Which one of the following is defined as the market value of goods and services
produced over a period of time?
A. Domestic Market Product (DMP)
B. Gross Domestic Product (GDP)
C. Gross Economic Activity (GEA)
D. Gross Market Value (GMV)
E. Market Value Product (MVP)
Trading symbols for mutual funds end in which letter?
A. M
B. F
C. X
D. Z
E. Q
Which one of the following is a municipal bond that is secured by the income collected
from a specific project?
A. agency bond
B. general obligation bond
C. development bond
D. contingency bond
E. revenue bond
Use the following wheat futures quotes to answer this question.
By how much did today’s settlement price per bushel for the Mar 08 wheat futures
contract increase over the prior day’s settlement price?
A. $0.3020
B. $0.3025
C. $30.20
D. $30.25
E. $30.50
Which one of the following has the highest expected risk premium?
A. stock portfolio with a beta of 1.06
B. U.S. Treasury bill
C. individual stock with a beta of 1.46
D. a stock mutual fund with a beta of .89
E. individual stock with a beta of .94
Kathy lives in State A and owns a municipal bond issued by State B. The interest earned
on this bond is most apt to be exempt from taxation at which of the following levels?
A. local only
B. state only
C. federal only
D. local and state only
E. federal, state, and local
A $50,000 face value STRIPS is quoted at 94.300. What is the dollar price?
A. $47,067.50
B. $47,150.00
C. $47,215.00
D. $47,277.78
E. $47,350.00
Fibonacci numbers:
A. are all odd numbers of increasing value.
B. result in a golden mean which has an approximate value of 1.618.
C. are the square roots of the products of the two previous numbers in the series.
D. result in a phi which is approximately equal to .382.
E. are a series of numbers which are equal to the product of the two previous numbers.
The Sharpe-optimal portfolio will be the investment opportunity set which lies on a
straight line that has which of the following characteristics?
A. the flattest slope when the line intersects the vertical axis at the risk-free rate
B. the steepest slope when the line intersects the vertical axis at the risk-free rate
C. the steepest slope when the line intersects the vertical axis at the origin
D. the flattest slope when the line intersects the vertical axis at the market rate
E. the steepest slope when the line intersects the vertical axis at the market rate
Detroit Imports has a dividend payout ratio of 40 percent and annual dividends of $2.60
per share. What is the retention ratio?
A. .167
B. .208
C. .600
D. .735
E. .792
An increase in which two of the following will have a negative effect on the value of a
put option?
I. risk-free interest rate
II. time to option maturity
III. underlying stock price
IV. option strike price
A. I and II only
B. I and III only
C. II and III only
D. II and IV only
E. III and IV only
A breakdown of the S&P 500 into major sectors specifying the relative market weight
of components is called a _______.
A. heat map
B. sector chart
C. component map
D. market capitalization chart
E. sector component map
Which one of the following best describes the Fisher hypothesis?
A. long-term interest rates are based on current inflation rates
B. nominal interest rates are inversely related to real rates
C. interest rates tend to be higher than inflation rates
D. nominal interest rates tend to be relatively constant over time
E. future interest rates must be higher than current interest rates
This morning, Josh sold 800 shares of stock that he did not own. This sale is referred to
as a:
A. margin sale.
B. long position.
C. wrap trade.
D. hypothecated sale.
E. short sale.
For a premium bond, the:
A. current yield is equal to the coupon rate but less than the yield to maturity.
B. yield to maturity exceeds both the coupon rate and the current yield.
C. coupon rate is equal to the yield to maturity but less than the current yield.
D. current yield is less than either the coupon rate or the yield to maturity.
E. coupon rate exceeds both the yield to maturity and the current yield.
Which one of the following statements is correct?
A. Professional money managers outperformed the Vanguard 500 Index Fund on an
annual basis more than half the time for the period 1977-2011.
B. Purchasing and holding a broad-based index fund is a highly recommended means of
investing.
C. The number of general equity mutual funds has decreased over the past 20 years due
to their underperformance as compared to index funds.
D. The survivorship bias lowers the returns earned by professional money managers as
a group.
E. In an efficient market, there is no need for professional money managers.
The risk premium is defined as the rate of return on:
A. a risky asset minus the risk-free rate.
B. the overall market.
C. a U.S. Treasury bill.
D. a risky asset minus the inflation rate.
E. a riskless investment.
A firm has earnings per share of $3.50 and cash flow per share of $3.84. The
price-earnings ratio is 24.1. What is the price-cash flow ratio?
A. 19.8
B. 20.1
C. 22.0
D. 26.0
E. 27.1
As a U.S. investor, you decide to invest $110,000 in Switzerland. You do so at a starting
exchange rate of 1.093 SwFr/$. Your Swiss investment gains 7 percent, and the ending
exchange rate is 1.091SwFr/$. What is your total return on this investment?
A. 6.30%
B. 6.85%
C. 7.20%
D. 7.40%
E. 7.55%
Which one of the following measures a bond’s sensitivity to changes in market interest
rates?
A. yield to call
B. yield to market
C. duration
D. immunization
E. target date valuation
A stock with a current price of $32 will either move up to $40.00 or down to $30 over
the next period. The risk-free rate of interest is 3 percent. What is the value of a call
option with a strike price of $35?
A. $1.30
B. $1.44
C. $1.87
D. $2.09
E. $2.41
You bought five call option contracts with a strike price of $47.50 and an option
premium of $1.20.
At expiration, the stock was selling for $51.30 a share and you exercised your option.
What is your total cost basis in the acquired shares?
A. $23,150
B. $25,050
C. $23,750
D. $24,350
E. $26,250
When does the holder of a short position realize a profit?
A. when prices rise
B. when prices either remain constant or rise
C. when prices remain constant
D. when prices either remain constant or decline
E. when prices decline
The risk-free rate is 4.35 percent. What is the expected risk premium on this security
given the following information?
A. 4.09 percent
B. 4.54 percent
C. 5.25 percent
D. 5.87 percent
E. 6.15 percent
Miller’s Farm has 120,000 shares of stock outstanding, sales of $850,000, and net
income of $55,000. Financial analysts believe the price-earnings ratio for this firm
should be 15.8. Given this information, what should be the current stock price?
A. $7.24
B. $8.87
C. $14.85
D. $14.57
E. $15.21
A risky security has a variance of .036190 and a covariance with the market of .0222.
The variance of the market is .01975. What is the correlation of the risky security to the
market?
A. .51
B. .65
C. .72
D. .83
E. .85
Which two of the following are the key reasons why most major corporations issue
employee stock options?
I. provide an employee benefit in place of a retirement plan
II. no immediate cost to the corporation
III. align management and shareholder interests
IV. replace employer-provided insurance benefits
A. I and II only
B. I and III only
C. II and III only
D. II and IV only
E. III and IV only
You are graphing the investment opportunity set for a portfolio of two securities with
the expected return on the vertical axis and the standard deviation on the horizontal
axis. If the correlation coefficient of the two securities is +1, the opportunity set will
appear as which one of the following shapes?
A. conical shape
B. linear with an upward slope
C. combination of two straight lines
D. hyperbole
E. horizontal line
Which one of the following is the clause which prevents a bond issuer from issuing new
debt that has seniority over current debt?
A. first-in-line
B. sinking fund
C. call provision
D. affirmation
E. negative pledge
Which one of the following best describes the graphical relationship between stock
prices and option prices?
A. linearity
B. concavity
C. convexity
D. hyperbolic
E. exponential
What is the put option premium given the following information?
A. $0.20
B. $0.54
C. $0.82
D. $1.01
E. $1.12
Which one of the following correlation coefficients can provide the greatest
diversification benefit?
A. -1.0
B. -0.5
C. 0.0
D. 0.5
E. 1.0