1) a corporate bond has a 10-year maturity and pays interest semiannually. the quoted
coupon rate is 6%, and the bond is priced at par. the bond is callable in 3 years at 110%
of par. what is the bond’s yield to call?
a.6.72%
b.9.17%
c.4.49%
d.8.98%
2) the primary market where new security issues are offered to the public is a good
example of _________.
a.an auction market
b.a brokered market
c.a dealer market
d.a direct search market
3) market-neutral hedge funds may experience considerable volatility. the source of
volatile returns is the use of _________.
a.pure play
b.leverage
c.directional bests
d.net short positions
4) during the 1926-2010 period which one of the following asset classes provided the
lowest real return?
a.small u.s. stocks
b.large u.s. stocks
c.long-term u.s. treasury bonds
d.equity world portfolio in u.s. dollars
5) what phrase might be used as a substitute for the treynor-black model developed in
1973?
a.solely active management
b.enhanced index approach
c.passive management
d.random selection
6) futures contracts have many advantages over forward contracts except that
_________.
a.futures positions are easier to trade
b.futures contracts are tailored to the specific needs of the investor
c.futures trading preserves the anonymity of the participants
d.counterparty credit risk is not a concern on futures
7) convertible arbitrage hedge funds _________.
a.attempt to profit from mispriced interest-sensitive securities
b.hold long positions in convertible bonds and offsetting short positions in stocks
c.establish long and short positions in global capital markets
d.use derivative products to hedge their short positions in convertible bonds
8) a firm increases its financial leverage when its roa is greater than the cost of debt.
everything else equal, this change will probably increase the firm’s:
i. beta
ii. earnings variability over the business cycle
iii. roe
iv. stock price
a.i and ii only
b.iii and iv only
c.i, iii, and iv only
d.i, ii, and iii only
9) __________ represents an ownership share in a corporation.
a.a call option
b.common stock
c.a fixed-income security
d.preferred stock
10) the free cash flow to the firm is reported as $198 million. the interest expense to the
firm is $15 million. if the tax rate is 35% and the net debt of the firm increased by $20
million, what is the approximate market value of the firm if the fcfe grows at 3% and
the cost of equity is 14%?
a.$1,950 billion
b.$2,497 billion
c.$2,585 billion
d.$3,098 billion
11) an investor who expects declining interest rates would maximize her capital gain by
purchasing a bond that has a _________ coupon and a _________ term to maturity.
a.low; long
b.high; short
c.high; long
d.zero; long
12) the s&p 500 index futures contract is an example of a(n) ______ delivery contract.
the pork bellies contract is an example of a(n) ______ delivery contract.
a.cash; cash
b.cash; actual
c.actual; cash
d.actual; actual
13) you put up $50 at the beginning of the year for an investment. the value of the
investment grows 4% and you earn a dividend of $3.50. your hpr was ____.
a.4%
b.3.5%
c.7%
d.11%
14) if an investor does not diversify his portfolio and instead puts all of his money in
one stock, the appropriate measure of security risk for that investor is the ________.
a.stock’s standard deviation
b.variance of the market
c.stock’s beta
d.covariance with the market index
15)
the breadth on day 3 is _______.
a.-70
b.10
c.90
d.170
16) a portfolio generates an annual return of 16%, a beta of 1.2, and a standard
deviation of 19%. the market index return is 12% and has a standard deviation of 16%.
what is the sharpe ratio of the portfolio if the risk-free rate is 6%?
a..4757
b..5263
c..6842
d..7252
17) a managed portfolio has a standard deviation equal to 22% and a beta of .9 when
the market portfolio’s standard deviation is 26%. the adjusted portfolio p* needed to
calculate the m2 measure will have ________ invested in the managed portfolio and the
rest in t-bills.
a.84.6%
b.118%
c.18%
d.15.4%