● A bond with a nominal rate of 10%, maturity of 3 years, the par value of $ 100, a discount rate of 7%.

Will be sold for => $107,87

● A bond with Modified Duration = 2,566, if interest rates fall by 1.5%, the bond’s price will => Increase 3,849%
● A bond with a nominal rate of 10%, maturity of 3 years, par value of $100, a discount rate of 7%. Duration would be => 2.75
● A coupon bond that pays interest annually has a par value of $1,000, matures in six years, and has a yield to maturity of 11%. The
intrinsic value of the bond today will be ___ if the coupon rate is 7.5% => $851.93
● A coupon bond that pays interest annually has a par value of $1,000, matures in five years, and has a yield to maturity of 10%. The
intrinsic value of the bond today will be ...... if the coupon rate is 7% (12%) => $886.28 ($1,075.82)
● A coupon bond that pays interest annually has a par value of $1,000, matures in 8 years, and has a yield to maturity of 9%. The intrinsic
value of the bond today will be ______ if the coupon rate is 6% => $833.96
● A coupon bond that pays interest semi-annually has a par value of $1,000, matures in 5 years, and has a yield to maturity of 10%. The
intrinsic value of the bond today will be ________if the coupon rate is 12% (8%)=> $1,077.22 ($922.78)
● A coupon bond that pays interest semi-annually has a par value of $1,000, matures in 7 (6) (7) years, and has a yield to maturity of 9.3%
(9%) (11%).The intrinsic value of the bond today will be ___ if the coupon rate is 9.5% (9%) (8.8%) => $1,010.12 ($1,000.00) ($894.51)
● A coupon bond that pays interest of $40 semi-annually ($90 annually) has a par value of $1,000, matures in four (9) years, and is
selling today at a $36 ($66) discount from par value. The yield to maturity on this bond is => 9.09% (10.15%)
● A coupon bond that pays interest semi-annually is selling at par value of $1,000, matures in 7 years, and has a coupon rate of 8.6%.
The yield to maturity on this bond is => 8.6%
● A coupon bond that pays interest annually is selling at par value of $1,000, matures in 5 years, and has a coupon rate of 9%. The yield
to maturity on this bond is => 9.0%
● A coupon bond pays annual interest, has a par value of $1,000, matures in four years, has a coupon rate of 10%, and has a yield to
maturity of 12%. The current yield on this bond is => 10.65%
● A zero-coupon bond has a yield to maturity of 9% (12%) (11%) and a par value of $1,000. If the bond matures in eight (18) (27) years
(using annual compounding), the bond should sell for a price of ____ today => 1000 /(1 + 9%)^8 = $501.87 ($130.04) ($59.74)
● A coupon bond that pays interest of $100 annually has a par value of $1,000, matures in five years, and is selling today at a $72
discount from par value. The yield to maturity on this bond approximately is => 12.00%
● A price range at which technicians would expect a substantial increase in the demand for a stock is called => support level
● A price range at which technicians feel that a significant increase in the price of the stock will be resisted is referred to as => Resistance
level
● A trader who has a _____ position in wheat futures believes the price of wheat will ____ in the future => long; increase
● A trader who has a ____ position in gold futures wants the price of gold to ____ in the future.=> short; decrease
● A technical analyst would consider the following a strong buy signal => a graph of declining prices ends in a trough followed by an
upward trend that breaks through the declining trend channel
● A year ago, you invested $1,000 in a savings account that pays an annual interest rate of 9%. What is your approximate annual real rate
of return if the rate of inflation was 4% over the year?=> 9% - 4% = 5%
● A futures contract => is an agreement to buy or sell a specified amount of an asset at a predetermined price on the expiration date of
the contract.
● A 6.5 percent coupon bond issued by the State of California sells for $1,000. What coupon rate on a corporate bond selling at $1,000
par value would produce the same after-tax return to the investor as the municipal bond if the investor is in the 26 percent marginal tax
bracket? => Municipal bond rate = Taxed bond rate * (1-Tax rate) => 6.5 = Taxed bond rate * (1-0.26) => 8.78 percent
● A tax-free municipal bond has coupon rate of 4.75% and is sold for $1,000. What coupon rate on a corporate bond selling at $1,000 par
value would produce the same after-tax return to the investor as the municipal bond if the investor is in the 28 percent marginal tax
bracket? => 6.6%
● A Treasury bond due in one year has a yield of 5.7%; a Treasury bond due in 5 years has a yield of 6.2%. A bond issued by Ford Motor
Company due in 5 years has a yield of 7.5%; a bond issued by Shell Oil due in one year has a yield of 6.5%. The default risk premiums
on the bonds issued by Shell and Ford, respectively, are => 0.8% and 1.3%
● A Treasury bond due in one year has a yield of 4.6%; a Treasury bond due in 5 years has a yield of 5.6%. A bond issued by Lucent
Technologies due in 5 years has a yield of 8.9%; a bond issued by Exxon due in one year has a yield of 6.2%. The default risk premiums
on the bonds issued by Exxon and Lucent Technologies, respectively, are => 1.6% and 3.3%
● A Treasury bond due in one year has a yield of 6.2%; a Treasury bond due in 5 years has a yield of 6.7%. A bond issued by Xerox due in
5 years has a yield of 7.9%; a bond issued by Exxon due in one year has a yield of 7.2%. The default risk premiums on the bonds issued
by Exxon and Xerox, respectively, are => 1.0% and 1.2%
● A Treasury bond due in one year has a yield of 4.3%; a Treasury bond due in 5 years has a yield of 5.06%. A bond issued by Boeing due
in 5 years has a yield of 7.63%; a bond issued by Caterpillar due in one year has a yield of 7.16%. The default risk premiums on the
bonds issued by Boeing and Caterpillar, respectively, are => 2.57% and 2.86%
● A preferred stock has the par value of $100 and pays a fixed annual dividend of $7. What is the reasonable price of this stock if your
preferred rate of return is 11%? => $63,64
● A support level is a price range => at which a significant increase in demand for a stock is expected
● A principal weakness of the Dow Theory is => the many versions that are available
● A firm has a higher (lower) asset turnover ratio than the industry average, which implies => the firm is utilizing assets more (less)
efficiently than other firms in the industry
● A fixed-income security pays => a fixed stream of income or a stream of income that is determined according to a specified
formula for the life of the security
● A __ bond is a bond where the bondholder has the right to cash in the bond before maturity at a specified price after a specific date =>
Put ☻ A bar chart is used to illustrate => high, low and closing stock prices on a daily basis
● A rapidly growing GDP indicates a(n) ___ economy with ___ opportunity for a firm to increase sales => expanding; ample
● A firm has a market to book value ratio that is equivalent to the industry average and an ROE that is less than the industry average,
which implies => the firm is more likely to avoid insolvency in the short run than other firms in the industry
● A firm has a higher (lower) quick (or acid test) ratio than the industry average, which implies => the firm is more (less) likely to avoid
insolvency in the short run than other firms in the industry, and the firm may be less (more) profitable than other firms in the industry
● A strategy whereby an investor seeks out stocks with good growth potential and grow at an above average rate compared to the industry
=> Growth Investing strategy ☻ A protective put strategy is => a long put plus a long position in the underlying asset
● At expiration, the time value of an in-the-money put option is always => equal to zero
● At what point would an investor be indifferent between a GM corporate bond yielding 9.5 percent and a tax-free municipal bond of equal
financial strength if the investor's marginal tax rate is 25 percent? => 7.13% (7.125%)
● At what point would an investor be indifferent between a Drifton corporate bond yielding 12.5 percent and a tax-free municipal bond of
equal financial strength if the investor's marginal tax rate is 25 percent? => 9.38% (9.375%)
● An inversion head and shoulders pattern is indicative => Price increases
● All of the following are assumptions made by technical analysts except => Stock price movements are independent
● An analyst looks at company A at the beginning of 2008. He assumes company A pays a dividend of $4/share in 2009 and $5/share in
2010. He also expects the stock price to the end of 2010 is $250. The estimated cost of equity ( r) is 11%. Assume all dividends are paid
at the end of the year. What is the estimated price of this stock at the end of 2009 using the discounted dividend model? => $229,73
● An investor buys 10 bonds with a par value of $100 and a nominal interest rate of 6% per year with a real worth of $900. Every year the
investor will receive the amount of interest as => 60 USD
● An American put option can be exercised => any time on or before the expiration date
● An American put option allows the holder to => sell the underlying asset at the striking price on or before the expiration date.
● An American call option allows the buyer to => buy the underlying asset at the exercise price on or before the expiration date and
sell the option in the open market prior to expiration.
● A European call option allows the buyer to => sell the option in the open market prior to expiration and buy the underlying asset at
the exercise price on the expiration date.
● A European put option allows the holder to => sell the underlying asset at the striking price on the expiration date.
● Accrued interest => must be paid by the buyer of the bond and remitted to the seller of the bond
● Antiquated Products Corporation produces goods that are very mature in their product life cycles. Antiquated Products Corporation is
expected to pay a dividend in year 1 of $1.00, a dividend of $0.90 in year 2, and a dividend of $0.85 in year 3. After year 3, dividends are
expected to decline at a rate of 2% per year. An appropriate required rate of return for the stock is 8%. The stock should be worth
_____.=> $8.98
● An example of a positive demand shock is => a decrease in tax rates.
● An example of a negative demand shock is => a decrease in government spending + a decrease in the money supply
● Assume that the consumer price index (CPI) rose 1.5% last year and that the following securities have the following nominal returns:
2.75% for bond A and 4.75% for bond B. What is the real return on these two bonds? => 1,25% & 3,25%
● Assume that the Federal Reserve decreases the money supply. This action will cause ____ to decrease => investment in the economy
● Assume the U.S government was to decide to increase the budget field. Holding all else constant, this will cause ____ to increase.=>
interest rates and government borrowing
● According to the Dow Theory, daily fluctuations and secondary movements in the stock market are used to identify the => primary trend
● According to Michael Porter, there are five determinants of competition. An example of ___ is when a buyer purchases a large fraction of
an industry’s output and can demand price concessions => bargaining power of buyers
● According to Michael Porter, there are five determinants of competition. An example of ___ is the threat new competitors pose to
existing competitors in an industry (is when new entrants to an industry put pressure on prices and profits) => threat of entry
● According to Michael Porter, there are five determinants of competition. An example of ___ is when competitors seek to expand their
share of the market => rivalry between existing competitors
● According to Michael Porter, there are five determinants of competition. An example of _____ is when the availability limits the prices
that can be charged to customers => Pressure from Substitute Products
● According to the credit rating agency S&P, Junk bonds are rated lower than => BBB
● According to the CAPM model, the expected return rate of two different stocks at the same time is different, because => Depends on
the Beta of each stock
● Buyers of put options anticipate the value of the underlying asset will _____, and sellers of call options anticipate the value of the
underlying asset will____=> decrease; decrease
● Based on the daily closing for the Dow Jones Industrial Average (day 1 is 10500, day 2 is 10025, day 3 is 10125, day 4 is 10210),
calculate a four-day moving average for Day 4 => (10500 + 10025 + 10125 + 10210) / 4= 10,215
● Before expiration, the time value of an in-the-money call option is always => positive
● Capital market trading occurs in => the primary and secondary markets
● Compared to money market securities, capital market securities have => longer maturities
● Calculate a four-day moving average for Day 4 based on the daily closings for the Dow Jones Industrial Average given as follows: Day 1
(Price = 10500), Day 2 (price = 10025), Day 3 (price = 10125), Day 4 (price = 10210) => 10,215
● Calculate the yield to maturity of a zero-coupon bond with a face value of $1000, maturing in 15 years and selling for a price of $525.75
=> 525.75 = 1000/(1+y)^15 => y = 4.38%
● Calculate the yield to maturity of a zero- coupon bond with a face value of $1000, maturing in 10 years, and selling for a price of $628.72
=> 628.72 = 1000/(1+y)^10 => y = 4.75 percent
● Callable bonds=> are more likely to be called when interest rates decline and have a call price that declines as time passes
● Ceteris paribus, the price and yield on a bond are => negatively related
● Commercial banks differ from other business in that both their assets and their liabilities are mostly => financial
● Consider a 5-year bond with a 10% coupon that has a present yield to maturity of 8%. If interest rates remain constant, one year from
now, the price of this bond will be => lower
● Consider two bonds, A and B. Both bonds presently are selling at their par value of %1,000. Each pays interest of $120 annually. Bond A
will mature in five years, while bond B will mature in six years. If the yields to maturity on the two bonds change from 12% to 10% =>
both bonds will increase in value, but bond B will increase more than bond A.
● Consider two bonds, F and G. Both bonds presently are selling at their par value of $1,000. Each pays interest of $90 annually. Bond F
will mature in 15 years while bond G will mature in 26 years. If the yields to maturity on the two bonds change from 9% to 10%, _____ =>
both bonds will decrease in value, but bond G will decrease more than bond F
● Company A issues preference shares with the par value of $100, with an annual dividend rate of 9%. Due to a change in the economy,
Investor X now requires a 10% rate of return. At what price would investor X be willing to buy this preferred stock if X received its first
dividend exactly 1 year from the time of purchase? => $90
● Determine how the investment fund is distributed, first across countries and then across asset classes within that country. Which object
in the top-down valuation process is the first target. => General economic analysis
● Dividend discount models and P/E ratios are used by _____ to find mispriced securities to try=> fundamental analysts
● Fundamental analysis uses => earnings and dividends prospects
● Floating-rate bonds are designed to __ while convertible bonds are designed to __=> minimize the holders' interest rate risk; give the
investor the ability to share in the price appreciation of the company's stock
● Fly Boy Corporation is expected have EBIT of $800k this year. Fly Boy Corporation is in the 30% tax bracket, will report $52,000 in
depreciation, will make $86,000 in capital expenditures, and have a $16,000 increase in net working capital this year. What is Fly Boy's
FCFF? => 510,000
● Firm B produces widgets. The price of widgets is $1 each. Firm B has total fixed costs of $240,000 and variable costs of $0.75 per
widget. The corporate tax rate is 40%. If the economy enters a recession, each firm will sell 1,100,000 widgets. If the economy enters a
recession, the after-tax profit of Firm B will be => None of the options are correct ($21,000)
● Firm A produces widgets. The price of widgets is $1 each. Firm A has total fixed costs of $500,000 and variable costs of $0.5 per widget.
The corporate tax rate is 40%. If the economy enters a recession, each firm will sell 1,100,000 widgets. If the economy enters a
recession, the after-tax profit of Firm A will be => $30,000
● Fiscal policy generally has a ___ direct impact than monetary policy on the economy, and the formulation and implementation of fiscal
policy is ____ than that of monetary policy => more; slower
● Governments never issue stock because => they cannot sell ownership claims
● High Tech Chip Company is expected to have EPS in the coming year of $2.50. The expected ROE is 12.5%. An appropriate required
return on the stock is 11%. If the firm has a plowback ratio of 70% the growth rate of dividends should be => 12.5% x 70% = 8.75%
● High P/E ratios tend to indicate that a company will ___ , ceteris paribus => grow quickly
● Increases in the money supply will cause demand for investment and consumption goods to ___ in the short run and cause prices to ___
in the long run => increase; increase
● If a 7% coupon bond is trading for $975.00, it has a current yield for => 7%/975 = 7.18%
● If a 6% coupon bond is trading for $950.00, it has a current yield of ______ percent. => 6%/950 = 6.3
● If the economy were going into a recession, an attractive industry to invest in would be the => medical services industry preferred stock
will pay a dividend of $2.75 in the upcoming year and every year thereafter; i.e., dividends are not expected to grow. You require a return
of 10% on this stock. Use the constant growth DDM to calculate the intrinsic value of this preferred stock => $27.50
● If the Federal Reserve lowers the discount rate, ceteris paribus, the equilibrium levels of funds lent will ... and the equilibrium level of
real interest rates will…=> increase; decrease
● If the currency of your country is depreciating, the result should be to ____ exports and to ___ imports => increase; decrease
● If a firm's sales decrease by 15%, and profits decrease by 20% during a recession, the firm's operating leverage (DOL) is => 1.33
● If the economy is growing, firms with high operating leverage will experience => higher increases in profits than firms with low
operating leverage.
● If a portfolio had a return of 18%, the risk-free asset return was 5%, and the standard deviation of the portfolio’s excess returns was 34%,
the risk premium would be => Risk Premium = Return on Investment - Risk-Free Rate = 18% - 5% = 13%
● If interest rates increase, business investment expenditures are likely to ______, and consumer durable expenditures are likely to _____.
=> decrease; decrease
● If you are a risk-lower, which of the following instruments is best suited for you? => Stock with Beta > 1
● In the FCFE model, which of the following discount rates should be used? => The required return rate is calculated from the CAPM
model
● In a futures contract, the futures price is=> determined by the buyer and the seller when they initiate the contract
● In order to have confirmation of a major market trend under the Dow Theory, the => transportation and industrial average must
confirm each other
● Investors trade previously issued securities in the ________ market(s)=> secondary
● In the investment process, which step must be identified before Asset allocation => Identify the level of risk tolerance
● Interest rate that equalizes the present value of all the cash flows a bond with the sale price of that is called => Yield to Maturity
● Investor X bought stock A for $10. The current market price of stock A is $32. Investor X does not want to realize the profit yet, but X is
worried about the short-term volatility of the stock market, the price of stock A will go down. Which of the following actions should
Investor X take? => Buy a put option on stock X
● In regard to moving averages, it is considered to be a signal when market price breaks through the moving average from => bullish;
below
● Low P/E ratios tend to indicate that a company will ____, ceteris paribus => grow slowly
● Let’s arrange the following steps in the correct order of the investment process. => Determining - Reviewing - Looking for - Analyzing
- Monitoring - Divesting
● 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.=> 10% x (1-40%) = 6.0%
● Many stock analysts assume that a mispriced stock will => gradually approach its intrinsic value over several years
● Most of the time, the interest rate on Treasury notes and bonds is… that on money market securities because of… risk => above;
interest rate
● New securities will be issued on the market: => Primary Market
● New issues of securities are sold in the ______ market(s) => primary
● One of the most popular tools used by technical analysts is => moving averages
● Of the following investments, ____ is (are) considered the safest => Treasury bills
● Other things being equal, a low ___ would be most consistent with a relatively high growth rate of firm earnings => dividend-payout ratio
● On which of the following does a hammer sometimes appear? => Candlestick chart
● SGA Consulting had a FCFE of $3.2M last year and has 3.2M shares outstanding. SGA’s required return on equity is 13% and WACC
is 11.5%. If FCFE is expected to grow at 8.5% forever, the intrinsic value of SGA’s shares is => $24.11
● Sales Company paid a $1.00 dividend per share last year and is expected to continue to pay out 40% of earnings as dividends for the
foreseeable future. If the firm is expected to generate a 10% return on equity in the future, and if you require a 12% return on the stock,
the value of the stock is => $17.67
● Sure Tool Company is expected to pay a dividend of $2 in the upcoming year. The risk-free rate of return is 4% and the expected return
on the market portfolio is 14%. Analysts expect the price of Sure Tool Company shares to be $22 a year from now. The beta of Sure
Tool Company’s stock is 1.25. The market’s required rate of return on Sure’s stock is => 0.04 + 1.25 (0.14 – 0.04) = 16.5% /
● Sector rotation => is shifting the portfolio more heavily toward an industry or sector that is expected to perform well in the future
● See Candy had a FCFE of $6.1M last year and has 2.32M shares outstanding. See's required return on equity is 10.6%, and WACC is
9.3%. If FCFE is expected to grow at 6.5% forever, the intrinsic value of See's shares is=> $68.30
● Suppose that the average P/E multiple in the oil industry is 20. Dominion Oil is expected to have an EPS of $3.00 in the coming year.
The intrinsic value of Dominion Oil stock should be => $60.00
● Suppose that Chicken Express, Inc. has a ROA of 7% and pays a 6% coupon on its debt. Chicken Express has a capital structure that
is 70% equity and 30% debt. Relative to a firm that is 100% equity-financed, Chicken Express's Net Profit will be ________ and its ROE
will be _____ => lower; higher
● Technical analysis differs from fundamental analysis in that technical analysis => is based on published market data and focuses on
internal factors
● Technical analysis reflects the idea that stock prices => move in trends /
● Technicians believe that an industry or stock that is outperforming the market will tend to => continue to outperform the market
● The Gordon model => is a generalization of the perpetuity formula to cover the case of a growing perpetuity and is valid only
when g is less than k
● The buyer of a futures contract is said to have a position, and the seller of a futures contract is said to have a position in futures => long;
short ☻ The two primary tools of a technical analyst are => price and volume
● The bonds of Ford Motor Company have received a rating of "B" by Moody's. The "B" rating indicates => both that the bonds are junk
bonds and the bonds are referred to as "high yield" bonds
● The most commonly quoted index is the Dow Jones Industrial Average (DJIA), an index based on the performance of the stocks of
_____ large companies => 30
● The process of marking to market => posts gain or losses to each account daily and may result in margin calls
● The goal of fundamental analysts is to find securities => whose intrinsic value exceeds market price
● The underlying stock’s price is $95, an investor pays $2 to buy a call contract at a strike price of $95. If the market price of the stock rises
to $97, what is the intrinsic value of the call contract? => $2
● The dividend rate of a joint stock company is 25%; ROE is 15%. We can forecast the growth rate (g) of this would be => 11,25%
● The growth rate of dividends (g) is affected by all of the following factors except for: => Investor’s required return (r)
● The top-down analysis of a firm starts with => the global economy
● The current yield on a bond is equal to ________.=> annual interest divided by the current market price
● The current YTM is 5% and the price of the bond is $100. Suppose that the yield increases by 100 bps (that is, to 6%), and the bond
price declines by $10. Suppose that the YTM then increases further, by another 100 bps (that is, to 7%). The bond price will => decline
by more than $10
● The price that buyer of a call option pays for the underlying asset if she executes her option is called the => strike price or exercise price
● The price that the buyer of a call option pays to acquire the option is called the => premium.
● The maximum loss a buyer of a stock call option can suffer is equal to => the call premium
● The maximum loss a buyer of a stock put option can suffer is equal to => the put premium
● The current market price of a share of AT&T stock is $50. If a call option on this stock has a strike price of $45, the call => is in the
money
● The current market price of a share of Disney stock is $60. If a call option on this stock has a strike price of $65, the call => is out of the
money.
● The Dow Theory describes stock prices as moving in trends analogous to the movement of water. Which of the following statements is
NOT true? => Waves are the most important /
● The terms of futures contracts ____ standardized, and the terms of forward contracts ___ standardized => are; are not
● The riskiest capital market security is => common stock
● The___ is used to calculate the present value of a bond => yield to maturity
● The ____ is defined as the present value of all cash proceeds to the investor in the stock => intrinsic value
● The ___ is a measure of the average rate of return an investor will earn if the investor buys the bond now and holds until maturity =>
yield to maturity
● The _________ gives the number of shares for which each convertible bond can be exchanged => conversion ratio
● The potential loss for a writer of a naked call option on a stock is => unlimited
● The value of a bond is the amount that the issuer must pay at maturity.=> face (=par)
● There are 5 types of bonds as follows: A’s coupon rate = 15%, B’s coupon interest = 11%, C’s coupon interest = 16%, D’s coupon
interest = 10%, E’s coupon interest = 9%. Let’s sort in descending order of Duration => E > D > B > A > C
● There are five types of bonds as follows: A with a maturity of 10 years, B with a maturity of 12 years, C with a maturity of 15 years, D with
a maturity of 11 years, and E with a maturity of 9 years. Let’s sort in descending order of Duration => E > A > D > B > C
● Two measures of an investment’s riskiness are: => Variance of returns and Coefficient variance of returns
● To a technician that believed in the importance of volume, a bullish signal would occur when=> prices increase on heavy volume
● Treasury bonds are subject to ____ risk but are essentially free of ____ risk => interest-rate; default
● Torque Corporation is expected to pay a dividend of $1.00 in the upcoming year. Dividends are expected to grow at the rate of 6% per
year. The risk-free rate of return is 5%, and the expected return on the market portfolio is 13%. The stock of Torque Corporation has a
beta of 1.2. What is the return you should require on Torque's stock? => 14.6%
● Which of the following is not a part of the candlestick chart? => Volume of trading
● Which of the following terms represents an upper price limit for a stock, based on the quantity of willing sellers? => Resistance.
● Which of the following securities is a money market instrument? => Commercial paper (+Certificate deposits)
● Which of the following are not examples of defensive industries?=> Durable goods producers
● Which of the following would be inconsistent with an efficient market? => Price adjustments are biased
● Which of the following is most closely associated with the terms “primary trend”, “intermediate trend” and “short-term trend”? => Dow
Theory ☻ Which of the following contains a real body? => Candlestick chart
● Which of the following to technical analyst believe is a lower bound on a stock’s price? => Support /
● Which of the following portfolio construction methods starts with security analysis?=> Bottom-up
● Which of the following is NOT a characteristic of a money market instrument? => Long maturity and liquidity premium
● Which of the following is not a financial asset? => Real estate + Knowledge (A and C)
● Which of the following statements is most accurate: => If intrinsic value > market price, an investor should buy
● Which of the following is NOT considered an assumption of technical analysis? => Stock prices follow a random walk.
● Which of the following factors is not part of the five factors in M.Porter’s industry analysis model? => Pressure from the Government
● Which of the following is true regarding the resistance level? => It is the level at which a significant increase in supply is expected
● Which of the following is not true regarding the Dow Theory? => It has a very high success rate
● Which of the following highlights traders’ opinions about the market? => Leading indicators
● Which of the following indicates a sell signal to technical analysts? => The amount of short selling done by specialists is high
● Which of the following indicates a buy signal to technical analysts? => The stock breaks through the moving average line from below
● Which of the financial statements recognizes only transactions in which cash changes hands? => Statement of cash flows
● Which type of chart includes daily high price, low price, opening price, and closing price? => Candlestick chart
● Which one of the following terms best describes Eurodollars? => Dollar-denominated deposits at foreign banks and branches of
American banks outside the U.S
● When odd-lot selling exceeds odd-lot buying, this is considered a => bullish signal
● When the 50-day moving average crosses the 200-day average from ___ on ___ volume, this would be a ___ signal => below, high,
bullish
● When the 50-day moving average crosses the 200-day moving average from below on good volume => this would be a bullish indicator
because it signals a change to a positive trend
● What is the definition of investment from the point of view of Benjamin Graham and David Dodd? => All of them
● You purchase one JNJ 75 call option for a premium of $3. Ignoring transaction costs, the break-even price (Profit to Call Holder = 0%) of
the position is => $78
● You write one JNJ February 70 put for a premium of $5. Ignoring transactions costs, what is the break-even price of this position? => $65
● You are considering acquiring a common stock that you would like to hold for one year. You expect to receive both $1.25 in dividends
and $32 from the sale of the stock at the end of the year. The maximum price you would pay for the stock today is ____ if you wanted to
earn a 10% return => (32+1.25)/(1+10%) = $30.23
● You are considering acquiring a common stock that you would like to hold for one year. You expect to receive both $0.75 in dividends
and $16 from the sale of the stock at the end of the year. The maximum price you would pay for the stock today is if you wanted to earn
a 12% return. => (16 + 0.75)/(1+12%) = $14.96
● You wish to earn a return of 13% on each of two stocks, X and Y. Stock X is expected to pay a dividend of $3 in the upcoming year while
stock Y is expected to pay a dividend of $4 in the upcoming year. The expected growth rate of dividends for both stocks is 7%. The
intrinsic value of stock X => will be less than the intrinsic value of stock Y.
● You hold one long corn futures contract that expires in April. To close your position in corn futures before the delivery date you must =>
sell one April corn futures contract
● You purchased one corn future contract at $2.29 per bushel. What would be your profit (loss) at maturity if the corn spot price at that time
were $2.10 per bushel? Assume the contract size is 5,000 bushels and there are no transactions costs. => Profit or Loss = ($2.29 -
$2.10) x 5,000 = $0.19 x 5,000 = $950 loss /
● You sold one silver future contract at $3 per ounce. What would be your profit (loss) at maturity if the silver spot price at that time is
$4.10 per ounce? Assume the contract size is 5,000 ounces and there are no transactions costs => $5,500 loss
● You purchased a share of stock for $68. One year later you received $3.00 as a dividend and sold the share for $74.50. What was your
holding-period return? => 13.97% (14%)
● US enterprise issues bonds in Japan and raised its funds in USD. This bond is called => European bonds
● ______ are analysts who use information concerning current and prospective profitability of a firm to assets the firm’s fair market value
=> Fundamental analysts / ☻ _____ are financial assets => Bonds and stocks /
● ____ is a summary of the profitability of the firm over a period of time, such as a year => The income statement /
● ___ is equal to common shareholders’ equity divided by common shares outstanding => Book value per share
● Proceeds from a company’s sale of stock to the public are included in => par value and additional paid-in capital
● Using semi-annual compounding, a 15-year zero-coupon bond that has a par value of 1,000 and a required return of 8% would be priced
at approximately => $308 ☻ WACC is the most appropriate discount rate to use when applying a ___ valuation model => FCFF
● Risk Metrics Company is expected to pay a dividend of $3.50 in the coming year. Dividends are expected to grow at a rate of 10% per
year. The risk-free rate of return is 5%, and the expected return on the market portfolio is 13%. The stock is trading in the market today
at a price of $90.00. What is the approximate beta of Risk Metrics's stock?=> 1.1
● Zero had a FCFE of $4.5M last year and has 2.25M shares outstanding. Zero's required return on equity is 10%, and WACC is 8.2%. If
FCFE is expected to grow at 8% forever, the intrinsic value of Zero's shares is => $108.00
● Preferred stockholders hold a claim on assets that has priority over the claims of => common stockholders, but after that of bondholders
● J.C.Penney Company is expected to pay a dividend in year 1 of $1.65, a dividend in year 2 of $1.97, and a dividend in year 3 of $2.54.
After year 3, dividends are expected to grow at the rate of 8% per year. An appropriate required return for the stock is 11%. The stock
should be worth _______ today. => $71.80
● 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
share price is $90. What is Paper Express's book value per share? => 32.14
● Each of two stocks, A and B, are expected to pay a dividend of $5 in the upcoming year. The expected growth rate of dividends is 10%
for both stocks. You require a rate of return of 11% on stock A and a return of 20% on stock B. The intrinsic value of stock A => will be
greater than the intrinsic value of stock B ☻ _______ are examples of financial intermediaries.=> All of the options
● Exercise Bicycle Company is expected to pay a dividend in year 1 of $1.20, a dividend in year 2 of $1.50, and a dividend in year 3 of
$2.00. After year 3, dividends are expected to grow at the rate of 10% per year. An appropriate required return for the stock is 14%. The
stock should be worth _______ today. => $40.68