1) of the following, the most flexible type of life insurance policy from the
policyholder’s perspective is probably a ___________ policy.
a.term life
b.whole life
c.variable life
d.universal life
2) consider the following two investment alternatives: first, a risky portfolio that pays a
20% rate of return with a probability of 60% or a 5% rate of return with a probability of
40%. second, a treasury bill that pays 6%. if you invest $50,000 in the risky portfolio,
your expected profit would be _________.
a.$3,000
b.$7,000
c.$7,500
d.$10,000
3) the fully automated trade-execution system installed on the nyse is called _____.
a.fax
b.direct +
c.nasdaq
d.superdot
4) you earn 6% on your corporate bond portfolio this year, and you are in a 25% federal
tax bracket and an 8% state tax bracket. your after-tax return is _____. (assume that
federal taxes are not deductible against state taxes and vice versa).
a.4.5%
b.4.14%
c.4.02%
d.3.12%
5) the federal government decides to pay for the transition to private social security
accounts with a one-time $1 trillion bond issue. what will be the biggest concern to
businesses relative to the “crowding out” effect?
a.higher interest rates due to the new government borrowing
b.inflation resulting from more government purchases
c.a negative supply shock
d.shortage of investment due to new accounts
6) some diversification benefits can be achieved by combining securities in a portfolio
as long as the correlation between the securities is _____________.
a.1
b.less than 1
c.between 0 and 1
d.less than or equal to 0
7) which of the following correlation coefficients will produce the least diversification
benefit?
a.-.6
b.-.3
c.0
d..8
8) what strategy could be considered insurance for an investment in a portfolio of
stocks?
a.covered call
b.protective put
c.short put
d.straddle
9)
identify the support level stock price.
a.$40
b.$42
c.$44
d.$46
10) relative strength is ______ indicator.
a.a fundamental
b.an economic
c.a technical
d.an international
11)
the moving average generates sell signals _____.
a.on days 3, 11, and 15
b.on days 7, 15, and 18
c.on days 5, 9, and 13
d.on day 16
12) you have an investment that in today’s dollars returns 15% of your investment in
year 1, 12% in year 2, 9% in year 3, and the remainder in year 4. what is the duration of
this investment?
a.4 years
b.3.5 years
c.3.22 years
d.2.95 years
13) you own a $15 million bond portfolio with a modified duration of 11 years. interest
rates are expected to increase by 5 basis points, or .05%. what is the price value of a
basis point?
a.$10,400
b.$14,300
c.$16,500
d.$21,300
14) which of the following is not a method employed by fundamental analysts?
a.analyzing the fed’s next interest rate move
b.relative strength analysis
c.earnings forecasting
d.estimating the economic growth rate
15) the net income of the company is $120. accounts payable increase by $20,
depreciation is $15, and equipment is purchased for $40. if the firm issued $110 in new
bonds, what is the total change in cash for the firm for all activities?
a.increase of $225
b.increase of $130
c.decrease of $195
d.decrease of $110
16) a fund has assets denominated in euros and liabilities in yen due in 6 months. the
6-month forward rate for the euro is $1.36 per euro, and the 6-month forward rate for
the yen is 121 yen per dollar. the 6-month forward rate for the euro versus the yen
should be ________ per euro.
a.88.97
b.145.34
c.154.67
d.164.56
17) if a defined benefit pension fund’s actual rate of return is _____ than the actuarial
assumed rate, then the ___________.
a.greater; employees will benefit
b.greater; firm’s shareholders will benefit
c.lower; employees will benefit
d.lower; firm’s shareholders will benefit
18) you are considering investing in one of several mutual funds. all the funds under
consideration have various combinations of front-end and back-end loads and/or 12b-1
fees. the longer you plan on remaining in the fund you choose, the more likely you will
prefer a fund with a __________ rather than a __________, everything else equal.
a.12b-1 fee; front-end load
b.front-end load; 12b-1 fee
c.back-end load; front-end load
d.12b-1 fee; back-end load
19) the most significant conceptual difference between the arbitrage pricing theory (apt)
and the capital asset pricing model (capm) is that the capm _____________.
a.places less emphasis on market risk
b.recognizes multiple unsystematic risk factors
c.recognizes only one systematic risk factor
d.recognizes multiple systematic risk factors