The yield that a bond will earn given that it is bought back by the issuer at the earliest
possible date is the:
A. market yield.
B. current yield.
C. yield to maturity.
D. yield to put.
E. yield to call.
Todd purchased 600 shares of stock at a price of $68.20 a share and received a dividend
of $1.42 per share. After six months, he resold the stock for $71.30 a share. What was
his total dollar return?
A. $1,008
B. $1,860
C. $2,712
D. $3,211
E. $3,400
If the nominal GDP was reported at $133.2 billion and real GDP was reported at $129.8
billion, what was the inflation rate for the period?
A. 1.59%
B. 1.94%
C. 2.32%
D. 2.62%
E. 2.88%
Which one of the following is the reason that Macaulay duration is NOT a good
measure of interest rate risk for mortgage bonds?
A. Mortgage bonds are long-term securities while Macaulay duration is a short-term
measure.
B. Macaulay duration assumes the debt has a variable rate and most mortgages have a
fixed rate.
C. Macaulay duration requires bond payments to be made semi-annually.
D. Macaulay duration assumes payments are fixed and mortgage bond payments vary.
E. Macaulay duration only applies to zero-coupon bonds.
A decrease in which one of the following will increase the intrinsic value of a put
option?
A. strike price
B. exercise price
C. option premium
D. time value
E. underlying stock price
The Market Stability Fund owns the following stocks:
The fund has no liabilities and has 57,600 shares outstanding. What is the NAV?
A. $14.72
B. $14.88
C. $15.47
D. $15.95
E. $16.02
If the future return on a security is known with absolute certainty, then the risk premium
on that security should be equal to:
A. zero.
B. the risk-free rate.
C. the market rate.
D. the market rate minus the risk-free rate.
E. the risk-free rate plus one-half the market rate.
A $1,000 semiannual coupon bond matures in 15 years, has a coupon rate of 7.5
percent, and a market price of $982. What is the yield to maturity?
A. 3.86 percent
B. 4.01 percent
C. 4.08 percent
D. 7.53 percent
E. 7.70 percent
Which type of stock fund focuses on maximizing share price appreciation?
A. growth and income
B. large-company
C. equity income
D. capital appreciation
E. growth
A fund has an alpha of 0.73 percent and a tracking error of 4.9 percent. What is the
fund’s information ratio?
A. 0.112
B. 0.135
C. 0.149
D. 0.208
E. 0.229
Upwind Tours just announced that it will pay an annual dividend of $3.60 a share one
year from now. Two years from now, the company expects to pay a $28 a share
liquidating dividend. After that, the company will cease operations. What is the current
value per share at a discount rate of 12.5 percent?
A. $23.88
B. $24.97
C. $25.32
D. $28.09
E. $29.16
Which one of the following is a derivative asset?
A. common stock
B. option contract
C. government bond
D. preferred stock
E. corporate bond
Over the past five years, Southwest Railway stock had annual returns of 10, 14, -6, 7.5,
and 16 percent, respectively. What is the variance of these returns?
A. .00548
B. .00685
C. .00770
D. .01370
E. .02740
Which one of the following correctly expresses the clean surplus relationship?
A. The change in book value per share is equal to earnings per share minus dividends.
B. The change in retained earnings is equal to net income.
C. The change in market value per share is equal to the change in book value per share.
D. The change in market value per share is equal to earnings per share minus dividends.
E. The rate of change in book value per share is equal to the firm’s discount rate.
A sector fund:
A. tends to perform consistently from one year to the next.
B. is usually highly diversified.
C. rarely outperforms other types of funds.
D. concentrates on investing in one industry or one commodity.
E. is best evaluated by its past performance.
What price will be used for this day for the mark-to-market per pound on December
cotton?
A. $0.7885
B. $0.8063
C. $78.85
D. $80.59
E. $80.63
L.B. Jay has net income of $38,000, total assets of $437,000, total liabilities of
$208,000, and a price-book ratio of 3.8. There are 60,000 shares of stock outstanding.
What is the firm’s price-earnings ratio?
A. 18.72
B. 19.11
C. 19.28
D. 20.80
E. 22.90
You purchased a call option with a $22.50 strike price and a call premium of $0.40. On
the expiration date, the underlying stock was priced at $23.40 per share. What is the
percentage return on your investment?
A. -100 percent
B. 0 percent
C. 50 percent
D. 125 percent
E. 200 percent
You have the following information:
You want the beginning price-weighted index of these two stocks to be 500. Given this,
what is the ending index value?
A. 408.33
B. 487.08
C. 511.19
D. 576.09
E. 612.24
The spot price on cocoa is $2,880 a ton. The futures price is $2,760 a ton. The basis is
_____ and the market is a(n) _____ market.
A. -120; carrying-charge
B. -120; inverted
C. 20; inverted
D. 120; carrying-charge
E. 120; inverted
One year ago, you invested $7,000 in the no-load Triple A Money Market Fund. You
have neither added to this account nor received any funds from this account since that
time. The fund earned a 5.2 percent rate of return for the past year. How many shares of
this fund do you currently own?
A. 750.00
B. 796.50
C. 7,000.00
D. 7,364.00
E. 7,965.00
A premium bond is defined as a bond that:
A. has a duration that is less than 1.0.
B. has a face value that exceeds its market value.
C. is callable at a price which exceeds the face value.
D. has a market price that exceeds par value.
E. is selling for less than face value.
A portfolio has a Treynor ratio of .070, a standard deviation of 16.40 percent, a beta of
1.16, and an expected return of 14.3 percent. What is the risk-free rate?
A. 1.32 percent
B. 5.21 percent
C. 5.39 percent
D. 6.18 percent
E. 6.41 percent
High Color Detergent is issuing new shares of stock which will trade on NASDAQ. If
Sue purchases 300 of these shares, the trade will occur in which one of the following
markets?
A. primary
B. secondary
C. third
D. fourth
E. over-the-counter
A portfolio has a beta of 1.52 and an actual return of 13.7 percent. The risk-free rate is
2.7 percent and the market risk premium is 7.8 percent. What is the value of Jensen’s
alpha?
A. -0.86 percent
B. 1.01 percent
C. 1.14 percent
D. 1.23 percent
E. 1.37 percent
Which one of the following accounts is least likely to vary directly with the level of
sales?
A. accounts payable
B. inventory
C. cost of goods sold
D. interest expense
E. accounts receivable
Jefferson-Smith bonds are quoted at a price of $952.42 for a $1,000 face value bond.
These bonds have a modified duration of 9.84. What is the dollar value of an 01?
A. $0.0977
B. $0.0963
C. $0.1028
D. $0.9372
E. $0.9767
A financial asset that represents a claim on another financial asset is classified as a
_____ asset.
A. secondary
B. optioned
C. contracted
D. derivative
E. primary
Which one of the following provisions grants the bondholder the option of selling the
bond back to the issuer at a prespecified price on prespecified dates?
A. convertible
B. call
C. put
D. exchange
E. sinking fund
A bond has a conversion ratio of 22, a $1,000 par value, and a market price of $1,038.
The stock is selling for $46.14. What is the conversion value?
A. $1,009.16
B. $1,015.08
C. $1,038.60
D. $1,049.35
E. $1,053.50
Which one of the following facilitates international trade?
A. secured bond
B. Treasury security
C. banker’s acceptance
D. commercial paper
E. Eurodollar loan
You own 1,500 shares of ABC stock that is currently priced at $27 a share. Given this
price, the option delta for a $25 call option on this stock is .724. How many $25 call
options do you need to hedge against a -$1 change in the price of the stock?
A. buy 1,500 options
B. buy 2,482 options
C. write 1,500 options
D. write 2,072 options
E. write 3,295 options
Which one of the following is an assessment of the credit quality of a bond based on the
financial condition of the bond issuer?
A. protective covenant
B. risk analysis
C. credit rating
D. serial report
E. in-the-money status
What is the purpose of a margin call?
A. to inform you that your margin loan is due and payable
B. to demand funds to increase your margin position
C. to let you know the amount of funds that are now available for you to borrow
D. to advise you that the interest rate on your loan has changed
E. to remind you of the upcoming monthly payment due on your margin loan