You invested $5,000 in a mutual fund 27 months ago when the NAV of the fund was
$30.00. You have not acquired or sold any shares since that time. Today, the NAV is
$28.40. The fund charges a contingent deferred sales charge of 6, 5, 4, 3, 2, 2, and 1
percent if the shares are redeemed within the first 7 years, respectively. How much
money will you receive if you redeem your shares today?
A. $4,383
B. $4,450
C. $4,544
D. $4,748
E. $4,801
An employee stock option is which one of the following?
A. call option
B. covered call
C. put option
D. protective put
E. index option
What is the investment cash flow, given the following information?
A. -$20
B. -$10
C. $10
D. $20
E. $100
Stephen’s Auto recently purchased Auto Express for $9.8 million. Auto Express had a
market value of $9.5 million at the time of acquisition. The additional $0.3 million that
Stephen’s Auto paid for Auto Express will be treated on Stephen’s Auto’s balance sheet
as which type of account?
A. patent
B. depreciation
C. licenses
D. goodwill
E. acquisition expense
Knit “n Needle started paying dividends 4 years ago. The annual dividends thus far
have been $0.25, $0.27, $0.30, and $0.33, respectively. What is the arithmetic average
dividend growth rate?
A. 6.33 percent
B. 8.58 percent
C. 9.70 percent
D. 10.80 percent
E. 11.17 percent
How frequently should you consider rebalancing the options hedge on a large equity
portfolio if you wish to maintain an effective hedge?
A. weekly
B. annually
C. just prior to the fiscal year end
D. at option expiration
E. only when the options are in-the-money
The Exploratory Fund is a new closed-end fund which just offered its shares to the
public. The fund raised $65 million and each share sold for $10. The fee for the fund
promoter was 6.5 percent of the initial proceeds. What was the value of your initial
$20,000 purchase before the shares began trading in the marketplace?
A. $18,400
B. $18,700
C. $19,100
D. $20,000
E. $21,300
The belief that information you hold is superior to information held by other investors
best describes:
A. over-confidence
B. the snakebite effect
C. the illusion of knowledge
D. the clustering illusion
E. loss aversion
Altoona Train stock increased from $18 a share to $25 a share. Based on phi, what are
the primary and secondary support areas for this stock?
A. $21.46; $19.19
B. $21.67; $20.38
C. $21.79; $20.11
D. $22.12; $20.58
E. $22.33; $20.67
Which one of the following is correct when computing the price of a debt security when
using a discount yield?
A. The price will exceed the face value.
B. An increase in the discount yield will increase the current price.
C. The current price will decrease as the days to maturity decrease.
D. The computation will be based on a 360-day year.
E. The computation will consider leap years.
Alco Metals just sold 2.5 million shares through an IPO offering. The shares were
offered at $25.50 a share and all shares were sold. The firm received a total of
$67,250,000 for this issue. What was the spread?
A. 5.49 percent
B. 6.25 percent
C. 6.40 percent
D. 7.00 percent
E. 7.20 percent
Which one of the following statements related to the NYSE Hybrid market is correct?
A. Floor brokers operate both electronically and in person.
B. The Hybrid system replaces the market specialists.
C. The automated system works better than the specialist for stocks with minimal
liquidity.
D. The automated system will only replace the specialist in times of market duress.
E. Investors can automatically trade an unlimited number of shares.
The total dollar return on a share of stock is defined as the:
A. change in the price of the stock over a period of time.
B. dividend income divided by the beginning price per share.
C. capital gain or loss plus any dividend income.
D. change in the stock price divided by the original stock price.
E. annual dividend income received.
A dedicated portfolio is a bond portfolio created to:
A. maximize current interest income.
B. provide an increasing steady stream of income.
C. maximize the return given declining interest rates.
D. fund a future cash outlay.
E. avoid taxation.
Southern Fields has an inventory of 838,000 pounds of sugar. The firm placed a partial
hedge on this inventory by selling 6 futures contracts at 9.56. The futures contracts are
based on 112,000 pounds and quoted in cents per pound. At the time the firm sold the
sugar, the spot rate was 9.63. How much profit did the firm lose because of the hedge?
A. $470.40
B. $586.60
C. $688.20
D. $4,704.00
E. $5,866.00
Which of the following uses of proceeds from private activity bonds will most likely
qualify those bonds as federally tax-exempt?
I. public airport runway
II. baseball stadium
III. multifamily housing project
IV. mass rail transit
A. I and II only
B. I and III only
C. II and III only
D. II and IV only
E. I, III, and IV only
The arithmetic average dividend growth rate is:
A. the compounded rate of growth over a specified time period.
B. easier to compute than the geometric average dividend growth rate.
C. the summation of the annual dividend growth rates.
D. generally preferred over the geometric average growth rate by most financial
analysts.
E. generally larger than the geometric average growth rate when the annual growth rates
are positive.
Assume that the Federal Reserve injects $3.5 billion into the financial system. If the
reserve requirement is 16 percent, what is the maximum increase in money supply (in
billions)?
A. $20.44
B. $21.30
C. $21.88
D. $22.10
E. $22.60
A $100,000 or more term deposit at a bank is called which one of the following?
A. interbank deposit
B. bankers’ acceptance
C. collateralized deposit
D. call bond
E. certificate of deposit
Which one of the following situations will produce the highest call price, all else
constant?
A. $29 stock price; $30 strike price
B. $41 stock price; $40 strike price
C. $20 stock price; $20 strike price
D. $34 stock price; $35 strike price
E. $24 stock price; $25 strike price
A trading floor broker:
A. is a NYSE member who trades on the floor for his or her personal account.
B. executes orders on behalf of commission brokers in exchange for a fee.
C. executes customers’ orders in exchange for a commission.
D. trades a limited number of securities and is obligated to maintain an orderly market
for those securities.
E. is any party who owns a NYSE trading license.
When the issuer assumes the risk for any shares the underwriters cannot sell, the
underwriting is known as a _____ underwriting.
A. Dutch auction
B. partial
C. firm commitment
D. best efforts
E. pro-rata
Hi-Tek Shoes is a private firm that has decided to issue shares of stock to the general
public. This stock issue will be referred to as a(n):
A. open-end sale
B. break-out issue
C. public service offering
D. initial public offering
E. initial trial issue
Which of the following describes the “M2” Money Supply?
A. M1 plus time deposits, savings accounts and money markets
B. M1 plus time deposits and savings accounts
C. M1 plus time deposits and money markets
D. M1 plus money markets
E. M1 plus checking and time deposits
Which one of the following stocks has the highest expected risk premium?
A. A
B. B
C. C
D. D
E. E
Which one of the following statements is correct concerning an open-end mutual fund
which charges a front-end load?
A. The number of shares outstanding was fixed at the time the fund was created.
B. If an investor wishes to sell her shares, she must do so by selling to another investor.
C. The NAV exceeds the offering price.
D. The load is expressed as a percentage of the NAV.
E. Investors receive the NAV when shares are sold.
Regulation FD requires companies to do which one of the following when disclosing
material non-public information?
A. advise the SEC 7 working days prior to such disclosure
B. disclose the information without preference to any party or parties
C. only disclose the information to professional analysts
D. only disclose the information after a 7-day advance notice of an announcement
E. disclose the information only after a 24-hour delay
Which one of the following statements applies to U.S. Treasury bonds?
A. They have original maturities of 1 to 10 years.
B. They have a minimum face value of $100,000.
C. They are zero-coupon securities.
D. They pay a fixed coupon payment semiannually.
E. They are adjusted semiannually for inflation.
Which one of the following is the interest rate that the largest commercial banks charge
their most creditworthy corporate customers for short-term loans?
A. discount
B. Federal funds
C. prime
D. bid
E. call money
The duration of an interest rate futures contract is equal to the summation of which of
the following?
I. duration of the instrument most likely to be used as a cross-hedge
II. duration of the underlying instrument
III. initial length of time of the futures contract
IV. time remaining on the futures contract
A. II only
B. I and II only
C. I and III only
D. II and III only
E. II and IV only