Archives: Quiz

The infant industry argument is the latest argument for government intervention in trade. As competition intensifies, global standardization strategies and transnational strategies tend to become less viable, and managers need to orientate their companies toward either an international strategy or […]

Source effects occur when the receiver of the message evaluates the message based on the status or image of the sender. Most modern democratic states practice representative democracy. TRUE In complex, advanced societies with populations in the tens or hundreds […]

Many totalitarian regimes were able to deliver economic progress to the vast bulk of their populations, which curbed the spread of democracy during the late 1980s. A central reason for the establishment of the EU was the devastation of Western […]

A manager receives a bonus because the national operating subsidiary, that she is in charge of, exceeds its performance target. This is an example of an incentive. A key benefit resulting from the adoption of the euro is the ability […]

A company does not need a large size to facilitate, and benefit from, the globalization of markets. Privatization refers to the process of hiring private management consultancy firms to manage state-owned enterprises. FALSE Privatization refers to the process of selling […]

A currency swap deal enables companies to insure themselves against foreign exchange risk. The international monetary system refers to the institutional arrangements that govern exchange rates. TRUE The international monetary system refers to the institutional arrangements that govern exchange rates. […]

Lack of knowledge is one of the biggest impediments to a company becoming a successful exporter. The most global markets currently are markets for consumer products. FALSE The most global markets currently are not markets for consumer products—where national differences […]

Moral hazard arises when people behave recklessly because they know they will be saved if things go wrong. Corporations can contribute to the global tragedy of the commons by not pumping pollutants into the atmosphere or dumping them in oceans […]

“Beggar thy neighbor” retaliatory trade policies involved countries progressively lowering trade barriers against each other, which contributed to the Great Depression of the 1930s. Establishment of the euro created the largest currency zone in the world, replacing the position the […]

To determine whether portfolio performance is statistically significant requires A. a very long observation period due to the high variance of stock returns. B. a short observation period due to the high variance of stock returns. C. a very long […]

The ____________ provides an unequivocal statement on the expected return-beta relationship for all assets, whereas the _____________ implies that this relationship holds for all but perhaps a small number of securities. A. APT; CAPM B. APT; OPM C. CAPM; APT […]

Which one of the following stock index futures has a multiplier of 50 Hong Kong dollars times the index? A. FTSE 100 B. Hang Seng C. Nikkei D. DAX-30 E. FTSE 100 and Hang Seng The critical variable in the […]

You sold short 100 shares of common stock at $45 per share. The initial margin is 50%. Your initial investment was A. $4,800. B. $12,000. C. $2,250. D. $7,200. If a portfolio had a return of 12%, the risk-free asset […]

The financial statements of Midwest Tours are given below. Note: The common shares are trading in the stock market for $36 each. Refer to the financial statements of Midwest Tours. The firm’s P/E ratio for 2009 is A. 4.74. B. […]

The risk that can be diversified away in a portfolio is referred to as ___________. I) diversifiable risk II) unique risk III) systematic risk IV) firm-specific risk A. I, III, and IV B. II, III, and IV C. III and […]

Kahneman and Tversky (1973) reported that __________ give too much weight to recent experience compared to prior beliefs when making forecasts. A. young men B. young women C. people D. older men E. older women In the mean-standard deviation graph, […]

Calculate the price at the beginning of year 1 of a 10% annual coupon bond with face value $1,000 and 5 years to maturity. A. $1,105 B. $1,132 C. $1,179 D. $1,150 E. $1,119 “ADRs” stands for ___________, and “WEBS” […]

Alpha-seeking hedge funds typically ______ relative mispricing of specific securities and ______ broad market exposure. A. bet on; bet on B. hedge; hedge C. hedge; bet on D. bet on; hedge E. None of the options are correct. A 7% […]

The financial statements of Black Barn Company are given below. Note: The common shares are trading in the stock market for $40 each. Refer to the financial statements of Black Barn Company. The firm’s leverage ratio for 2009 is A. […]

Holding other factors constant, which one of the following bonds has the smallest price volatility? A. 5-year, 0% coupon bond B. 5-year, 12% coupon bond C. 5 year, 14% coupon bond D. 5-year, 10% coupon bond E. Cannot tell from […]

The interest rate on a 1-year Canadian security is 8%. The current exchange rate is C$ = US $0.78. The 1-year forward rate is C$ = US $0.76. The return (denominated in U.S. $) that a U.S. investor can earn […]

Low Tech Company has an expected ROE of 10%. The dividend growth rate will be ________ if the firm follows a policy of paying 40% of earnings in the form of dividends. A. 6.0% B. 4.8% C. 7.2% D. 3.0% […]

Which of the inputs in the Black-Scholes option pricing model are directly observable? A. The price of the underlying security B. The risk-free rate of interest C. The time to expiration D. The variance of returns of the underlying asset […]

Studies of Siamese twin companies find __________, which __________ the EMH. A. correct relative pricing; supports B. correct relative pricing; does not support C. incorrect relative pricing; supports D. incorrect relative pricing; does not support You purchased shares of a […]

Which statement is not true regarding the capital market line (CML)? A. The CML is the line from the risk-free rate through the market portfolio. B. The CML is the best attainable capital allocation line. C. The CML is also […]

Commodity futures pricing A. must be related to spot prices. B. includes cost of carry. C. converges to spot prices at maturity. D. All of the options are correct. E. None of the options. Par-value bond XYZ has a modified […]

Tracking error is defined as A.the difference between the returns on the overall risky portfolio versus the benchmark return. B. the variance of the return of the benchmark portfolio. C. the variance of the return difference between the portfolio and […]

Which of the following statement(s) is(are) true? I) The real rate of interest is determined by the supply and demand for funds. II) The real rate of interest is determined by the expected rate of inflation. III) The real rate […]

Before expiration, the time value of an at-the-money put option is always A. equal to zero. B. equal to the stock price minus the exercise price. C. negative. D. positive. E. None of the options are correct. Unique risk is […]

If a trader holding a long position in corn futures fails to meet the obligations of a futures contract, the party that is hurt by the failure is A.the offsetting short trader. B. the corn farmer. C. the clearinghouse. D. […]

Consider the one-factor APT. The variance of returns on the factor portfolio is 6%. The beta of a well-diversified portfolio on the factor is 1.1. The variance of returns on the well-diversified portfolio is approximately A. 3.6%. B. 6.0%. C. […]

A debt security pays A. a fixed level of income for the life of the owner. B. a variable level of income for owners on a fixed income. C. a fixed or variable income stream at the option of the […]

All else equal, call option values are higher A. in the month of May. B.for low dividend-payout policies. C. for high dividend-payout policies. D. in the month of May and for low dividend-payout policies. E. in the month of May […]

You purchased shares of a mutual fund at a price of $20 per share at the beginning of the year and paid a front-end load of 5.75%. If the securities in which the fund invested increased in value by 11% […]

A portfolio has an expected rate of return of 0.15 and a standard deviation of 0.15. The risk-free rate is 6%. An investor has the following utility function: U = E(r) (A/2)s2. Which value of A makes this investor indifferent […]

A coupon bond that pays interest of $40 semi-annually has a par value of $1,000, matures in four years, and is selling today at a $36 discount from par value. The yield to maturity on this bond is A. 8.69%. […]

________ is a risk measure that indicates vulnerability to extreme negative returns. A. Value at risk B. Lower partial standard deviation C. Expected shortfall D. None of the options E. None of the options are correct. The spread between the […]

An American-style call option with six months to maturity has a strike price of $35. The underlying stock now sells for $43. The call premium is $12. If the company unexpectedly announces it will pay its first-ever dividend three months […]

The duration of a perpetuity with a yield of 10% is A. 13.50 years. B. 11 years. C. 6.66 years. D. Cannot be determined Suppose you own two stocks, A and B. In year 1, stock A earns a 2% […]

A trader who has a __________ position in gold futures wants the price of gold to __________ in the future. A. long; decrease B. short; decrease C. short; stay the same D. short; increase E. long; stay the same Which […]

Top Flight Stock currently sells for $53. A one-year call option with strike price of $58 sells for $10, and the risk-free interest rate is 5.5%. What is the price of a one-year put with strike price of $58? A. […]

Metals and energy currency futures contracts are actively traded on A. copper. B. platinum. C. weather. D. copper and platinum. E. All of the options are correct. If the interest rate on debt is lower than ROA, then a firm […]

Assume you sold short 100 shares of common stock at $70 per share. The initial margin is 50%. What would be the maintenance margin if a margin call is made at a stock price of $85? A. 40.5% B. 20.5% […]

The largest component of the fixed-income market is _______ debt. A. Treasury B. asset-backed C. corporate D. tax-exempt E. mortgage-backed If the yield on mortgage-backed securities was abnormally high compared to Treasury bonds, a hedge fund pursuing a relative value […]

An example of a ______ strategy is the mispricing of a futures contract that must be corrected by contract expiration. A. market neutral B. directional C. relative value D. divergence E. convergence Consider the Treynor-Black model. The alpha of an […]

Two basic assumptions of technical analysis are that security prices adjust A. rapidly to new information, and market prices are determined by the interaction of supply and demand. B. rapidly to new information, and liquidity is provided by security dealers. […]

The first step a pension fund should take before beginning to invest is to A. establish investment objectives. B. develop a list of investment managers with superior records to interview. C. establish asset allocation guidelines. D. decide between active and […]

Paper Express Company has a balance sheet which lists $85 million in assets, $40 million in liabilities, and $45 million in common shareholders’equity. It has 1,400,000 common shares outstanding. The replacement cost of the assets is $115 million. The market […]

A mutual fund had average daily assets of $3.0 billion in 2016. The fund sold $600 million worth of stock and purchased $700 million worth of stock during the year. The fund’s turnover ratio is A. 27.5%. B. 12%. C. […]

If the hedge ratio for a stock call is 0.50, the hedge ratio for a put with the same expiration date and exercise price as the call would be A. 0.30. B. 0.50. C. −0.60. D. −0.50. E. −0.17. A […]