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The one-year standard deviation of your portfolio is 14.8 percent. What is the two-year
standard deviation?
A. 16.47 percent
B. 18.23 percent
C. 20.93 percent
D. 25.41 percent
E. 27.20 percent
Which of the following are common characteristic of the OTCBB market?
I. low stock prices
II. dual listings with NASDAQ
III. high percentage price changes
IV. thinly traded securities
A. I and III only
B. I, II, and III only
C. I, III, and IV only
D. II, II, and IV only
E. I, II, III, and IV
After the trigger point is reached, a stop-loss order will be executed at the:
A. trigger price.
B. stop price.
C. trigger price or better.
D. stop price or better.
E. market price.
An efficient portfolio is a portfolio that does which one of the following?
A. offers the highest return for the lowest possible cost
B. provides an evenly weighted portfolio of diverse assets
C. eliminates all risk while providing an expected positive rate of return
D. lies on the vertical axis when graphing expected returns against standard deviation
E. offers the highest return for a given level of risk
Last year, you created an immunized portfolio with an average maturity date of 14.5
years, a yield-to-maturity of 9.8 percent, and a duration of 9.6 years. According to the
policy of dynamic immunization, you should now modify your portfolio in which one
of the following ways?
A. modify the yield-to-maturity to 9.1 percent
B. modify the portfolio so the average maturity remains at 14.5 years
C. modify the portfolio so the average maturity becomes 13.5 years
D. modify the portfolio so the duration remains at 9.6 years
E. modify the portfolio so the duration becomes 8.6 years
Given the following information, what is the net money flow at the end of the trading
day?
A. -213,500
B. -103,000
C. 91,200
D. 187,600
E. 257,800
Which two of the following are the largest categories of fixed-income securities in the
U.S.?
I. U.S. government debt
II. corporate debt
III. municipal government debt
IV. real estate mortgage debt
A. I and II only
B. I and III only
C. III and IV only
D. I and IV only
E. II and IV only
Jefferson Mills stock produced returns of 14.8, 22.6, 5.9, and 9.7 percent, respectively,
over the past four years. During those same years, U.S. Treasury bills returned 3.8, 4.6,
4.8, and 4.0 percent, respectively, for the same time period. What is the variance of the
risk premiums on Jefferson Mills stock for these four years?
A. .00298
B. .00196
C. .00396
D. .00478
E. .00528
The day-of-the-week effect is defined as the tendency for which day of the week to
have a negative average rate of return?
A. Monday
B. Tuesday
C. Wednesday
D. Thursday
E. Friday
The wider the distribution of an investment's returns over time, the _____ the expected
average rate of return and the ______ the expected volatility of those returns.
A. higher; higher
B. higher; lower
C. lower; higher
D. lower; lower
E. The distribution of returns does not affect the expected average rate of return.
If the Federal Reserve injects $75 billion into the financial system and the money
supply increases by a maximum of $300 billion, what must the reserve requirement be?
A. 15%
B. 18%
C. 20%
D. 22%
E. 25%
Which one of the following is the best example of unsystematic risk?
A. decrease in company sales
B. increase in market interest rates
C. change in corporate tax rates
D. increase in inflation
E. This risk is related to expected portfolio returns
Which one of the following measures returns in relation to total risk?
A. Treynor ratio
B. Sharpe ratio
C. Jensen's alpha
D. Value at Risk
E. beta
Which one of the following is a mortgage-backed security that has first priority to
scheduled principal payments?
A. priority strip bond
B. principal strip
C. amortized principal strip
D. protected amortization class bond
E. principal priority tranche
The Country Farm and the Cookie Maker met today and agreed to exchange wheat six
months from now at a price which they negotiated today. This agreement was made
between the two firms and did not pass through an organized exchange. Which one of
the following best describes this transaction?
A. futures contract
B. spot market
C. cash market
D. forward contract
E. CME transaction
What is the standard deviation of a security which has the following expected returns?
A. 7.48 percent
B. 7.61 percent
C. 7.67 percent
D. 7.82 percent
E. 7.91 percent
Matt owns 724.08 shares of a fund which has a current NAV of $41.04. He has owned
all of these shares for 3.3 years. The fund charges a contingent deferred sales charge
which starts at 5 percent for the first year and declines by 1 percent each year. How
much cash will he receive if he redeems all of his shares today?
A. $29,121.92
B. $29,709.36
C. $30,334.82
D. $30,647.55
E. $31,023.14
You currently have $5,000 in cash in your brokerage account. You decide to spend
$8,000 to purchase shares of stock and borrow $3,000 from your broker to do so. Which
type of brokerage account do you have?
A. Cash
B. Wrap
C. Margin
D. Short
E. Asset allocation
The Federal Reserve is offering Treasury bills with a par value of $30 billion for sale.
They have received $11 billion of noncompetitive bids. The competitive bids for a
$10,000 par value bond are:
How much money will the Federal Reserve raise from this offering?
A. $29.55 billion
B. $29.40 billion
C. $29.10 billion
D. $29.33 billion
E. $29.25 billion
Given a set of variables, the Black-Scholes option pricing formula has a put option delta
of -.154. What is the call delta given these same variables?
A. -1.154
B. -.846
C. .846
D. 1.154
E. The answer cannot be determined based on the information provided.
Which of the following statements correctly apply to TIPS?
I. They are quoted as a percentage of the current accrued principal.
II. They pay a variable interest rate that responds to movements in the inflation rate.
III. They are backed by the full faith and credit of the U.S. government.
IV. They adjust for inflation on an annual basis.
A. I and III only
B. II and IV only
C. III and IV only
D. I, II, and III only
E. II, III, and IV only
A Sharpe-optimal portfolio provides which one of the following for a given set of
securities?
A. Jensen's Alpha
B. highest possible level of risk
C. highest level of return for a market-equivalent level of risk
D. highest excess return per unit of systematic risk
E. highest risk premium per unit of total risk
Which one of the following statements related to callable bonds is correct?
A. Callable bonds are issued at the call price.
B. Callable bonds can be called at any time.
C. Callable bonds are generally called at the market price at the time of the call.
D. Callable bonds are more apt to be called if market interest rates decline.
E. Callable bonds are generally priced higher than comparable noncallable bonds.
The risk-free rate is 4.15 percent. What is the expected risk premium on this stock given
the following information?
A. 5.88 percent
B. 5.95 percent
C. 6.10 percent
D. 6.23 percent
E. 6.27 percent
Which one of the following statements is true concerning VaR?
A. VaR ignores time.
B. VaR only applies to time periods of one year.
C. VaR applies only to time periods equal to or greater than one year.
D. VaR values can be computed for monthly time periods.
E. VaR is accurate only for time periods less than one year.
A mortgage pool was created six years ago. Which one of the following PSA values is
most apt to apply to that pool if market mortgage rates have been declining quite
rapidly over the past five years?
A. 0
B. 50
C. 100
D. 150
E. 200
Seven years ago, you purchased 216.34 shares of a mutual fund. Since then, you have
reinvested your fund dividends and acquired an additional 31.02 shares. The fund
currently has an NAV of $38.06. The fund charges a contingent deferred sales charge of
5 percent for the first 2 years after which time the charge declines by 1 percent a year.
How much money will you receive if you redeem all of your shares today?
A. $9,320.38
B. $9,414.52
C. $9,508.67
D. $9,603.75
E. $9,699.79
Glassmakers, Inc. purchased $137,600 of new equipment this year and also increased
the inventory by $36,800. Thirty-three thousand dollars worth of old equipment was
sold. What is the investment cash flow for the year?
A. -$49,300
B. -$98,000
C. -$104,600
D. -$125,500
E. -$133,300
Consider both a European put and call that expire in June and have a strike price of $30.
The no-arbitrage relationship between this put and call is referred to as which one of the
following?
A. intrinsic equilibrium
B. Euro-match
C. bull-call spread
D. butterfly spread
E. put-call parity
Which one of the following statements is correct concerning an open-high-low-close
bar chart?
A. The prices indicated by the two horizontal lines are the maximum and minimum
daily prices.
B. The upper trendline indicates the support level.
C. If the overall price movement is downward, the lower trendline is called the channel
line.
D. If the overall price movement is upward, the upper trendline is called the head line.
E. The final price of the day is indicated by a horizontal line to the left side of the
vertical line.
Farm Tractors, Inc., stock has a beta of 1.12 and an expected return of 12.8 percent. The
risk-free rate is 3.84 percent. What is the market rate of return?
A. 6.67 percent
B. 8.90 percent
C. 9.08 percent
D. 11.84 percent
E. 12.63 percent
Which one of these statements regarding corporate bond credit ratings is correct?
A. Bonds rated Ba3 or above by Moody's are considered investment-grade bonds.
B. All bonds issued by the same issuer will have the same credit rating.
C. A bond's credit spread may be a better indicator of a bond's risk than its rating.
D. Bond ratings are based solely on the seniority of the bond issue and the protective
covenants by which it is covered.
E. Credit ratings are assigned to the bond issuer, not the bond issue.
Return on equity is equal to which one of the following?
A. dividend yield divided by total equity
B. retained earnings divided by total equity
C. revenue divided by total equity
D. net income divided by total equity
E. operating cash flow divided by total equity
Which type of trader is defined as one who decides to trade securities based on publicly
available information and analysis?
A. public
B. informed
C. normal
D. inside
E. block
Cochran's Furniture Outlet is issuing 25-year, 9 percent callable bonds. These bonds are
callable in 4 years with a call premium of $45. The bonds are being issued at par and
pay interest semi-annually. What is the yield to call?
A. 9.94 percent
B. 10.72 percent
C. 11.00 percent
D. 11.47 percent
E. 12.08 percent
