Archives: Quiz

1) what economic variable is most closely associated with increasing corporate profits? a.exchange rates b.inflation c.gross domestic product d.budget deficits 2) even if the markets are efficient, professional portfolio management is still important because it provides investors with: i. low-cost […]

1) an underpriced stock provides an expected return that is ____________ the required return based on the capital asset pricing model (capm). a.less than b.equal to c.greater than d.greater than or equal to 2) in their 2010 study, fama and […]

1) one hundred fund managers enter a contest to see how many times in 13 years they can earn a higher return than their competitors. the probability distribution of the number of successful years out of 13 for the best-performing […]

1) according to market technicians, it is time to sell stock in a head-and-shoulders formation when ___________. a.the price index pierces the left shoulder b.the price index pierces the right shoulder c.the price index pierces the head d.none of these […]

1) this stock has greater systematic risk than a stock with a beta of ___. a..50 b.1.5 c.2 d.3 2) you are considering investing $1,000 in a complete portfolio. the complete portfolio is composed of treasury bills that pay 5% […]

1) for which of the following goods are services are prices least sticky? a.taxi fares b.haircuts c.microwave ovens d.airlines tickets 2) an important characteristic of market equilibrium is _______________. a.the presence of many opportunities for creating zero-investment portfolios b.all investors […]

1) you put half of your money in a stock portfolio that has an expected return of 14% and a standard deviation of 24%. you put the rest of your money in a risky bond portfolio that has an expected […]

1) the conference board’s consumer confidence index is released ______. a.daily b.weekly c.monthly d.quarterly 2) a bond has a current price of $1,030. the yield on the bond is 8%. if the yield changes from 8% to 8.1%, the price […]

1) a __________ gives its holder the right to sell an asset for a specified exercise price on or before a specified expiration date. a.call option b.futures contract c.put option d.interest rate swap 2) which one of the following represents […]

1) $1,000 par value zero-coupon bonds (ignore liquidity premiums) one year from now bond c should sell for ________ (to the nearest dollar). a.$857 b.$842 c.$835 d.$821 2) a person in poor health trying to buy supplemental health insurance is […]

1) the purchase of a futures contract gives the buyer _________. a.the right to buy an item at a specified price b.the right to sell an item at a specified price c.the obligation to buy an item at a specified […]

1) assume that you have recently purchased 100 shares in an investment company. upon examining the balance sheet, you note that the firm is reporting $225 million in assets, $30 million in liabilities, and 10 million shares outstanding. what is […]

1) a put option with several months until expiration has a strike price of $55 when the stock price is $50. the option has _____ intrinsic value and _____ time value. a.negative; positive b.positive; positive c.zero; zero d.zero; positive 2) […]

1) a market-timing strategy is one in which asset allocation in the stock market __________ when one forecasts that the stock market will outperform treasury bills. a.decreases b.increases c.remains the same d.may increase or decrease 2) proponents of the emh […]

1) of the following, the most flexible type of life insurance policy from the policyholder’s perspective is probably a ___________ policy. a.term life b.whole life c.variable life d.universal life 2) consider the following two investment alternatives: first, a risky portfolio […]

1) you find a 5-year aa xerox bond priced to yield 6%. you find a similar-risk 5-year canon bond priced to yield 6.5%. if you expect interest rates to rise, which of the following should you do? a.short the canon […]

1) __________ are examples of synthetically created zero-coupon bonds. a.colts b.opossms c.strips d.arms 2) if the beta of the market index is 1 and the standard deviation of the market index increases from 12% to 18%, what is the new […]

1) the price-to-sales ratio is probably most useful for firms in which phase of the industry life cycle? a.start-up phase b.consolidation c.maturity d.relative decline 2) the strong form of the emh states that ________ must be reflected in the current […]

1) ______ are mutual funds that vary the proportions of funds invested in particular market sectors according to the fund manager’s forecast of the performance of that market sector. a.asset allocation funds b.balanced funds c.index funds d.income funds 2) which […]

1) the spot price for gold is $1,550 per ounce. the dividend yield on the s&p 500 is 2.5%. the risk-free interest rate is 3.5%. the futures price for gold for a 6-month contract on gold should be __________. a.$1,504.99 […]

1) the present exchange rate is c$1 = us$.77. the 1-year futures rate is c$1 = us$.73. the yield on a 1-year u.s. bill is 4%. a yield of __________ on a 1-year canadian bill will make investors indifferent between […]

1) portfolio managers martin and krueger each manage $1 million funds. martin has perfect foresight, and the call option value of his perfect foresight is $150,000. krueger is an imperfect forecaster and correctly predicts 50% of all bull markets and […]

1) advantages of cash flow matching and dedicated strategies include: i. once the cash flows are matched, there is no need for rebalancing. ii. cash flow matching typically earns a higher rate of return than active bond portfolio management. iii. […]

1) immunization of coupon-paying bonds does not imply that the portfolio manager is inactive because: i. the portfolio must be rebalanced every time interest rates change. ii. the portfolio must be rebalanced over time even if interest rates don’t change. […]

1) when the market breaks through the moving average line from below, a technical analyst would probably suggest that it is a good time to ___________. a.buy the stock b.hold the stock c.sell the stock d.short the stock 2) the […]

1) investor a bought a call option, and investor b bought a put option. all else equal, if the interest rate increases, the value of investor a’s position will ______ and the value of investor b’s position will _______. a.increase; […]

1) which of the following firms was not engaged in a major accounting scandal between 2000 and 2005? a.general electric b.parmalat c.enron d.worldcom 2) the dollar-weighted return is the _________. a.difference between cash inflows and cash outflows b.arithmetic average return […]

1) you invest $600 in security a with a beta of 1.5 and $400 in security b with a beta of . 90. the beta of this portfolio is _________. a.1.14 b.1.2 c.1.26 d.1.5 2) a 1-year gold futures contract […]

1) the commission, or front-end load, paid when you purchase shares in mutual funds may not exceed __________. a.3.5% b.6% c.8.5% d.10% 2) today’s futures markets are dominated by trading in _______ contracts. a.metals b.agriculture c.financial d.commodity Answer: c 3) […]

1) market signals will help to allocate capital efficiently only if investors are acting _____. a.on the basis of their individual hunches. b.as directed by financial experts. c.as dominant forces in the economy. d.on accurate information. 2) the value of […]

1) a coupon bond that pays semiannual interest is reported in the wall street journal as having an ask price of 117% of its $1,000 par value. if the last interest payment was made 2 months ago and the coupon […]

1) security selection refers to the ________. a.allocation of the investment portfolio across broad asset classes b.analysis of the value of securities c.choice of specific securities within each asset class d.top-down method of investing 2) the yield curve spread between […]

1) if an economy wants to increase its current level of investment, it must: a.sacrifice future consumption. b.print more money. c.offer more stocks and bonds to financial investors. d.sacrifice current consumption. 2) according to multiple studies by ritter, initial public […]

1) which of the following is the least likely to be included in the portfolio management process? a.monitoring market conditions and relative values b.monitoring investor circumstances c.identifying investor constraints and preferences d.organizing the investment management process itself 2) which of […]

1) which of the following variables do fama and french claim do a better job explaining stock returns than beta? i. book-to-market ratio ii. unexpected change in industrial production iii. firm size a.i only b.i and ii only c.i and […]

1) the maximum maturity on commercial paper is _____. a.270 days b.180 days c.90 days d.30 days 2) suppose you have maxed out your allowable contributions to your tax-sheltered retirement plans and you still want to shelter income. the best […]

1) firm a produces gadgets. the price of gadgets is $2 each. firm a has total fixed costs of $1,000,000 and variable costs of $1 per gadget. the corporate tax rate is 40%. if the economy is strong, the firm […]

1) everything else equal, the __________ the maturity of a bond and the __________ the coupon, the greater the sensitivity of the bond’s price to interest rate changes. a.longer; higher b.longer; lower c.shorter; higher d.shorter; lower 2) which one of […]

1) annual percentage rates can be converted to effective annual rates by means of the following formula: a.[1 + (apr/n)]n – 1 b.(apr)(n) c.(apr/n) d.(periodic rate)(n) 2) a preferred share of coquihalla corporation will pay a dividend of $8 in […]

1) if you believe in the __________ form of the emh, you believe that stock prices reflect all relevant information, including information that is available only to insiders. a.semistrong b.strong c.weak d.perfect 2) caribou gold mining corporation is expected to […]

1) in the futures market the short position’s loss is ___________ the long position’s gain. a.greater than b.less than c.equal to d.sometimes less than and sometimes greater than 2) on a particular day, there were 890 stocks that advanced on […]

1) adding additional risky assets to the investment opportunity set will generally move the efficient frontier _____ and to the ______. a.up; right b.up; left c.down; right d.down; left 2) a firm has an roe equal to the industry average, […]

1) both investors and gamblers take on risk. the difference between an investor and a gambler is that an investor _______. a.is normally risk neutral b.requires a risk premium to take on the risk c.knows he or she will not […]

1) liabilities equal approximately _____ of total assets for nonfinancial u.s. businesses. a.10% b.25% c.48% d.75% 2) use the following cash flow data of haven hardware for the year ended december 31, 2012. what is the net cash provided by […]

1) which of the following is (are) true about hedge funds? i. they are open to institutional investors. ii. they are open to wealthy individuals. iii. they are more likely than mutual funds to pursue simple strategies. a.i and ii […]

1) both a wife and her husband work in the airline industry. they are in their 40s, and they have a high tax bracket and are concerned about their after-tax rate of return. a meeting with their financial planner reveals […]

1) order the following stages in the industry life cycle from the earliest to latest to occur after the start-up phase: i. maturity ii. relative decline iii. consolidation a.iii, i, ii b.i, iii, ii c.iii, ii, i d.i, ii, iii […]

1) 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? a.3.2% b.3.68% c.4.92% d.5% 2) you are considering investing $1,000 in a complete portfolio. the […]

1) in 1980 the dollar-yen exchange rate was about $.0045. in 2012 the yen-dollar exchange rate was about 80 yen per dollar. a japanese producer would have had to increase the dollar price of a good sold in the united […]

1) __________ funds stand ready to redeem or issue shares at their net asset value. a.closed-end b.index c.open-end d.hedge 2) a bond pays annual interest. its coupon rate is 9%. its value at maturity is $1,000. it matures in 4 […]