1) in the context of a bond portfolio, price risk and reinvestment rate risk exactly cancel
out at a time horizon equal to the ____.
a.average bond maturity in the portfolio
b.duration of the portfolio
c.difference between the shortest duration and longest duration of the individual bonds
in the portfolio
d.average of the shortest duration and longest duration of the bonds in the portfolio
2) total capitalization of corporate equity in the united states in 2011 was about
_______ trillion.
a.$13.9
b.$23.4
c.$30.2
d.$45.5
3) which of the following contradicts the proposition that the stock market is weakly
efficient?
a.over 25% of mutual funds outperform the market on average.
b.insiders earn abnormal trading profits.
c.every january, the stock market earns above-normal returns.
d.applications of technical trading rules fail to earn abnormal returns.
4) an asian call option gives its holder the right to ____________.
a.buy the underlying asset at the exercise price on or before the expiration date
b.buy the underlying asset at a price determined by the average stock price during some
specified portion of the option’s life
c.sell the underlying asset at the exercise price on or before the expiration date
d.sell the underlying asset at a price determined by the average stock price during some
specified portion of the option’s life
5) a call option with several months until expiration has a strike price of $55 when the
stock price is $50. the option has _____ intrinsic value and _____ time value.
a.negative; positive
b.positive; negative
c.zero; zero
d.zero; positive
6) the optimal risky portfolio can be identified by finding:
i. the minimum-variance point on the efficient frontier
ii. the maximum-return point on the efficient frontier and the minimum-variance point
on the efficient frontier
iii. the tangency point of the capital market line and the efficient frontier
iv. the line with the steepest slope that connects the risk-free rate to the efficient frontier
a.i and ii only
b.ii and iii only
c.iii and iv only
d.i and iv only
7) rank the interest sensitivity of the following from the most sensitive to an interest
rate change to the least sensitive:
i. 8% coupon, noncallable 20-year maturity par bond
ii. 9% coupon, currently callable 20-year maturity premium bond
iii. zero-coupon 30-year maturity bond
a.i, ii, iii
b.ii, iii, i
c.iii, i, ii
d.iii, ii, i
8) the price of a stock fluctuates over a period of 10 days. the movement of the stock
price below the 10-day minimum price of $25 triggers a rash of selling. the $25 price
might now be considered the _______________.
a.congestion area
b.penetration point
c.resistance level
d.support level
9) suppose a u.s. investor wants to invest in a british firm currently selling for 50 per
share. the investor has $7,000 to invest, and the current exchange rate is $1.40/.
after 1 year, the exchange rate is $1.50/ and the share price is 45. how much of your
dollar-denominated return is due to the currency change?
a.10%
b.6.43%
c.4.34%
d.2.12%
10) the broadest information set is included in the _____.
a.weak-form efficiency argument
b.semistrong-form efficiency argument
c.strong-form efficiency argument
d.technical analysis trading method
11) if the currency of your country is depreciating, this should __________ exports and
__________ imports.
a.stimulate; stimulate
b.stimulate; discourage
c.discourage; stimulate
d.discourage; discourage
12) which of the following etfs tracks the s&p 500 index?
a.qubes
b.diamonds
c.vipers
d.spiders
13) the stock price of atlantis corp. is $43 today. the risk-free rate of return is 10%, and
atlantis corp. pays no dividends. a call option on atlantis corp. stock with an exercise
price of $40 and an expiration date 6 months from now is worth $5 today. a put option
on atlantis corp. stock with an exercise price of $40 and an expiration date 6 months
from now should be worth __________ today.
a.$.05
b.$.14
c.$2
d.$3.95
14) as a result of bond convexity, an increase in a bond’s price when yield to maturity
falls is ________ the price decrease resulting from an increase in yield of equal
magnitude.
a.greater than
b.equivalent to
c.smaller than
d.the answer cannot be determined from the information given.