1) What is the Sharpe measure for the S&P 500 over the last ten years if the standard
deviation was 8% and the return was 14%?
a. 1.55
b. 1.69
c. 1.75
d. 1.99
e. 2.09
2) Using the constant growth model, an increase in the required rate of return from 19
to 17 percent combined with an increase in the growth rate from 11 to 9 percent would
cause the price to
a. Fall more than 2%
b. Fall less than 2%.
c. Remain constant.
d. Rise more than 2%.
e. Rise less than 3%.
3) Given a portfolio of stocks, the envelope curve containing the set of best possible
combinations is known as the
a. Efficient portfolio.
b. Utility curve.
c. Efficient frontier.
d. Last frontier.
e. Capital asset pricing model.
4) You are provided with the following information about Javier Corporation. Sales for
the year 2010 were $500,000, the Net Profit Margin (NPM) was 15%. Analysts project
sales to grow by 12% next year (that is 2011). However, because of more competition,
the NPM is expected to decline by 10% for the year 2010. The expected P/E multiple
for the year 2011 is 22. The total number of shares outstanding is 20,000. Use the
earnings multiplier model to calculate the expected price for Javier Corporation in the
year 2011.
a. $74.25
b. $61.6
c. $82.5
d. $83.16
e. $101.64
5) The purchase and sale of commodities for current delivery and consumption is
known as dealing in the ____ market.
a.Futures
b.Spot
c.Money
d.Capital
e.Options
6) Which factors indicate that in-depth credit analysis of high-yield bonds is important?
a. The large number of high-yield issues.
b. The overall decline in quality of these bonds.
c. The wide range of quality among these bonds.
d. The growing complexity of these bonds.
e. All of the above.
7) The correlation of stock market returns between the U.S. and Japan is ____ and
____.
a. High, increasing.
b. High, decreasing.
c. Low, increasing.
d. Low, decreasing.
e. Low, remaining constant.
8) Exhibit 21.12
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Suppose you are a loan officer for a commercial bank and one of your clients has just
approached you about a one-year loan for $4,000,000. Interest on the new loan will be
paid at the end of each quarter based on the prevailing level of LIBOR at the beginning
of each quarter. The LIBOR yield curve in the cash market is as follows:
What will the dollar level of the bank’s interest receipt be at the end of the first quarter?
a. $26,500
b. $27,000
c. $28,500
d. $108,000
e. None of the above
9) Exhibit 12.6
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the following information that you propose to use to obtain an estimate of
year 2004 EPS for the MacLog Company.
In addition a regression analysis indicates the following relationship between growth in
sales per share for MacLog and GDP growth is
Estimate the firm’s growth rate in sales per share.
a. 1.5%
b. 2%
c. 2.16%
d. 4.13%
e. 3.73%
10) Which of the following is not a characteristic of shelf registrations? Shelf
registrations:
a.Were introduced by Rule 415.
b.Allow large firms to register security issues and sell them piecemeal during the
following six years.
c.Provide flexibility and reduce registration fees and expenses.
d.Are typically used for the sale of straight debentures rather than common stock or
convertible issues.
e.All of the above are characteristics of shelf registrations.
11) The relationship between an economic series such as disposable personal income
and retail sales is usually stronger in an industry that has become more specialized.
12) Treynor’s performance measure implicitly assumes a completely diversified
portfolio.
13) Rule 144A reduced registration documentation requirements for placing securities
privately with large institutional investors.
14) Unlike stock options, futures options require the holder to enter into a futures
contract.
15) A resistance level is the price range at which the technician would expect an
increase in the demand of stock and a price reversal.
16) The conversion parity price is equal to the par value of a convertible bond divided
by the number of shares into which it can be converted.