Archives: Quiz

An experiment was performed on a certain metal to determine if the strength is a function of heating time. The sample size consists of 10 metal sheets. The simple linear regression equation is The time is in minutes and the […]

In a one-way analysis of variance with three treatments, each with five measurements, in which a completely randomized design is used, what is the degrees of freedom for error? A researcher has used a one-way analysis of variance model to […]

AAA Co. operates distribution centers in the Midwest. Three of their centers were recently audited to determine if they are in compliance with company standard billing procedures. According to the auditing firm, a billing had an equal probability of being […]

An experiment was performed on a certain metal to determine if the strength is a function of heating time. Results based on 10 metal sheets are given below. Use the simple linear regression model. Determine the value of the F […]

AAA Co. operates distribution centers in the Midwest. Three of their centers were recently audited to determine if they are in compliance with company standard billing procedures. According to the auditing firm, a billing had an equal probability of being […]

The local grocery store wants to predict its daily sales in dollars. The manager believes that the amount of newspaper advertising significantly affects sales. He randomly selects 7 days of data consisting of daily grocery store sales (in thousands of […]

A ___________ is a set of process observations that are examined for the purpose of constructing control charts. A. Subgroup B. Sample C. Zone D. List of common causes A manufacturing company produces part A732 for the aerospace industry. This […]

Rational subgrouping allows us to detect changes ____________ subgroups. A. Within B. Between C. In the sizes of D. None of these The chi-square goodness of fit is _________ a one-tailed test with the rejection region in the right tail. […]

If a regression model with k independent variables has a C statistic less than _______, then the model is considered to be desirable. A. k + 1 B. k C. k – 1 D. 1/k E. k – 2 The […]

When using and R charts to analyze and improve a process, first, the chart is analyzed and the necessary action(s) to correct assignable causes of variation is (are) taken before the R chart is analyzed. In a regression model, at […]

If sample mean plots look essentially parallel, we can intuitively conclude that there is an interaction between the two factors. Answer: FALSE When sample mean plots are parallel, there is no interaction between the two factors. When we carry out […]

A fixed-income portfolio manager sets a minimum acceptable rate of return on the bond portfolio at 5% per year over the next 4 years. The portfolio is currently worth $10 million. One year later interest rates are at 6%. What […]

The intrinsic value of a call option is equal to _______________. A. the stock price minus the exercise price B. the exercise price minus the stock price C. the stock price minus the exercise price plus any expected dividends D. […]

On Monday morning you sell one June T-bond futures contract at 97:27, that is, for $97,843.75. The contract’s face value is $100,000. The initial margin requirement is $2,700, and the maintenance margin requirement is $2,000 per contract. Use the following […]

A portfolio generates an annual return of 16%, a beta of 1.2, and a standard deviation of 19%. The market index return is 12% and has a standard deviation of 16%. What is Jensen’s alpha of the portfolio if the […]

Research suggests that option-pricing models that allow for the possibility of ___________ provide more accurate pricing than does the basic Black-Scholes option-pricing model. I. early exercise II. changing expected returns of the stock III. time varying stock price volatility A. […]

Which type of fund generally has the lowest average expense ratio? A. actively managed bond funds B. hedge funds C. indexed funds D. actively managed international funds LIBOR is a key reference rate in the money markets. Many ______ of […]

In his 1970 study, Malkiel found that mutual funds that do well in one period have an approximately ________ chance of doing well in the subsequent-year period. A. 33% B. 52% C. 65% D. 85% In a 2011 study, Agarwal, […]

Operating ROA is calculated as __________, while ROE is calculated as _________. A. EBIT/total assets; net profit/total assets B. net profit/total assets; EBIT/total assets C. EBIT/total assets; net profit/equity D. net profit/EBIT; sales/total assets $1,000 par value zero-coupon bonds (ignore […]

The figures below show plots of monthly excess returns for two stocks plotted against excess returns for a market index. Which stock is likely to further reduce risk for an investor currently holding her portfolio in a well-diversified portfolio of […]

__________ is the amount of money per common share that could be realized by breaking up the firm, selling its assets, repaying its debt, and distributing the remainder to shareholders. A. Book value per share B. Liquidation value per share […]

A covered call strategy benefits from what environment? A. Falling interest rates B. Price stability C. Price volatility D. Unexpected events What is the geometric average return of the following quarterly returns: 3%, 5%, 4%, and 7%? A. 3.72% B. […]

Inflation-indexed Treasury securities are commonly called ____. A. PIKs B. CARs C. TIPS D. STRIPS An investment strategy that entails shifting the portfolio into industry sectors that are expected to outperform others based on macroeconomic forecasts is termed ______________. A. […]

You sold short 300 shares of common stock at $30 per share. The initial margin is 50%. You must put up _________. A. $4,500 B. $6,000 C. $9,000 D. $10,000 Yields on municipal bonds are typically ___________ yields on corporate […]

Which of the following is not one of the main areas covered in the examinations that must be taken in order to achieve the designation of Chartered Financial Analyst? A. investment management ethics B. securities analysis C. securities marketing techniques […]

You are cautiously bullish on the common stock of the Wildwood Corporation over the next several months. The current price of the stock is $50 per share. You want to establish a bullish money spread to help limit the cost […]

Investing in two assets with a correlation coefficient of -.5 will reduce what kind of risk? A. market risk B. nondiversifiable risk C. systematic risk D. unique risk On day 1, the stock price of Ford was $12 and the […]

The Option Clearing Corporation is owned by _________. A. the exchanges on which stock options are traded B. the Federal Deposit Insurance Corporation C. the Federal Reserve System D. major U.S. banks When the market is more optimistic about a […]

The issuer of ________ bond may choose to pay interest either in cash or in additional bonds. A. an asset-backed B. a TIPS C. a catastrophe D. a pay-in-kind The stock price of Atlantis Corp. is $43 today. The risk-free […]

Which one of the following is largely based on forecasts of macroeconomic factors? A. security selection B. passive investing C. market efficiency D. market timing During a period when prices have been rising, the _________ will be _______ the current […]

You purchased a share of stock for $29. One year later you received $2.25 as dividend and sold the share for $28. Your holding-period return was _________. A. -3.57% B. -3.45% C. 4.31% D. 8.03% Which of the following ETFs […]

Suppose that in 2012 the expected dividends of the stocks in a broad market index equaled $240 million when the discount rate was 8% and the expected growth rate of the dividends equaled 6%. Using the constant-growth formula for valuation, […]

Historically, the best asset for the long-term investor wanting to fend off the threats of inflation and taxes while making his money grow has been ____. A. stocks B. bonds C. money market funds D. Treasury bills Which of the […]

Which one of the following country risks includes the possibility of expropriation of assets, changes in tax policy, and restrictions on foreign exchange transactions? A. default risk B. foreign exchange risk C. market risk D. political risk A ______ insurance […]

The risk premium for exposure to exchange rates is 5%, and the firm has a beta relative to exchange rates of .4. The risk premium for exposure to the consumer price index is -6%, and the firm has a beta […]

An adjusted beta will be ______ than the unadjusted beta. A. lower B. higher C. closer to 1 D. closer to 0 Mutual funds provide the following for their shareholders. A. diversification B. professional management C. record keeping and administration […]

The expected rate of return of a portfolio of risky securities is _________. A. the sum of the securities’ covariance B. the sum of the securities’ variance C. the weighted sum of the securities’ expected returns D. the weighted sum […]

If a firm’s borrowing rate exceeds its ROA, then ROE will ______. A. increase by an amount that depends on the equity/debt ratio. B. increase by an amount that depends on the debt/equity ratio. C. decline by an amount that […]

The value of a listed put option on a stock is lower when: I. The exercise price is higher. II. The contract approaches maturity. III. The stock decreases in value. IV. A stock split occurs. A. II only B. II […]

A call option on Juniper Corp. stock with an exercise price of $75 and an expiration date 1 year from now is worth $3 today. A put option on Juniper Corp. stock with an exercise price of $75 and an […]

Hedge ratios for long calls are always __________. A. between -1 and 0 B. between 0 and 1 C. 1 D. greater than 1 A security with normally distributed returns has an annual expected return of 18% and standard deviation […]

An analyst starts by examining the broad economic environment and then considers the implications of the economy on the industry in which the firm operates. Finally, the firm’s position within the industry is examined. This is called __________ analysis. A. […]

An investor may deposit $2,000 into a traditional or Roth IRA. After 30 years, given a 9% annual return and a 20% tax rate, how much more or less money will the investor have if all investments are liquidated after […]

Which one of the following is not a demand shock? A. increase in government spending B. increases in the money supply C. reductions in consumer spending D. improvements in education of U.S. workers Investing in two assets with a correlation […]

You are considering investing $1,000 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 5% and a risky portfolio, P, constructed with two risky securities, X and Y. The optimal weights of X and Y […]

Which of the following funds are usually most tax-efficient? A. equity funds B. bond Funds C. ETFs D. specialized-sector funds The term investment horizon refers to __________. A. the proportion of short-term to long-term investments held in an investor’s portfolio […]

The decline in the value of the dollar relative to the yen will have what impact on the purchase of U.S. goods in Japan? A. U.S. goods will increase in cost, and Japan will import more. B. U.S. goods will […]

In the mean standard deviation graph, the line that connects the risk-free rate and the optimal risky portfolio, P, is called the _________. A. capital allocation line B. indifference curve C. investor’s utility line D. security market line A typical […]

In the article “Danger: High Levels of Company Stock,” what is the maximum amount of your employer’s stock that the author recommends you hold in your retirement account? A. 5% B. 10% C. 50% D. 90% Recent analysis indicates that […]

The __________ is among the world’s largest derivatives exchanges and operates a fully electronic trading and clearing platform. A. CBOE B. CBOT C. CME D. Eurex The difference between balanced funds and asset allocation funds is that _____. A. balanced […]