1) Unit labor costs, the rate of inflation, the level of foreign competition, and the
capacity utilization rate were variables tested by Finkel and Tuttle as determinants of
the
a. Balance of payments.
b. The exchange rate.
c. Aggregate operating profit margin.
d. Aggregate profit margin.
e. Aggregate cost margin.
2) Exhibit 22.4
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the following information on put and call options for Citigroup
Calculate the net value of a covered call position at a stock price at expiration of $20,
and a stock price at expiration of $45.
a. $6.35, $18.85
b. $29.65, $42.15
c. $21.65, $34.15
d. $8, $8
e. -$8, -$8
3) TIPS are U.S Treasury securities where the coupon rate is
a. Zero
b. Indexed to the rate of inflation.
c. Indexed to the discount rate.
d. Indexed to the prime rate.
e. None of the above.
4) A stock currently trades at $110. June put options on the stock with a strike price of
$100 are priced at $5.25. Calculate the dollar return on one put contract.
a. -$525
b. $1000
c. $0
d. -$1000
e. $525
5) Exhibit 11.6
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider a firm that has just paid a dividend of $2. An analyst expects dividends to
grow at a rate of 8% per year for the next five years. After that dividends are expected
to grow at a normal rate of 5% per year. Assume that the appropriate discount rate is
7%.
The present value today of dividends for years 1 to 5 is
a. $4.06
b. $10.28
c. $12.40
d. $14.52
e. $10.0
6) The face value of a U.S. government agency security
a. Is always $1000.
b. Ranges from $1000 to $5000.
c. Ranges from $1000 to $100,000.
d. Ranges from $1000 to $50,000.
e. Is always $10,000.
7) According to the strong-form efficient market hypothesis, stock prices fully reflect
a.All security market information only.
b.All public information only.
c.All public and private information only.
d.All of the above.
e.None of the above.
8) Exhibit 10.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
What was the financial leverage multiplier used in the Star system?
a. 0.852
b. 1.896
c. 1.996
d. 2.054
e. 2.998
9) Which of the following is not a technique for constructing a passive index portfolio?
a. Full replication
b. Sampling
c. Quadratic programming
d. Linear programming
e. None of the above (that is, all are techniques for constructing a passive index
portfolio)
10) Under the following conditions, what are the expected returns for stocks X and Y?
a. 11.58% and 12.8%
b. 15.65% and 18.23%
c. 13.27% and 15.6%
d. 18.2% and 16.45%
e. None of the above
11) The writer of a ____ agreement makes settlement payments when LIBOR is greater
than the striking rate of the agreement.
a. Swap
b. Cap
c. Floor
d. Collar
e. None of the above
12) The Sharpe measure examines the risk premium per unit of systematic risk.
13) A negative EVA (Economic Value Added) for the year implies that the firm has not
earned enough during the year to cover its total cost of capital and the value of the firm
has declined.
14) Multifactor models of risk and return can be broadly grouped into models that use
macroeconomic factors and models that use microeconomic factors.
15) Tests have shown that if small filters are used in simulating trading rules, these
trading rules have produced above average returns after transactions costs are factored
in.
16) The market rewards investors for bearing total risk.
17) European options can only be exercised on the expiration date.
18) Asset allocation is the process of dividing funds into different classes of assets.
19) The cyclical indicator approach to market analysis is based on the belief that the
economy expands and contracts in a random manner.
20) The breadth of the market measures the daily volume for a particular market.