Which one of the following is the type of risk that affects a large number of assets?
A. unique
B. systematic
C. asset-specific
D. unsystematic
E. firm-specific
Which of the following interest rates is directly controlled by the Federal Reserve?
A. the fed funds rate
B. the discount rate
C. the prime rate
D. mortgage rates
E. credit card rates
Ted owns a bond which is callable in 2.5 years. The bond has a 6 percent coupon, pays
interest semiannually, has a par value of $1,000, and has a yield to call of 6.3 percent.
What is the call premium if the bond currently sells for $1,044.54?
A. $50
B. $60
C. $70
D. $75
E. $80
Assuming there is no default risk, both a premium bond and a discount bond must share
which one of the following characteristics?
A. market price less than a par value bond
B. yield-to-maturity less than the coupon rate
C. maturity value equal to a par value bond
D. current yield equal to that of a par value bond
E. coupon rate exceeding the yield-to-maturity
An issuer has a bond outstanding that matures in 18 years. Which one of the following
prevents the issuer from buying back that bond today?
A. make-whole provision
B. call protection period
C. newly issued provision
D. put provision
E. call premium
A long hedge is the addition of which one of the following to a short position in the
underlying asset?
A. short spot position
B. any spot position
C. any futures position
D. long futures position
E. either a short spot or short futures position
You invest $4,300 in a money market fund at the beginning of the year. The fund’s
assets appreciate by 3.2 percent over the year. How many shares of the fund do you
own at the end of the year?
A. 4,300.00 shares
B. 4,437.60 shares
C. 4,529.60 shares
D. 4,682.40 shares
E. 4,700.00 shares
An index consists of the following securities and has an index divisor of 2.0. What is
the price-weighted index return?
A. -0.69 percent
B. -0.18 percent
C. 0.00 percent
D. 0.22 percent
E. 0.31 percent
Which one of the following is defined as an option that can only be exercised at
expiration?
A. European style option
B. in-the-money option
C. out-of-the-money option
D. American style option
E. derivative option
Healthy Supplements, Inc. paid $7,300 in interest and $4,300 in dividends for the year.
The firm also issued $15,000 worth of new equity securities. What is the amount of the
financing cash flow?
A. $2,500
B. $5,200
C. $6,800
D. $7,700
E. $10,700
Which one of the following terms applies to the process of reducing the mortgage
principal over the life of the mortgage according to a schedule?
A. mortgage amortization
B. mortgage prepayment
C. mortgage elimination
D. mortgage securitization
E. mortgage passthrough
Which type of fund should you purchase if you are interested in investing primarily in
countries that have relatively new stock markets?
A. international fund
B. emerging markets fund
C. social conscience fund
D. global fund
E. sector fund
You purchased a stock eight months ago for $36 a share. Today, you sold that stock for
$41.50 a share.
The stock pays no dividends. What was your annualized rate of return?
A. 23.32 percent
B. 24.77 percent
C. 25.70 percent
D. 26.03 percent
E. 27.67 percent
What is the price difference on a $100,000, 10-year Treasury note futures contract
between the highest and lowest prices at which the bond traded on this day?
Treasury note, $100,000, pts and one-half of 1/32 of a point
A. $106.50
B. $1,065.00
C. $1,203.13
D. $10,650.00
E. $12,031.30
Over the past four years, Jellystone Quarry stock produced returns of 12.5, 15.1, 8.7,
and 2.6 percent, respectively. For the same time period, the risk-free rate 4.7, 5.3, 3.9,
and 3.4 percent, respectively. What is the arithmetic average risk premium on this stock
during these four years?
A. 5.13 percent
B. 5.25 percent
C. 5.40 percent
D. 5.83 percent
E. 5.97 percent
Which one of the following rates is the normally quoted rate?
A. nominal
B. deflated
C. inflated
D. real
E. indexed
You own 6 put option contracts on JL Industrial stock. You paid an option premium of
$0.75 for a strike price of $42.50. On the option expiration date, the stock was selling
for $41.00 a share. What is your percentage return?
A. -100 percent
B. -18.75 percent
C. 51.26 percent
D. 78.75 percent
E. 100 percent
The capital gains yield is equal to:
A. (Pt – Pt + 1 + Dt + 1)/Pt + 1.
B. (Pt + 1 – Pt + Dt)/Pt.
C. Dt + 1/Pt.
D. (Pt + 1 – Pt)/Pt.
E. (Pt + 1 – Pt)/Pt + 1.
Which one of the following statements applies to unsystematic risk?
A. It can be eliminated through portfolio diversification.
B. It is also called market risk.
C. It is a type of risk that applies to most, if not all, securities.
D. Investors receive a risk premium as compensation for accepting this risk.
E. This risk is related to expected returns.
NASDAQ has which of the following characteristics?
I. trading floor
II. computer network
III. specialist system
IV. multiple market makers
A. I and IV only
B. II and IV only
C. I, III, and IV only
D. II, III, and IV only
E. I, II, III, and IV
Reed Plastics just announced the earnings per share for the quarter just ended were $.45
a share. Analysts were expecting $.51. What is the amount of the surprise portion of the
announcement?
A. -$.12
B. -$.06
C. $.06
D. $.00
E. $.03
Which of the following reports are always included in a 10K filing with the SEC?
I. statement of cash flows
II. balance sheet
III. pro-forma statement
IV. income statement
A. I only
B. IV only
C. II, III, and IV only
D. I, II, and IV only
E. I, II, III, and IV
Ted recently inherited a large sum of money that he wants to invest in the stock market.
Since he has no investment experience, he has decided that he would like to work with
a professional who can explain the market to him and also manage his funds for him.
Ted most likely needs the services offered by a(n):
A. deep-discount broker.
B. discount broker.
C. full-service broker.
D. online broker.
E. cyberbroker.
Which one of the following states that investors cannot consistently earn positive
excess returns?
A. market return hypothesis
B. current market hypothesis
C. efficient market hypothesis
D. risk-return theory
E. excess theory
What is the standard deviation of the returns on this stock?
A. 223.94 percent
B. 24.08 percent
C. 24.17 percent
D. 25.72 percent
E. 26.90 percent
The NYSE circuit breakers are recalculated:
A. every day
B. every week
C. monthly
D. every 6 months
E. annually
The yield-to-maturity assumes which one of the following?
A. The bond is purchased at par value.
B. All interest payments earn the latest rate of market interest.
C. The bond is called on the earliest possible date.
D. The bond is a pure discount bond.
E. All coupon payments are reinvested at the yield-to-maturity rate.
What is the current value of a $5,000 face value STRIPS with 6 years to maturity and a
yield to maturity of 8.1 percent?
A. $2,998.09
B. $3,009.16
C. $3,105.02
D. $3,128.10
E. $3,133.40
Use the following stock quotes to answer this question:
How many whole shares of Ditch Digger stock traded today?
A. 11,298
B. 112,980
C. 11,298,006
D. 112,980,060
E. 1,129,800,600
You purchased five September wheat futures contracts at the open today and sold those
contracts at the close. What is your total profit or loss on these contracts?
A. -$750,000
B. -$75,000
C. -$7,500
D. -$750
E. -$75
A stock fund has a standard deviation of 17 percent and a bond fund has a standard
deviation of 8 percent. The correlation of the two funds is .24. What is the approximate
weight of the stock fund in the minimum variance portfolio?
A. 11 percent
B. 15 percent
C. 21 percent
D. 24 percent
E. 27 percent