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Which of the following affect the earnings per share?
I. decrease in interest expense
II. share repurchase
III. increase in tax rates
IV. preferred stock dividend
A. I and III only
B. II and IV only
C. I, II, and III only
D. II, III, and IV only
E. I, II, III, and IV
A group of stocks and bonds held by an investor is called which one of the following?
A. weights
B. grouping
C. basket
D. portfolio
E. bundle
According to the concept of loss aversion, individual investors are most apt to do which
one of the following?
A. sell stocks with gains more frequently than stocks with losses
B. sell stocks with losses more frequently than stocks with gains
C. hold stocks with gains and sell stocks with losses
D. sell all stocks after a pre-determined length of time
E. hold all stocks unless they decline more than ten percent in value
Which one of the following terms is given to the value of a convertible bond that would
equate to the value of a comparable nonconvertible bond?
A. out-of-the money value
B. in-the-money value
C. discounted value
D. external value
E. intrinsic value
What is the correlation coefficient of two assets that are uncorrelated?
A. -100
B. -1
C. 0
D. 1
E. 100
Which one of the following risks is associated with investing a coupon payment at a
rate that is lower than the bond's yield-to-maturity?
A. reinvestment rate risk
B. current rate risk
C. payment risk
D. current yield risk
E. maturity risk
Joanne invested $15,000 six years ago. Her arithmetic average return on this investment
is 8.72 percent, and her geometric average return is 8.50 percent. What is Joanne's
portfolio worth today?
A. $23,989
B. $24,472
C. $26,409
D. $26,514
E. $26,766
In order to currently trade on the floor of the NYSE, members must:
A. be registered as a floor trader
B. own a seat
C. purchase a trading license
D. be a specialist
E. be designated as a floor broker
If you purchase shares in a closed-end fund at the initial offer price, you should expect
to:
A. earn an abnormally high rate of return the first year.
B. immediately see a decrease in the value of your investment.
C. receive offers to purchase your shares at a premium prior to the official first day of
trading.
D. earn tax-advantaged income.
E. realize a capital gain if you sell your shares as soon as trading in the shares
commences.
Which of the following is NOT one of Michael Porter's Five Forces?
A. Threat of new entrants
B. Bargaining power of buyers
C. Bargaining power of suppliers
D. Threat of new technology
E. Threat of substitute products
Futures contracts exist for which of the following?
I. pork bellies
II. S&P 500 index
III. Eurodollars
IV. cocoa
A. I and IV only
B. II and III only
C. I, II, and IV only
D. I, III, and IV only
E. I, II, III, and IV
An index has a market value of $689,400 at the beginning of the period and $722,009 at
the end of the period. If you want the beginning index value to be 100, what is the
ending index value?
A. 104.73
B. 105.42
C. 105.67
D. 105.89
E. 106.13
The following premiums apply to a 3-month bond: interest rate risk premium = 0.2
percent; real return = 1.9 percent; default premium = 0.8 percent; inflation premium =
1.4 percent. What is the expected nominal interest rate on a default-free security that
has 3 months to maturity?
A. 1.9 percent
B. 2.0 percent
C. 2.1 percent
D. 3.3 percent
E. 3.6 percent
Periscope Adventures last annual dividend was $0.63 a share. The firm will increase the
dividend by 7 percent for the next 4 years and thereafter increase the dividend by 4
percent annually. What is this stock worth today if the required return is 11 percent?
A. $10.38
B. $11.06
C. $11.30
D. $13.97
E. $14.08
The Rug Barn has paid annual dividends of $1.30, $1.36, $1.40, $1.42, and $1.45 over
the last 5 years, respectively. What is the geometric average dividend growth rate?
A. 1.98 percent
B. 2.11 percent
C. 2.39 percent
D. 2.55 percent
E. 2.77 percent
The short interest on Blue Water Cruisers stock was 351,900 when the market opened
this morning. During the day, 288,500 shares were covered and 151,600 shares were
sold short. What was the short interest on this stock at the end of the trading day?
A. 203,100 shares
B. 215,000 shares
C. 233,100 shares
D. 308,100 shares
E. 447,900 shares
You own 450,000 bushels of wheat. If you decide to add a short futures position in
wheat you will be taking which one of the following positions?
A. short hedge
B. long hedge
C. program trade
D. short arbitrage
E. long arbitrage
Which one of the following Value-at-Risk measures would be most appropriate for a
portfolio designed for a very risk-adverse investor?
A. Prob (Rp ≤ - .20) = 100%
B. Prob (Rp ≤ - .15) = 50%
C. Prob (Rp ≤ - .10) = 25%
D. Prob (Rp ≤ - .10) = 10%
E. Prob (Rp ≤ - .05) = 1%
Last year, BT Motors issued 10-year bonds with a 9 percent coupon and semi-annual
interest payments. What is the market price of a $1,000 bond if the yield to maturity is
8.9 percent?
A. $1,003.97
B. $1,006.53
C. $1,042.89
D. $1,414.14
E. $1,585.36
Which one of the following is a bear call spread?
A. buying a $20 call and selling a $25 call on the same stock
B. selling a $20 call and buying a $20 call on the same stock
C. buying a $20 call and selling a $15 call on the same stock
D. selling a $20 call and buying a $25 put
E. buying a $20 call and selling a $25 put
Which of the following are common characteristics associated with corporate bonds?
I. specified cash flows
II. equity ownership
III. call feature
IV. set maturity date
A. I and II only
B. I and IV only
C. II and III only
D. I, II, and IV only
E. I, III, and IV only
You are investing $8,000 in a mutual fund that charges a 4.50 percent front-end load.
The offering price is $24.70 a share. What will your investment be worth immediately
after your shares are purchased?
A. $7,520
B. $7,640
C. $8,000
D. $8,360
E. $8,420
You invest $150,000 in Germany when the exchange rate is $1.25/€. Your investment
gains 10%, and you subsequently exchange the euros back into dollars at a rate of
$1.20/€. What is your total percentage return on this investment?
A. 4.48%
B. 4.89%
C. 5.10%
D. 5.35%
E. 5.60%
The measure of performance of one investment compared to another investment is
called the:
A. wave height.
B. relative arm.
C. relative strength.
D. bar height.
E. support factor.
Assume the inflation rate in 2012 is 1.3 percent. If the nominal GDP grew 3.5 percent
and nominal wages grew 2.6 percent, what are the approximate real growth rates of
GDP and wages?
A. 2.00%; 0.80%
B. 3.05%; 0.90%
C. 2.10%; 1.10%
D. 2.20%; 1.20%
E. 2.20%; 1.30%
You have computed the expected return using VaR with a 2.5 percent probability for a
one-year period of time. How would this expected return be expressed on a normal
distribution curve?
A. lower tail starting at the point that is 2.5 standard deviations below the mean
B. lower tail of a 95 percent probability range
C. the point that corresponds to 2.5 standard deviations below the mean
D. the point that represents the lower end of the 90 percent probability range
E. the negative range that lies within 2.5 standard deviations of the mean
If wages grew 3.15 percent in 2013, but inflation was 2.75 percent, what was the
approximate real increase in wages?
A. 0.10%
B. 0.20%
C. 0.30%
D. 0.40%
E. 0.50%
A stock has an expected return of 14.59 percent and a beta of 1.35. What is the risk-free
rate if the market rate is 12.7 percent?
A. 6.48 percent
B. 6.92 percent
C. 7.01 percent
D. 7.30 percent
E. 7.90 percent
What are the restrictions on investment portfolios that require that all securities held
within the portfolio meet a specified level of safety called?
A. protective covenants
B. negative restrictions
C. prudent investment guidelines
D. safety monitors
E. risk ranges
A portfolio consists of the following securities. What is the portfolio weight of stock X?
A. .183
B. .202
C. .219
D. .246
E. .285
A decrease in which one of the following will increase a firm's sustainable rate of
growth?
A. net income
B. dividend payout ratio
C. total assets
D. retention ratio
E. earnings per share
The _____ duration for mortgage-backed securities is the duration measure that
accounts for how mortgage prepayments are affected by changes in interest rates.
A. mean
B. modified
C. average
D. effective
E. adjusted
Which one of the following is the primary difference between operating cash flow and
net income?
A. interest expense
B. indirect costs
C. taxes
D. fixed costs
E. depreciation
The absolute minimum initial margin requirement is set by the:
A. individual investor.
B. brokerage firm.
C. Federal Reserve.
D. Security Investors Protection Corporation.
E. Securities and Exchange Commission.
