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35
71) The primary purpose of the NYSE circuit breakers is to:
A) halt short selling.
B) encourage program trading.
C) limit trading by specialists.
D) minimize institutional trading.
E) slow a market decline.
72) From the end of 1989 to the spring of 2003, the Nikkei Index declined in value
approximately ________ percent.
A) 50
B) 60
C) 70
D) 80
E) 90
36
73) The Asian stock market crash of 1990 was followed by a:
A) long bull market.
B) rapid recovery.
C) prolonged flat market.
D) short-term decline.
E) long bear market.
74) The value of the Amex Internet Index increased by about ________ percent from October
1998 to March 2000 and subsequently declined by about ________ percent by October 2002.
A) 100; 50
B) 200; 75
C) 400; 80
D) 500; 90
E) 600; 80
37
75) By the end of 2002, the AMEX Internet Index was at a level approximately equal to _____
percent of the index high.
A) 75
B) 50
C) 25
D) 17
E) 9
38
76) The following are the daily returns for both the overall market and for Alpha Inc. What is the
cumulative abnormal return on Alpha, Inc., stock for these 5 days?
Date
R(m)
Alpha
24-Oct
1.50
%
1.20
%
25-Oct
–
0.40
%
0.10
%
26-Oct
–
0.10
%
1
%
27-Oct
0.30
%
–
0.50
%
28-Oct
0.60
%
–
0.70
%
A) –0.8 percent
B) –0.4 percent
C) –0.1 percent
D) 0.2 percent
E) 0.5 percent
39
77) Over the past 5 days, the common stock of Taylor Mfg. had daily returns of 0.2, –0.1, –0.2,
0.3, and 0.1 percent, respectively. For the same 5 days, the market had daily returns of 0.1, 0.3, –
0.4, 0.4, and 0.2 percent, respectively. What is the cumulative abnormal return on Taylor Mfg.
stock for this time period?
A) –0.3 percent
B) –0.1 percent
C) 0.0 percent
D) 0.1 percent
E) 0.3 percent
40
78) Samson Co. announced its merger plans on October 25 and had a daily return of 0.7 percent.
Thompson Co. announced its merger plans on October 26 and had a daily return of 0.4 percent.
The Whitewood Co. announced its merger plans on October 27 and had a daily return of –0.6
percent. The daily market returns for October 25 through October 27 were 0.2, –0.3, and 0.4,
respectively. What is the combined cumulative abnormal return for the announcement date?
A) 0.0 percent
B) 0.2 percent
C) 0.6 percent
D) 0.8 percent
E) 1.0 percent
41
79) A.C. Pharmaceutical announced FDA approval for a new drug on October 12th. X.Y.Drug
Co. announced approval for its new drug on October 14th. No other information was released
that would affect returns over the period. What is the combined cumulative abnormal return for
the 5 day period commencing 2 days prior to the approval announcement date? Use the
following data to answer this question. No trading occurred on October 15th and 16th.
Date
Market
AC Return
XY Return
10-Oct
0.20
%
0.10
%
0.00
%
11-Oct
0.10
%
0.20
%
–
0.10
%
12-Oct
0.00
%
0.60
%
0.30
%
13-Oct
–
0.10
%
0.40
%
0.20
%
14-Oct
–
0.20
%
–
0.50
%
0.30
%
17-Oct
0.10
%
–
0.30
%
–
0.10
%
18-Oct
–
0.10
%
–
0.10
%
–
0.40
%
A) 0.6 percent
B) 1.0 percent
C) 1.2 percent
D) 1.4 percent
E) 1.6 percent
42
80) The following are the daily returns for both the overall market and for Omega Inc. What is
the cumulative abnormal return on Omega, Inc., stock for these 5 days?
Date
R(m)
Omega
24-Nov
1.20
%
1.20
%
25-Nov
–
0.40
%
0.10
%
26-Nov
–
0.10
%
1.00
%
27-Nov
0.40
%
–
0.50
%
28-Nov
0.50
%
–
0.70
%
A) –0.8 percent
B) –0.5 percent
C) –0.1 percent
D) 0.2 percent
E) 0.5 percent
44
81) Over the past 5 days, the common stock of Scott Mfg. had daily returns of 0.3, –0.2, 0.3, 0.1,
and 0.1 percent, respectively. For the same 5 days, the market had daily returns of 0.2, 0.4, –0.5,
0.3, and 0.1 percent, respectively. What is the cumulative abnormal return on Scott Mfg. stock
for this time period?
A) –0.3 percent
B) –0.1 percent
C) 0.0 percent
D) 0.1 percent
E) 0.3 percent
45
82) Samson Co. announced its merger plans on October 25 and had a daily return of 0.7 percent.
Thompson Co. announced its merger plans on October 26 and had a daily return of 0.4 percent.
The Whitewood Co. announced its merger plans on October 27 and had a daily return of 0.1
percent. The daily market returns for October 25 through October 27 were 0.1, –0.3, and 0.4,
respectively. What is the combined cumulative abnormal return for the announcement date?
A) 0.0 percent
B) 0.2 percent
C) 0.6 percent
D) 0.8 percent
E) 1.0 percent
46
83) Ace. Pharmaceutical announced FDA approval for a new drug on December 3. West.Drug
Co. announced approval for its new drug on December 5. No other information was released that
would affect returns over the period. What is the combined cumulative abnormal return for the 5
day period commencing 2 days prior to the approval announcement date? Use the following data
to answer this question. No trading occurred on December 6th and 7th.
Date
Market
Ace Return
West Return
1-Dec
0.30
%
0.10
%
0.10
%
2-Dec
0.20
%
0.20
%
–
0.20
%
3-Dec
0.10
%
0.70
%
0.30
%
4-Dec
0.00
%
0.50
%
0.20
%
5-Dec
–
0.10
%
–
0.40
%
0.40
%
8-Dec
0.10
%
–
0.30
%
–
0.10
%
9-Dec
–
0.20
%
–
0.10
%
–
0.20
%
A) 0.6 percent
B) 1.0 percent
C) 1.1 percent
D) 1.2 percent
E) 1.3 percent
47
