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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
3) which of the following is not a concept related to explaining abnormal excess stock
returns?
a.january effect
b.neglected-firm effect
c.p/e effect
d.preferred stock effect
4) a company with an expected earnings growth rate which is greater than that of the
typical company in the same industry most likely has _________________.
a.a dividend yield which is greater than that of the typical company
b.a dividend yield which is less than that of the typical company
c.less risk than the typical company
d.less sensitivity to market trends than the typical company
5) consider the theory of active portfolio management. stocks a and b have the same
positive alpha and the same nonsystematic risk. stock a has a higher beta than stock b.
you should want __________ in your active portfolio.
a.equal proportions of stocks a and b
b.more of stock a than stock b
c.more of stock b than stock a
d.the answer cannot be determined from the information given.
6) which of the following is an example of an agency problem?
a.managers engage in empire building.
b.managers protect their jobs by avoiding risky projects.
c.managers over consume luxuries such as corporate jets.
d.all of these options are examples of agency problems.
7) you invest $1,000 in a complete portfolio. the complete portfolio is composed of a
risky asset with an expected rate of return of 16% and a standard deviation of 20% and
a treasury bill with a rate of return of 6%. __________ of your complete portfolio
should be invested in the risky portfolio if you want your complete portfolio to have a
standard deviation of 9%.
a.100%
b.90%
c.45%
d.10%
8) an investment adviser has decided to purchase gold, real estate, stocks, and bonds in
equal amounts. this decision reflects which part of the investment process?
a.asset allocation
b.investment analysis
c.portfolio analysis
d.security selection
9) if the s&p 500 index futures contract is overpriced relative to the spot s&p 500 index,
you should __________.
a.buy all the stocks in the s&p 500 and write put options on the s&p 500 index
b.sell all the stocks in the s&p 500 and buy call options on s&p 500 index
c.sell s&p 500 index futures and buy all the stocks in the s&p 500
d.sell short all the stocks in the s&p 500 and buy s&p 500 index futures
10) the _______ decision should take precedence over the _____ decision.
a.asset allocation; stock selection
b.bond selection; mutual fund selection
c.stock selection; asset allocation
d.stock selection; mutual fund selection
11) consider a newly issued tips bond with a 3-year maturity, par value of $1,000, and
coupon rate of 5%. assume annual coupon payments.
what is the real rate of return on the tips bond in the first year?
a.5%
b.8.15%
c.7.15%
d.4%
hprnom = hprreal =
