Stocks which are listed on the NYSE can:
A. not be listed on any other exchange.
B. only be dual listed on a regional exchange.
C. only be dual listed on Instinet.
D. only be dual listed on the Archipelago Exchange.
E. also be listed on NASDAQ.
Which of the following will lead to excess profits in a semistrong-form efficient
market?
I. private financial information
II. historical price trends
III. financial analysts reports
IV. unreleased merger plans
A. I only
B. I and IV only
C. II and III only
D. I, II, and III only
E. I, III, and IV only
Assume the DJIA closed at 15,150 last night. The divisor is 0.123017848. Assume that
29 of the stocks in the index were unchanged today. One stock increased in value from
$44.80 a share yesterday to $47.90 a share today. What is the DJIA index value at the
close of trading today?
A. 15,175.20
B. 15,208.30
C. 15,365.60
D. 15,412.20
E. 15,524.10
A $1,000 face value bond is selling for $1,016.36. The bond pays interest semiannually
and has 3.5 years to maturity. The yield to maturity is 5.48 percent. The current yield is
_____ percent and the coupon rate is _____ percent.
A. 5.86; 5.90
B. 5.90; 6.00
C. 5.90; 5.86
D. 6.00; 5.90
E. 6.00; 5.86
Which of the following are typical characteristics of employee stock options?
I. originally issued with 10-year life
II. right to purchase stock at a designated price
III. exchange-traded
IV. vesting period
A. II only
B. I and II only
C. I and III only
D. I, II, and IV only
E. I, II, III, and IV
A futures position that is equal, but opposite, the position you have in the underlying
asset defines which one of the following terms?
A. short hedge
B. long hedge
C. full hedge
D. partial hedge
E. underlying hedge
Kris implemented an option trading strategy consisting of two call options. This
strategy is known as which one of the following?
A. spread
B. straddle
C. split
D. combination
E. counteraction
If the markets are efficient, then why is asset allocation still considered important?
A. because the risk-return relationship must still be considered
B. because market timing is critical in efficient markets
C. because individual security selection is the key to the markets being efficient
D. because asset allocation combines market timing with individual security selection
E. because the majority of market gains tend to occur only over long periods of time
A bond is currently priced at $1,076.88 and has a par value of $1,000. If the conversion
ratio is 25, what is the conversion price?
A. $35.71
B. $36.92
C. $38.46
D. $40.00
E. $41.67
Which one of the following will increase the investment cash flow?
A. purchase of an investment
B. issuing new shares of stock
C. repaying a bond issue
D. sale of a building
E. payment of interest on a bond issue
Which one of the following is the federal agency which regulates the financial markets
in the U.S.?
A. Treasury Department
B. National Association of Securities Dealers
C. Over the Counter Commission
D. Federal Reserve
E. Securities and Exchange Commission
You purchased 700 shares of stock for $54.30 a share. The initial margin requirement is
75 percent and the maintenance margin is 35 percent. What is the maximum percentage
decrease that can occur in the stock price before you receive a margin call?
A. 35 percent
B. 38 percent
C. 48 percent
D. 57 percent
E. 62 percent
What is the variance of the expected returns on this stock?
A. 1.21
B. 1.42
C. 1.56
D. 3.84
E. 4.03
Today, you short sold 1,100 shares of Jasper Industrial stock at $48 a share. The initial
margin is 60 percent and the maintenance margin is 30 percent. Which one of the
following is correct concerning your account balance sheet for this transaction?
A. You have an asset of $31,680 from the sale proceeds.
B. You have a liability from the short position of $21,120.
C. Your account equity is $21,120.
D. Your initial margin deposit is $15,840.
E. Your total assets are $84,480.
You purchased 7 put option contracts on Alto Industries. The strike price was $42.50
and the option premium was $1.30. On the expiration date, the stock was valued at
$41.40 a share. What is the payoff on the option contracts?
A. -$140
B. $0
C. $110
D. $360
E. $770
Zonvier, Inc. has sales of $53,800, a profit margin of 10.5 percent, and a plowback ratio
of 40 percent. The company has 15,000 shares of stock outstanding. The firm uses the
percentage of sales method for pro forma statements and estimates next year’s sales will
increase by 15 percent.
What is the dividend per share expected to be next year?
A. $0.249
B. $0.250
C. $0.260
D. $0.268
E. $0.274
Besides size, how else does a mutual fund style box classify equity funds?
A. cost and fees as a percent of NAV
B. taxability at federal, state, and local levels
C. value versus growth characteristics
D. age of the fund
E. short and long-term rates of return
Which one of the following terms applies to a rate that serves as an indicator of future
trends?
A. bellwether
B. prime
C. call
D. discount
E. nominal
Tom decides to begin investing some portion of his annual bonus, beginning this year
with $6,000. In the first year he earns a 8% return and adds $3,000 to his investment. In
the second his portfolio loses 4% but, sticking to his plan, he adds $1,000 to his
portfolio. In this year his portfolio returns 2%. What is Tom’s dollar-weighted average
return on his investments?
A. 0.34 percent
B. 1.20 percent
C. 1.54 percent
D. 2.23 percent
E. 2.58 percent
The Potato Patch has a retention ratio of .80, dividends of $52,000, and total equity of
$3.3 million. What is the firm’s sustainable rate of growth?
A. 1.58 percent
B. 4.22 percent
C. 6.30 percent
D. 7.38 percent
E. 8.54 percent
Which one of the following involves creating a portfolio in a manner which minimizes
the uncertainty of the portfolio’s maturity target date value?
A. duration
B. reinvestment
C. immunization
D. modification
E. call protection
Which one of the following is an account used to provide for scheduled redemptions of
outstanding bonds?
A. redemption fund
B. sinking fund
C. liquidation account
D. serial account
E. callable account
When the total return on an investment is expressed on a per-year basis it is called the:
A. capital gains yield.
B. dividend yield.
C. holding period return.
D. effective annual return.
E. initial return.
Which one of the following will increase the return on equity?
A. increase in the corporate tax rate
B. decrease in fixed costs
C. issuance of debt to purchase equipment
D. increase in variable costs per unit
E. decrease in net sales
You short sold 500 shares of Jasper stock at $41 a share at an initial margin of 60
percent. What is the highest the stock price can go before you receive a margin call if
the maintenance margin is 40 percent?
A. $46.86
B. $47.08
C. $55.50
D. $56.90
E. $57.40
Which of the following are generally included in a standardized futures contract?
I. delivery date
II. quantity to be delivered
III. specific item to be delivered
IV. delivery location
A. I and II only
B. I, II, and III only
C. II, III, and IV only
D. I, III, and IV only
E. I, II, III, and IV
A portfolio has a 3-year standard deviation of 18.1 percent. What is the one-year
standard deviation?
A. 6.39 percent
B. 8.69 percent
C. 10.45 percent
D. 11.80 percent
E. 12.33 percent
When the offering price and the NAV are the same, you know that a mutual fund is not
charging which one of the following fees?
A. 12b-1 fee
B. front-end load
C. management fee
D. contingent deferred sales charge
E. trading costs
The Latest Trend Fund has $2,648,900 in assets, and $1,878,400 in liabilities. How
many shares are outstanding if the NAV is $10.07?
A. 75,481
B. 76,514
C. 77,089
D. 79,142
E. 79,638
Delta measures the dollar impact of a change in which one of the following on the value
of a stock option?
A. volatility of the underlying stock price
B. risk-free interest rate
C. underlying stock price
D. option strike price
E. time to maturity
You are interested in reviewing the information corporations file with the SEC. Which
one of the following is the archive of these filings?
A. SAMSON
B. REG FD
C. EDGAR
D. Nonpublic information files
E. ROA filings
You are planning to invest $150,000 in Hong Kong. If your Hong Kong investment
gains 7.5 percent while the exchange rate moves from 7.75 Hong Kong dollars (HK$)
per U.S. dollar to 7.70 per dollar over the period, what is your total return on this
investment?
A. 6.8%
B. 7.1%
C. 7.6%
D. 8.2%
E. 8.4%
You manage a $265 million bond portfolio which has a duration of 7.1 years. You want
to hedge this portfolio with Treasury note futures that have a duration of 7.6 years and a
futures price of 116. U.S. Treasury notes futures contracts are based on a par value of
$100,000 and quoted as a percentage of par. How many contracts do you need to sell to
complete this hedge?
A. 1,371 contracts
B. 1,400 contracts
C. 1,550 contracts
D. 1,867 contracts
E. 2,134 contracts
The value of an individual security divided by the portfolio value is referred to as the
portfolio:
A. beta.
B. standard deviation.
C. balance.
D. weight.
E. variance.
A change in a bond’s price caused by which one of the following is defined as the dollar
value of an 01?
A. change in yield to call due to passage of one year
B. change in yield to maturity of one percent
C. change in yield to maturity of one basis point
D. change in coupon rate of one percent
E. change in coupon rate of one basis point
Why is the expected rate of sales growth so critical to pro forma statements?
For the period 1926-2012, small-cap stocks outperformed large-cap stocks by a
significant amount.
Given this, why do investors still purchase large-cap stocks?
Identify and describe five interest rates that directly apply to the money market.
Briefly discuss any three (3) constraints that an investor might face in designing his
investment strategy and how they affect that strategy.
SLK stock is selling for $28 a share. A $30 call on this stock is priced at $2. What is
your maximum profit and maximum loss if you buy the stock and write the call? How
does this compare to your maximum profit and loss if you write the call but do not
purchase the stock?
Answer:
Answer will vary
Feedback:
Describe the primary advantage and disadvantage of a limit sell order.
Give some examples of how overconfidence affects investor behavior along with the
results that might be expected based on that behavior.
Explain the three tiers of “top-down analysis”.
You want to purchase a security that tracks the S&P 500. What types of securities can
you purchase to accomplish this goal? Which type of security would you purchase and
why would you choose that security over your other options?
Why would you purchase a call option? What is your maximum profit or loss on such a
position?
Preferred stock is sometimes considered to be a cross between debt and equity. Describe
the characteristics of preferred stock that make it similar to debt as well as the
characteristics that make it similar to equity.
What value does the Statement of Cash Flows add to the financial statements of a firm?
Explain what a reverse mortgage is, how it works, and who it is intended to help.
Explain the primary goal of portfolio diversification as it relates to asset allocation and
correlation.
You are having a discussion with Kate when she mentions that she just initiated a short
position on ABC stock. Given that statement, what do you know about Kate’s future
outlook for ABC stock?
A trader was found guilty of violating insider trading laws. As part of his sentencing, he
had to forfeit the excessive profits earned on the illegal trades. What does this
conviction indicate about the current form of market efficiency?