The party who serves as a dealer for a few securities on an exchange floor and is
obligated to maintain an orderly market for those securities is called a:
A. floor trader.
B. designated market maker.
C. floor broker.
D. member.
E. house broker.
How will the price of a stock be affected if the dividend growth rate is decreased?
A. increase
B. either increase or no change
C. no change
D. either decrease or no change
E. decrease
A Treasury bill is quoted at a bank discount yield of 1.21 percent and has 15 days to
maturity. What is the bond equivalent yield given that this is a leap year?
A. 1.16 percent
B. 1.18 percent
C. 1.20 percent
D. 1.22 percent
E. 1.23 percent
Prospect theory is based on the concept that investors are:
A. always risk takers.
B. risk-adverse regarding losses.
C. risk-taking regarding losses.
D. always risk-averse.
E. neutral regarding risk.
Which of the following is NOT one of the four stages of the business cycle?
A. boom
B. peak
C. contraction
D. trough
E. expansion
The maximum loss you can incur on a short sale is:
A. limited to your initial equity.
B. limited to your initial margin.
C. limited to the margin loan plus interest.
D. zero.
E. unlimited.
Jeremy owns a stock that has historically returned 7.5 percent annually with a standard
deviation of 10.2 percent. There is only a 0.5 percent chance that the stock will produce
a return greater than _____ percent in any one year.
A. 20.9
B. 22.9
C. 32.2
D. 38.1
E. 54.8
A portfolio consists of the following securities. What is the portfolio weight of stock B?
A. .226
B. .239
C. .245
D. .251
E. .257
Which one of the following is defined as an estimate of stock price volatility obtained
from an option price?
A. calculated alpha
B. estimated variance
C. implied theta
D. VIX
E. implied standard deviation
The stocks listed on the Pink Sheets:
A. are those stocks trading on the NASDAQ CAPITAL MARKET.
B. do not have to file financial statements with the SEC.
C. have all been delisted by the NYSE.
D. are the highest priced stocks listed on NASDAQ.
E. must file financial statements with the SEC but do not have to meet any listing
requirements.
Use the following bond quotes to answer this question:
If you purchase five Zeus bonds, the cost will be _____ and the annual interest income
will be _____.
A. $5,000.00; $388.75
B. $5,000.00; $412.50
C. $5,000.00; $460.00
D. $5,101.50; $412.50
E. $5,101.50; $460.00
The value of a load mutual fund’s assets less its liabilities, divided by the number of
shares outstanding is referred to as the fund’s:
A. net asset value.
B. offering price.
C. open-end value.
D. closed-end value.
Economic metrics that tend to rise and fall in advance of the economy are called _____
indicators.
A. predictive
B. forecast
C. leading
D. coincident
E. cyclical
Which one of the following announcements is most apt to cause the price of a firm’s
stock to increase?
A. The firm met its quarterly earnings forecast.
B. An unpopular CEO unexpectedly announced he is resigning effective immediately.
C. A firm officially confirmed the rumors that it is merging with a competitor.
D. The firm just lowered its projected earnings per share for next year.
E. Analysts are expected to lower the firm’s credit rating on its debt.
An agreement that grants the owner the right, but not the obligation, to buy or sell a
specific asset at a specified price during a specified time period is called a(n) _____
contract.
A. futures
B. obligatory
C. quoted
D. fixed
E. option
Which one of the following means of communication do most firms use for
announcements in order to comply with Regulation FD?
A. TV spots
B. e-mail alerts
C. public newspapers
D. radio
E. analyst networks
If you are willing to buy a stock and you wish to receive the option premium you
should:
A. buy a call.
B. sell a call.
C. buy a put.
D. sell a put.
E. either sell a call or buy a put.
A bond has a conversion price of $47.62, a par value of $1,000, and a market price of
$833.40. What is the conversion ratio?
A. 20
B. 21
C. 22
D. 23
E. 24
Which one of the following terms is used as a shortcut means of saying “time to
maturity”?
A. holder
B. expiry
C. timing
D. elapsing
E. dating
The buying and selling of bonds to manage the money supply is called ________.
A. Quantitative easing
B. Discount window operations
C. Open market operations
D. Money supply management
E. Federal Reserve operations
Wilson just placed an order with his broker to purchase 500 of the outstanding shares of
GE. This purchase will occur in which one of the following markets?
A. primary
B. secondary
C. third
D. fourth
E. fifth
Roy’s Markets has net income of $164,000. The firm has 200,000 shares of common
stock outstanding. The dividend for this year is $0.61 per share. What is the retention
ratio?
A. .220
B. .256
C. .314
D. .774
E. .780
A price-weighted index consists of stocks A, B, and C which are priced at $27, $11, and
$18 a share, respectively. The current index divisor is 2.24. If stock B undergoes a
1-for-3 reverse stock split, the new index divisor will be:
A. 1.9467.
B. 2.1806.
C. 2.2000.
D. 3.0842.
E. 3.1200.
A stock with a current price of $30 will either move up to $37 or down to $26 over the
next period. The risk-free rate of interest is 2.5 percent. What is the value of a call
option with a strike price of $35?
A. $0.49
B. $0.68
C. $0.86
D. $0.97
E. $1.21
Stuart, Inc. reported net income of $20 million for last year. Depreciation expense
totaled $15 million and capital expenditures came to $5 million. Free cash flow is
expected to grow at a rate of 6% for the foreseeable future. Stuart faces a 40% tax rate
and has a 0.30 debt to equity ratio with $75 million (market value) in debt outstanding.
Stuart’s equity beta is 1.1, the risk-free rate is currently 6% and the market risk premium
is estimated to be 8.0%. What is the current value (in millions) of Stuart’s equity?
A. $237.34
B. $352.42
C. $427.42
D. $556.79
E. $689.10
Which option price(s) will increase when the dividend yield increases?
A. both the call and put
B. call only
C. put only
D. neither the call nor the put
E. Answer cannot be determined from the information provided.
Which one of the following ratios tells you the amount of assets a firm needs to
generate $1 in sales?
A. capital intensity ratio
B. return on assets
C. asset turnover rate
D. profit margin
E. earnings ratio
A company that owns income-producing real estate such as an apartment complex or a
retail shopping center is called a(n):
A. REIT.
B. SIPC.
C. REEF.
D. EAR.
E. SPIC.
McKenzie, Inc. reported net income of $8.5 million for last year. Depreciation expense
totaled $5 million and capital expenditures came to $2 million. Free cash flow is
expected to grow at a rate of 2.5% for the foreseeable future. McKenzie faces a 40% tax
rate and has a 0.50 debt to equity ratio with $20 million (market value) in debt
outstanding. McKenzie’s equity beta is 1.4, the risk- free rate is currently 5% and the
market risk premium is estimated to be 7.5%. McKenzie has 10 million shares of
common stock outstanding. What is the current value of a share of McKenzie stock?
A. $6.62
B. $7.32
C. $8.45
D. $9.12
E. $10.25
Use the following bond quotes to answer this question:
The Alpha Industrial bonds pay an annual interest payment equal to 5.875 percent of:
A. $999.90.
B. $1,000.00.
C. $1,000.13.
D. $1,033.54.
E. $1,034.07.
Eastern States Mutual Fund sold $82.5 million of assets during the year and purchased
$93 million of new assets. The average daily assets of the fund were $330 million. What
is the fund’s turnover rate for the year?
A. .25
B. .27
C. .52
D. .94
E. 1.07