fed funds
C. discount
D. prime
E. call money
You own a stock that will produce varying rates of return based upon the state of the
economy. Which one of the following will measure the risk associated with owning that
stock?
A. weighted average return given the multiple states of the economy
B. rate of return for a given economic state
C. variance of the returns given the multiple states of the economy
D. correlation between the returns give the various states of the economy
E. correlation of the weighted average return as compared to the market
Aaron purchased 300 shares of a technology stock for $16.80 a share. The initial margin
requirement on this stock is 85 percent and the maintenance margin is 60 percent. What
is the lowest the stock price can go before he receives a margin call?
A. $4.43
B. $5.55
C. $6.30
D. $8.33
E. $10.03
A stock has a return of 16.9 percent, a standard deviation of 11.7 percent, and a beta of
1.50. The risk-free rate is 2.65 percent and the market risk premium is 8.45 percent.
What is the Jensen-Treynor alpha of this stock?
A. -1.37 percent
B. -1.09 percent
C. -0.48 percent
D. 0.89 percent
E. 1.05 percent
Which one of the following statements is correct concerning U.S. Treasury bill rates for
the period 1800 – 2010?
A. T-bill rates never exceeded 10 percent.
B. T-bill rates never exceeded T-bond rates.
C. T-bill rates were lower than 1 percent for a period of time.
D. T-bill rates were less volatile than T-bond rates.
E. T-bill rates were the highest during the World War II years of the 1940’s.
A call option has a premium of $0.60, a strike price of $40, and 3 months to expiration.
The current stock price is $39.60. The stock will pay a $0.80 dividend two months from
now. The risk-free rate is 3 percent. What is the premium on a 3-month put with a strike
price of $40? Assume the options are European style.
A. $0.25
B. $0.51
C. $0.78
D. $1.23
E. $1.50
A $1,000 par value bond has a market price of $986 and a conversion ratio of 15. The
stock is selling for $60.74. What is the conversion value?
A. $903.17
B. $911.10
C. $925.60
D. $930.57
E. $946.49
Marti purchased 100 shares of Better Foods stock on margin at a price of $49 a share.
The initial margin requirement is 60 percent and the maintenance margin is 30 percent.
What is the lowest the stock price can go before Marti receives a margin call?
A. $17.00
B. $24.00
C. $28.00
D. $30.00
E. $33.00
Independent deviations from rationality:
A. only exist when the overall market is overvalued.
B. prevent the markets from ever being efficient.
C. can create an efficient market.
D. are the actions taken by rational arbitrage traders.
E. do not exist in an efficient market.
Which one of the following is classified as a fixed-income security?
A. U.S. Treasury bill
B. 6-month municipal bond
C. common stock that pays regular quarterly dividends
D. 2-year U.S. Treasury security
E. 9-month bank certificate of deposit
An increase in which one of the following will have a negative effect on the price of a
call option?
A. option strike price
B. time remaining to option expiration
C. underlying stock price
D. volatility of the underlying stock price
E. risk-free interest rate
The 6-month futures price on a non-dividend-paying stock is $36.20. The risk-free rate
is 2.75 percent and the market rate is 9.60 percent. What is the spot rate for this stock if
spot-futures parity exists?
A. $35.43
B. $35.71
C. $36.30
D. $36.70
E. $36.99
A pure discount security is an interest-bearing asset that pays:
A. interest on a semi-annual basis.
B. interest on an annual basis.
C. a single payment at maturity.
D. no interest.
E. a variable-rate interest.
Alex invested $10,000 in a mutual fund two and one-half years ago when the NAV of
the fund was $25. Today, the NAV has risen to $28.30. Since the time of his original
investment, Alex has obtained an additional 54.36 shares by reinvesting the fund
distributions. The fund charges a contingent deferred sales charge of 6 percent the first
year with the charge decreasing by 1 percent each year. How much money will he
receive if he redeems his shares today?
A. $11,633.78
B. $11,930.52
C. $12,344.05
D. $12,858.39
E. $13,501.31
Which one of the following is the upper price bound for the intrinsic value of a
European call option on a stock?
A. $0
B. strike price
C. stock price
D. Max (S – K, 0)
E. Max (K – S, 0)
Stuart purchased 300 shares of Microsoft stock which he has pledged to his broker as
collateral for the loan in his margin account. This process of pledging securities is
called:
A. margin calling.
B. hypothecation.
C. leveraging.
D. maintaining the margin.
E. street securitization.
How much faster will a mortgage pool with a PSA of 150 be prepaid as compared to the
benchmark?
A. 150 times faster
B. 15 times faster
C. 1.5 times faster
D. 1.5 times slower
E. 15 times slower
Which one of the following best describes heuristics?
A. clustering
B. rules of thumb
C. grouping
D. representativeness
E. herding
What is the call option premium given the following information?
A. $5.91
B. $6.28
C. $6.75
D. $6.90
E. $7.13
A list of available option contracts and their prices for a particular security listed in
order of strike price and maturity date is referred to as which one of the following?
A. value chain
B. intrinsic list
C. option chain
D. strike list
E. exercise price display
Which one of the following situations will produce the highest put price, all else
constant? Assume the options are all in-the-money.
A. $15 strike price; 45 days to option expiration
B. $15 strike price; 60 days to option expiration
C. $20 strike price; 45 days to option expiration
D. $20 strike price; 60 days to option expiration
E. Insufficient information is provided to answer this question.
You have a portfolio which is comprised of 60 percent of stock A and 40 percent of
stock B. What is the expected rate of return on this portfolio?
A. 12.76 percent
B. 12.88 percent
C. 13.44 percent
D. 13.56 percent
E. 13.85 percent
Juno Markets is offering 900 shares in a Dutch auction IPO. The following bids have
been received:
How much will Bidder B have to spend to purchase all of the shares that have been
allocated to him?
A. $4,050.00
B. $4,212.00
C. $4,800.00
D. $5,200.00
E. $5,700.00
Five months ago, you purchased 200 shares of a mutual fund at an offering price of $54
a share. The fund imposes a front-end load of 4.5 percent and has total annual expenses
of 1.08 percent. The NAV of the fund today is $52.40. There were no fund distributions
during these five months. What is your holding period return on this investment?
A. -2.96 percent
B. -1.92 percent
C. 1.44 percent
D. 1.89 percent
E. 2.26 percent
A stock had year end prices of $24, $27, $32, and $26 over the past four years,
respectively. What is the geometric average return?
A. 2.02 percent
B. 2.18 percent
C. 2.55 percent
D. 2.70 percent
E. 2.81 percent
Which of the following features apply to a futures contract?
I. zero-sum game
II. derivative security
III. maturity date
IV. settlement procedure
A. I and II only
B. I and III only
C. II and III only
D. II, III, and IV only
E. I, II, III, and IV