Archives: Quiz

1) Exhibit 10.1 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) What was BMC’S fixed asset turnover ratio? a. 0.680 b. 0.780 c. 1.278 d. 1.874 e. 8.220 Answer: C Fixed asset turnover ratio = 1025 / 802 = 1.278 […]

1) As a contract approaches maturity, the spot price and forward price a. Increase. b. Diverge. c. Maintain a fixed price differential. d. Have a random relationship. e. Converge. 2) Exhibit 21.1 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) […]

1) The original maturity of a United States Treasury bill is a.Zero years to five years. b.Six months to ten years. c.One year or less. d.One year to ten years. e.Over ten years. 2) The term dedication, used to describe […]

1) In the Black-Scholes option pricing model, an increase in security price (S) will cause a. An increase in call value and an increase in put value b. An increase in call value and a decrease in put value c. […]

1) Exhibit 8.3 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Refer to Exhibit 8.3. What is the beta for Radtron using the true index? a. 0.87 b. 0.97 c. 1.02 d. 1.15 e. 1.28 2) If this year is […]

1) Which of the following is not a technique for valuing a firm’s common stock? a. Present value of free cash flow to equity b. Present value of dividends c. Price-earnings ratio d. Price-book value ratios e. Price-cost of goods […]

1) Exhibit 23.2 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Darden Industries has decided to borrow $25,000,000.00 for six months in two three-month issues. As the Treasurer, you are concerned that interest rates will rise over the next three […]

1) In Berkshire Hathoway annual reports Warren Buffet highlights financial tenets that he believes are important. Which of the following is not a financial tenet of Warren Buffet? a. Focus on return on equity (ROE) not earnings per share (EPS). […]

1) Suppose you consider investing $1,000 in a load fund which charges a fee of 2%, and you expect the fund to earn 14% over the next year. Alternatively, you could invest in a no-load fund with similar risk that […]

1) What is the Sharpe measure for the S&P 500 over the last ten years if the standard deviation was 8% and the return was 14%? a. 1.55 b. 1.69 c. 1.75 d. 1.99 e. 2.09 2) Using the constant […]

1) At what point would an investor be indifferent between a Bridgford corporate bond yielding 8.0 percent and a tax-free municipal bond of equal financial strength if the investor’s marginal tax rate is 25 percent? a. 5.00% b. 7.10% c. […]

1) All of the following are normal characteristics of a convertible bond, except a. Conversion at the option of the issuer. b. Conversion into a fixed number of shares of common stock. c. A conversion price initially above the market […]

1) Given the following fees and expected returns for fund Y, assuming an initial investment of $1000 calculate the value of the investment at the end of 5 years a. $1069.82 b. $1550.77 c. $1642.36 d. $1389.95 e. $1362.59 2) […]

1) Funds that normally contain a combination of common stock and fixed income securities are known as a. Section 401(k) plans. b. Balanced funds. c. Contractual plans. d. Income funds. e. Flexible funds. 2) Tayco Corporation has just paid dividends […]

1) Exhibit 14.11 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) What is the required rate of return for Stock X based on the capital asset pricing model (CAPM)? a. 15.5% b. 17.3% c. 21.3% d. 26.5% e. 30.5% 2) […]

1) Exhibit 12.4 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Assume that the dividend payout ratio will be 45 percent when the rate on long term government bonds falls to 9 percent. Since investors are becoming more risk averse, […]

1) There are four major factors accounting for the existence of yield differentials. Which of the following is not a factor? a. Segments b. Sectors c. Indentures d. Coupons e. Maturities 2) Research has shown that the asset allocation decision […]

1) Which of the following would be considered a low liquidity investment? a.Warrants b.Call options c.Zero coupon bonds d.Balanced mutual funds e.Diamonds 2) Exhibit 8.2 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) You expect the risk-free rate (RFR) to […]

1) Which of the following would be inconsistent with an efficient market? a.Information arrives randomly and independently. b.Stock prices adjust rapidly to new information. c.Price changes are independent. d.Price changes are random. e.Price adjustments are biased. 2) Exhibit 8.7 USE […]

1) Assume that you are embarking on a test of the small-firm effect using APT. You form 10 size-based portfolios. The following finding would suggest there is evidence supporting APT: a. The top five size based portfolios should have excess […]

1) Cho, Elton, and Gruber tested the APT by examining the number of factors in the return generating process and found that a. Five factors were required using Roll-Ross procedures. b. Six factors were present when using historical beta. c. […]

1) Regional exchanges exist because a.They provide trading facilities for local companies b.They allow local brokers to trade dual listed stocks c.They allow for trading of local bonds d.a and b. e.b and c. 2) If the annual geometric mean […]

1) The nominal yield of a bond is the a. Annual coupon as a percent of the current price. b. Annual rate earned including the capital gain or loss. c. Rate earned giving consideration to coupon reinvestment. d. Coupon rate. […]

1) Which of the following series does not include the long-leading index? a. Dow Jones Industrial Average b. Dow Jones Bond Prices, Percent Face Value c. Price to Unit Labor Cost d. M2 Money Supply, Deflated e. New Building Permits […]

1) Refer to Exhibit 5.4. Calculate the average annual rate of change for this index for the 5 year period using the geometric mean. a.0.09% b.1.99% c.3.99% d.4.50% e.4.67% 2) Exhibit 21.8 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) […]

1) Exhibit 25.5 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The data presented below has been collected at this point in time. Compute the Sharpe Measure for the XXX fund. a. 6.98 b. 2.35 c. 2.53 d. 3.86 e. […]

1) Which of the following is a market tenet of Warren Buffett? a. Long term prospects. b. Resistance to institutional imperative. c. Creation of one dollar of market value for every dollar retained. d. Purchase at discount to intrinsic value. […]

1) General obligation bonds are a. U.S. Treasury bonds backed by the full faith and credit of the issuer. b. U.S. Treasury bonds backed by income generated form specific projects. c. Municipal bonds backed by the full faith and credit […]

1) Which of the following statements is false? a.Unrealized capital gains are taxable. b.Realized capital gains are taxable. c.Tax-exempt investments are attractive to individuals with high tax liabilities. d.Returns comparisons should be made on an equivalent tax basis. e.Tax exempt […]

1) A positive covariance between two variables indicates that a. the two variables move in different directions. b. the two variables move in the same direction. c. the two variables are low risk. d. the two variables are high risk. […]

1) Datacorp stock currently trades at $50. August call options on the stock with a strike price of $55 are priced at $5.75. October call options with a strike price of $55 are priced at $6.25. Calculate the value of […]

1) An example of an international fund would be one that consisted of investments in securities from a. The U.S., Germany, and Japan. b. Germany, Italy, and the U.K. c. The U.S., Korea, and Argentina. d. All of the above. […]

1) Exhibit 12.6 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Consider the following information that you propose to use to obtain an estimate of year 2004 EPS for the MacLog Company. In addition a regression analysis indicates the following […]

1) Exhibit 25.5 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The data presented below has been collected at this point in time. Compute the Jensen Measure for the YYY fund. a. 6.98 b. 2.35 c. 2.53 d. 3.86 e. […]

1) Exhibit 23.9 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The Skalmory Corporation has entered into a 3-year interest rate swap, with semiannual settlement, to pay a fixed rate of 7.5% per year and receive 6-month LIBOR. The notional […]

1) Which of the following ratios is least likely to be impacted by accounting manipulation? a. P/E b. ROE c. ROI d. P/S e. PM 2) All of the following are considered fixed income securities except a.Debentures. b.Eurobonds. c.Preferred stock. […]

1) A currency call is like being ____ in the currency futures. a. Out-of-the-money b. In-the-money c. Long d. Short e. At-the-money 2) Contingent immunization strategies a. Provide the bond portfolio manager to engage in various active portfolio strategies if […]

1) Which of the following is not an example of an alternative asset class? a. Hedge funds b. Private equity c. Real estate d. Commodities e. All of the above are examples of alternative asset classes. 2) Exhibit 19.1 USE […]

1) Exhibit 10.2 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) What is Star’s operating profit margin? a. 0.104 b. 0.094 c. 0.084 d. 0.067 e. 0.047 Answer: B Operating profit margin = 101 / 1075 = 0.094 2) Exhibit […]

1) A one year call option has a strike price of 50, expires in 6 months, and has a price of $4.74. If the risk free rate is 3%, and the current stock price is $45, what should the corresponding […]

1) Exhibit 12.9 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The aggregate market currently has a retention ratio of 60 percent, a required rate of return of 12 percent, and an expected growth rate for dividends of 4 percent. […]

1) ____ gains are taxable and occur when an asset is sold for more than its basis (the value of the asset when it was purchased by the original owner, or inherited by the heirs of the original owner). a.Realized […]

1) Exhibit 22.4 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Consider the following information on put and call options for Citigroup A protective put is an appropriate strategy if a. An investor wishes to generate additional income. b. An […]

1) Which of the following statements is not true? a. During a specific time period, rates of return across industry do not vary substantially. b. The rates of return for individual industries do vary substantially over time. c. During a […]

1) Exhibit 6.6 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Rit= return for stock i during period t Rmt= return for the aggregate market during period t Refer to Exhibit 6.6. What is the abnormal rate of return for […]

1) Recently you have received a tip that the stock of Buttercup Industries is going to rise from $76.00 to $85.00 per share over the next year. You know that the annual return on the S&P 500 has been 13% […]

1) A portfolio manager has the following sequence of cash flows over a two year period: Calculate the portfolio manager’s dollar weighted return. a. 13.56% b. 11.48% c. 15.50% d. 8.75% e. 10.67% 2) An 8.5 percent coupon bond issued […]

1) Exhibit 4.7 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) Shares of RossCorp stock are selling for $45 per share. Brokerage commissions are 2% for purchases and 2% for sales. The interest rate on margin debt is 6.25% per […]

1) As the correlation coefficient between two assets decreases, the shape of the efficient frontier a. approaches a horizontal straight line. b. bends out. c. bends in. d. approaches a vertical straight line. e. none of the above. 2) The […]

1) Which of the following assumptions regarding price movements summarized by Levy (1966) are controversial? a. Supply and demand determine the market value of any good or service. b. Supply and demand are governed by numerous rational and irrational factors. […]