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47. Suppose the market prices of the 30 stocks in the Dow Jones Industrial Average all
change by the same dollar amount on a given day. Assuming there are no stock splits, which stock
will have the greatest impact on the average?
48. A bond issued by the state of Alabama is priced to yield 6.25%. If you are in the 28% tax
bracket, this bond would provide you with an equivalent taxable yield of _________.
8.68% = 6.25%/(1 - .28)
49. The purchase of a futures contract gives the buyer _________.
50. Ownership of a put option entitles the owner to the __________ to ___________ a specific
stock, on or before a specific date, at a specific price.
51. An investor in a 28% tax bracket is trying to decide whether to invest in a municipal bond
or a corporate bond. She looks up municipal bond yields (
rm
) but wishes to calculate the taxable
equivalent yield
r.
The formula she should use is given by ______.
52. June call and put options on King Books Inc. are available with exercise prices of $30, $35,
and $40. Among the different exercise prices, the call option with the _____ exercise price and the
put option with the _____ exercise price will have the greatest value.
53. Ownership of a call option entitles the owner to the __________ to __________ a specific
stock, on or before a specific date, at a specific price.
54. The ________ the ratio of municipal bond yields to corporate bond yields, the _________ the
cutoff tax bracket at which more individuals will prefer to hold municipal debt.
55. Which of the following types of bonds are excluded from most bond indexes?
56. The Hang Seng index reflects market performance on which of the following major stock
markets?
57. The Standard & Poor's 500 is __________ weighted index.
58. A firm that fails to pay dividends on its preferred stock is said to be _________.
59. Large well-known companies often issue their own short-term unsecured debt notes
directly to the public, rather than borrowing from banks; their notes are called _________.
60. Which of the following is most like a short-term collateralized loan?
61. Eurodollars are _________.
62. Which of the following is used to back international sales of goods and services?
63. Treasury notes have initial maturities between ________ years.
64. Which of the following is
not
a characteristic of common stock ownership?
65. If you thought prices of stock would be rising over the next few months, you might want to
__________________ on the stock.
66. A typical bond price quote includes all but which one of the following?
67. What are business firms most likely to use derivative securities for?
68. What would you expect to have happened to the spread between yields on commercial
paper and Treasury bills immediately after September 11, 2001?
69. A stock quote indicates a stock price of $60 and a dividend yield of 3%. The latest
quarterly dividend received by stock investors must have been ______ per share.
70. Three stocks have share prices of $12, $75, and $30 with total market values of $400
million, $350 million, and $150 million, respectively. If you were to construct a price-weighted
index of the three stocks, what would be the index value?
71. Which of the following is
not
considered a money market investment?
72. The Federal Reserve Board of Governors directly controls which of the following interest
rates?
73. You decide to purchase an equal number of shares of stocks of firms to create a portfolio.
If you wanted to construct an index to track your portfolio performance, your best match for your
portfolio would be to construct ______.
74. 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.
75. A corporation in a 34% tax bracket invests in the preferred stock of another company and
earns a 6% pretax rate of return. An individual investor in a 15% tax bracket invests in the same
preferred stock and earns the same pretax return. The after-tax return to the corporation is
_______, and the after-tax return to the individual investor is _______.
76. All but which one of the following indices is value weighted?
77. What is the tax exempt equivalent yield on a 9% bond yield given a marginal tax rate of
28%?
78. A tax free municipal bond provides a yield of 3.2%. What is the equivalent taxable yield on
the bond given a 35% tax bracket?
79. An index computed from a simple average of returns is a/an _____.
80. A tax free municipal bond provides a yield of 2.34%. What is the equivalent taxable yield
on the bond given a 28% tax bracket?
81. The Chompers Index is a price weighted stock index based on the 3 largest fast food
chains. The stock prices for the three stocks are $54, $23, and $44. What is the price weighted
index value of the Chompers Index?
82. The Hydro Index is a price weighted stock index based on the 5 largest boat
manufacturers in the nation. The stock prices for the five stocks are $10, $20, $80, $50 and $40.
The price of the last stock was just split 2 for 1 and the stock price was halved from $40 to $20.
What is the new divisor for a price weighted index?
83. A benchmark index has three stocks priced at $23, $43, and $56. The number of
outstanding shares for each is 350,000 shares, 405,000 shares, and 553,000 shares, respectively.
If the market value weighted index was 970 yesterday and the prices changed to $23, $41, and
$58, what is the new index value?
84. A benchmark market value index is comprised of three stocks. Yesterday the three stocks
were priced at $12, $20, and $60. The number of outstanding shares for each is 600,000 shares,
500,000 shares, and 200,000 shares, respectively. If the stock prices changed to $16, $18, and $62
today respectively, what is the 1-day rate of return on the index?
85. Which of the following mortgage scenarios will benefit the homeowner the most?
86. The TED spread refers to
