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Historical returns have generally been __________ for stocks of small firms as (than)
for stocks of large firms.
A. the same
B. lower
C. higher
D. none of these options (There is no evidence of a systematic relationship between
returns on small-firm stocks and returns on large-firm stocks.)
In 2010, the ___ countries with the largest capitalization of equities made up
approximately 60% of the world equity portfolio.
A. 2
B. 4
C. 5
D. 12
You are a U.S. investor who purchased British securities for 3,500 pounds 1 year ago
when the British pound cost $1.35. No dividends were paid on the British securities in
the past year. Your total return based on U.S. dollars was __________ if the value of the
securities is now 4,200 pounds and the pound is worth $1.15.
A. -3.8%
B. 2.2%
C. 5.6%
D. 15%
The PEG ratio normalizes the P/E ratio by the
A. tax rate.
B. growth rate.
C. market cap.
D. book rate.
A pension fund manager who decided to move money out of an index fund and into a
socially responsible fund is _________.
A. violating the prudent investor rule
B. conducting best practices of investing
C. conforming to CFA ethics requirements
D. planning for the future
__________ assets generate net income to the economy, and __________ assets define
allocation of income among investors.
A. Financial, financial
B. Financial, real
C. Real, financial
D. Real, real
You have an APR of 7.5% with continuous compounding. The EAR is _____.
A. 7.5%
B. 7.65%
C. 7.79 %
D. 8.25%
SEC Rule 12b-1 allows managers of certain funds to deduct __________ expenses from
fund assets; however, these expenses may not exceed
__________ of the fund's average net assets per year.
A. marketing; 1%
B. marketing; 5%
C. administrative; .5%
D. administrative; 2%
Eurodollars are _________.
A. dollar-denominated deposits at any foreign bank or foreign branch of an American
bank
B. dollar-denominated bonds issued by firms outside their home market
C. currency issued by Euro Disney and traded in France
D. dollars that wind up in banks as a result of money-laundering activities
Which of the following expressions represents the value of a call option to its holder on
the expiration date?
A. ST- X ifST>X, 0 ifST≤X
B. - (ST - X) if ST > X, 0 if ST ≤ X
C. 0 if ST ≥ X, X - ST if ST < X
D. 0 if ST ≥ X, - (X - ST) if ST < X
The correlation coefficient between two assets equals _________.
A. their covariance divided by the product of their variances
B. the product of their variances divided by their covariance
C. the sum of their expected returns divided by their covariance
D. their covariance divided by the product of their standard deviations
You buy a TIPS at issue at par for $1,000. The bond has a 3% coupon. Inflation turns
out to be 2%, 3%, and 4% over the next 3 years. The total annual coupon income you
will receive in year 3 is _________.
A. $30
B. $33
C. $32.8
D. $30.90
Security A has an expected rate of return of 12% and a beta of 1.1. The market expected
rate of return is 8%, and the risk-free rate is 5%. The alpha of the stock is _________.
A. -1.7%
B. 3.7%
C. 5.5%
D. 8.7%
An important characteristic of market equilibrium is _______________.
A. the presence of many opportunities for creating zero-investment portfolios
B. all investors exhibit the same degree of risk aversion
C. the absence of arbitrage opportunities
D. the lack of liquidity in the market
A supply-side economist would likely agree with which of the following statements?
A. Real output and aggregate employment are primarily determined by aggregate
demand.
B. Real income will rise when government expenditures and tax rates increase.
C. Real output and aggregate employment are primarily determined by tax rates.
D. Increasing the money supply will increase real output without causing higher
inflation.
The Wildwood Fund sells Class A shares with a front-end load of 5% and Class B
shares with a 12b-1 fee of 1% annually. If you plan to sell the fund after 4 years, are
Class A or Class B shares the better choice? Assume a 10% annual return net of
expenses before the 12b-1 fee is applied.
A. Class A.
B. Class B.
C. There is no difference.
D. The answer cannot be determined from the information given.
Strike prices of options are adjusted for ____________ but not for ____________.
A. dividends; stock splits
B. stock splits; cash dividends
C. exercise of warrants; stock splits
D. stock price movements; stock dividends
A put on Sanders stock with a strike price of $35 is priced at $2 per share, while a call
with a strike price of $35 is priced at $3.50. The maximum per-share loss to the writer
of an uncovered put is __________, and the maximum per-share gain to the writer of an
uncovered call is _________.
A. $33; $3.50
B. $33; $31.50
C. $35; $3.50
D. $35; $35
The table presents the actual return of each sector of the manager's portfolio in column
(1), the fraction of the portfolio allocated to each sector in column (2), the benchmark
or neutral sector allocations in column (3), and the returns of sector indexes in column
4.
What is the
contribution of
security
selection to
relative
performance?
A. -.15%
B. .15%
C. -.3%
D. .3%
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%
In the Treynor-Black model, security analysts __________.
A. analyze a relatively small number of stocks
B. analyze all stocks that are publicly traded
C. are redundant
D. devote their attention to market timing rather than fundamental analysis
According to a model that was estimated using monthly excess returns over a 5 year
period, ending in October of 2014, average returns of equity hedge funds are
__________ the S&P 500 Index.
A. equal to
B. considerably higher than
C. slightly lower than
D. slightly higher than
Which of the following is (are) true about nonconforming mortgage loans?
A. They are also known as subprime loans.
B. They have higher default risk than conforming loans.
C. They were able to be offered without due diligence.
D. All of the options are true.
The expansion of the money supply at a rate that exceeds the increase in goods and
services will likely result in ___________.
A. expanding economy
B. increased inflation
C. interest rate declines
D. lower GDP
Next year's earnings are estimated to be $5. The company plans to reinvest 20% of its
earnings at 15%. If the cost of equity is 9%, what is the present value of growth
opportunities?
A. $9.09
B. $10.10
C. $11.11
D. $12.21
For which one of the following institutions is liquidity usually the most important?
A. mutual funds
B. pension funds
C. life insurers
D. banks
The success of common stock investments depends on the success of _________.
A. derivative securities
B. fixed-income securities
C. the firm and its real assets
D. government methods of allocating capital
Weyerhaeuser Incorporated has a balance sheet that lists $70 million in assets, $45
million in liabilities, and $25 million in common shareholders' equity. It has 1 million
common shares outstanding. The replacement cost of its assets is $85 million. Its share
price in the market is $49. Its book value per share is _________.
A. $16.67
B. $25
C. $37.50
D. $40.83
Trading on inside information is:
I. Prohibited by federal law
II. Prohibited by the CFA Institute Standards of Professional Conduct
III. Monitored by the SEC
A. I and II only
B. II and III only
C. I and III only
D. I, II, and III
Annual percentage rates can be converted to effective annual rates by means of the
following formula:
A. [1 + (APR/n)]n - 1
B. (APR)(n)
C. (APR/n)
D. (periodic rate)(n)
