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You purchased a share of stock for $29. One year later you received $2.25 as dividend
and sold the share for $28. Your holding-period return was _________.
A. -3.57%
B. -3.45%
C. 4.31%
D. 8.03%
Which of the following ETFs tracks the S&P 500 Index?
A. Qubes
B. Diamonds
C. Vipers
D. Spiders
When interest rates increase, the duration of a 20-year bond selling at a premium
_________.
A. increases
B. decreases
C. remains the same
D. increases at first and then declines
In a ___________ index, changes in the value of the stock with the greatest market
value will move the index value the most, everything else equal.
A. value-weighted index
B. equally weighted index
C. price-weighted index
D. bond price index
The market capitalization rate on the stock of Aberdeen Wholesale Company is 10%. Its
expected ROE is 12%, and its expected EPS is $5. If the firm's plowback ratio is 60%,
its P/E ratio will be _________.
A. 7.14
B. 14.29
C. 16.67
D. 22.22
The German stock market is measured by which market index?
A. FTSE
B. Dow Jones 30
C. DAX
D. Nikkei
Your investment has a 40% chance of earning a 15% rate of return, a 50% chance of
earning a 10% rate of return, and a 10% chance of losing 3%. What is the standard
deviation of this investment?
A. 5.14%
B. 7.59%
C. 9.29%
D. 8.43%
The tendency of investors to hold on to losing investments is called the ________.
A. overweighting effect
B. head-in-the-sand effect
C. disposition effect
D. prospector effect
Taxes are applied to the _______________________.
A. real value of sheltered investment income
B. nominal value of unsheltered investment income
C. nominal value of sheltered investment income
D. real value of unsheltered investment income
A decrease of 1% in both your tax exemption and your income tax rate would, on net,
_______________.
A. make you better off
B. make you worse off
C. make you neither better off nor worse off
D. make you either better or worse off depending on your age
Which of the following is (are) true about dark pools?
I. They allow anonymity in trading.
II. They often involve large blocks of stocks.
III. Trades made through them might not be reported.
A. I and II only
B. II and III only
C. I and III only
D. I, II, and III
The maximum loss a buyer of a stock call option can suffer is the _________.
A. call premium
B. stock price
C. stock price minus the value of the call
D. strike price minus the stock price
Your timing was good last year. You invested more in your portfolio right before prices
went up, and you sold right before prices went down. In calculating historical
performance measures, which one of the following will be the largest?
A. dollar-weighted return
B. geometric average return
C. arithmetic average return
D. mean holding-period return
You would expect the beta of cyclical industries to be ______ and the beta of defensive
industries to be ______.
A. greater than 1; less than 1
B. less than 1; less than 1
C. less than 1; greater than 1
D. greater than 1; greater than 1
A TRIN ratio of greater than 1 is considered a __________.
A. bearish signal
B. bullish signal
C. bearish signal by some technical analysts and a bullish signal by other technical
analysts
D. trend reversal signal
Technical traders view mutual fund investors as _________ market timers.
A. excellent
B. frequent
C. neutral
D. poor
If an investment returns a higher percentage of your money back sooner, it will ______.
A. be less price-volatile
B. have a higher credit rating
C. be less liquid
D. have a higher modified duration
Market risk is also called __________ and _________.
A. systematic risk; diversifiable risk
B. systematic risk; nondiversifiable risk
C. unique risk; nondiversifiable risk
D. unique risk; diversifiable risk
A stock with a current market price of $50 and a strike price of $45 has an associated
call option priced at $6.50. This call has an intrinsic value of ______ and a time value
of _____.
A. $5; $1.50
B. $1.50; $5
C. $0; $6.50
D.
An investor would want to __________ to hedge a long position in Treasury bonds.
A. buy interest rate futures
B. buy Treasury bonds in the spot market
C. sell interest rate futures
D. sell S&P 500 futures
Which of the following does not approximate the performance of a buy-and-hold
portfolio strategy?
A. an equally weighted index
B. a price-weighted index
C. a value-weighted index
D. all of these options (Weights are not a factor in this situation.)
Consider the single factor APT. Portfolio A has a beta of 1.3 and an expected return of
21%. Portfolio B has a beta of .7 and an expected return of 17%. The risk-free rate of
return is 8%. If you wanted to take advantage of an arbitrage opportunity, you should
take a short position in portfolio __________ and a long position in portfolio
_________.
A. A; A
B. A; B
C. B; A
D. B; B
Which one of the following provides the best example of securitization?
A. convertible bond
B. call option
C. mortgage pass-through security
D. preferred stock
If you know that a call option will be profitably exercised, then the Black-Scholes
model price will simplify to _______.
A.
S0-X
B.
X -S0
C.
S0- PV(X)
D.
Everything else equal, which variable is negatively related to the intrinsic value of a
company?
A. D1
B. D0
C. g
D. k
The financial statements of Burnaby Mountain Trading Company are shown below.
Note: The common shares are trading in the stock market for $27 each.
Refer to the financial statements of Burnaby Mountain Trading Company. The firm's
P/E ratio for 2015 is _________.
A. 2.8
B. 3.6
C. 6
D. 11.11
Suppose a U.S. investor wants to invest in a British firm currently selling for ₤50 per
share. The investor has $7,000 to invest, and the current exchange rate is $1.40/₤.
How many shares can the investor purchase?
A. 140
B. 100
C. 71.43
D. none of these options
Risk that can be eliminated through diversification is called ______ risk.
A. unique
B. firm-specific
C. diversifiable
D. all of these options
Arbitrage is based on the idea that _________.
A. assets with identical risks must have the same expected rate of return
B. securities with similar risk should sell at different prices
C. the expected returns from equally risky assets are different
D. markets are perfectly efficient
Net asset value is defined as ________________________.
A. book value of assets divided by shares outstanding
B. book value of assets minus liabilities divided by shares outstanding
C. market value of assets divided by shares outstanding
D. market value of assets minus liabilities divided by shares outstanding
A forecast of bond returns based largely on a prediction of the yield curve at the end of
the investment horizon is called a _________.
A. contingent immunization
B. dedication strategy
C. duration analysis
D. horizon analysis
You have the following rates of return for a risky portfolio for several recent years:
2011 35.23% 2012 18.67% 2013 −9.87% 2014 23.45%
If you invested $1,000 at the beginning of 2011, your investment at the end of 2014
would be worth ___________.
A. $2,176.60
B. $1,785.56
C. $1,645.53
D. $1,247.87
A mutual fund may not hold more than ______ of the shares of any publicly traded
company.
A. 5%
B. 10%
C. 25%
D. 50%
A longer time to maturity will unambiguously increase the value of a call option
because:
I. The longer maturity time reduces the effect of a dividend on call price.
II. With a longer time to maturity the present value of the exercise price falls.
III. With a longer time to maturity the range of possible stock prices at expiration
increases.
A. I only
B. I and II only
C. II and III only
D. I, II, and III
