1) you find that the bid and ask prices for a stock are $10.25 and $10.30, respectively. if
you purchase or sell the stock, you must pay a flat commission of $25. if you buy 100
shares of the stock and immediately sell them, what is your total implied and actual
transaction cost in dollars?
a.$50
b.$25
c.$30
d.$55
2) if you start saving for retirement only in your later years and your income growth
from that point is rapid, then ________________________.
a.a traditional retirement plan is probably a better choice than a roth retirement plan
b.a roth retirement plan is probably a better choice than a traditional retirement plan
c.a sep is probably a better choice than medicare
d.a 401k is probably a better choice than a 403b
3) under current rules most workers will have ________ of their salary deducted to pay
for social security retirement benefits and _______ toward medicare.
a.1.45%; 6.2%
b.6.2%; 1.45%
c.7.65%; 1.45%%
d.15.3%; 4.9%
4) all other things equal(ytm = 10%), which of the following has the shortest duration?
a.a 30-year bond with a 10% coupon
b.a 20-year bond with a 9% coupon
c.a 20-year bond with a 7% coupon
d.a 10-year zero-coupon bond
5) another term for eva is ______.
a.net income
b.operating income
c.residual income
d.market-based income
6) a fund that invests in securities worldwide, including the united states, is called
______.
a.an international fund
b.an emerging market fund
c.a global fund
d.a regional fund
7) according to the liquidity preference theory of the term structure of interest rates, an
increase in the yield on long-term corporate bonds versus short-term bonds could be
due to _______.
a.declining liquidity premiums
b.an expectation of an upcoming recession
c.a decline in future inflation expectations
d.an increase in expected interest rate volatility
8) the m2 measure is a variant of ________________.
a.the sharpe measure
b.the treynor measure
c.jensen’s alpha
d.the appraisal ratio
9) banks and other financial institutions can best manage interest rate risk by
_____________.
a.maximizing the duration of assets and minimizing the duration of liabilities
b.minimizing the duration of assets and maximizing the duration of liabilities
c.matching the durations of their assets and liabilities
d.matching the maturities of their assets and liabilities
10) security a has a higher standard deviation of returns than security b. we would
expect that:
i. security a would have a higher risk premium than security b.
ii. the likely range of returns for security a in any given year would be higher than the
likely range of returns for security b.
iii. the sharpe ratio of a will be higher than the sharpe ratio of b.
a.i only
b.i and ii only
c.ii and iii only
d.i, ii, and iii
11) which of the following statements is (are) true regarding time diversification?
i. the standard deviation of the average annual rate of return over several years will be
smaller than the 1-year standard deviation.
ii. for a longer time horizon, uncertainty compounds over a greater number of years.
iii. time diversification does not reduce risk.
a.i only
b.ii only
c.ii and iii only
d.i, ii, and iii
12) the greatest value to an analyst from calculating a stock’s intrinsic value is _______.
a.how easy it is to come up with accurate model inputs
b.the precision of the value estimate
c.how the process forces analysts to understand the critical variables that have the
greatest impact on value
d.how all the different models typically yield identical value results