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ch1 1 Derivative securities can be issued based on __________. A) precious metals B) stock market index C) treasury bonds D) All of the above 2 A __________ represents an ownership share in a corporation. A) preferred stock B) bond C) common stock D) All of the above 3 In securities markets, there should be a risk-return trade-off with assets with lower expected returns having__________ risk than assets with higher expected returns. A) higher B) lower C) the same D) None of the above 4 Allocation of the investment portfolio across broad asset classes refers to the __________. A) security analysis B) top-down portfolio construction C) asset allocation __________the above D) None of . 5A) top-down the value of securities refers to the Analysis of portfolio construction B) security analysis C) asset allocation D) None of the above 6 Money Market securities are characterized by _________. A) longer than 10 years to maturity B) 5 to 10 years to maturity C) a very short term to maturity 7D) a variable term to maturityjuice is an example of a A futures contract of orange __________. A) financial asset B) real asset C) mutual fund D) None of the above 8 Firms that specialize in helping companies raise capital by selling securities are called __________. A) industrial banks B) commercial banks C) investment banks D) None of the above 9 __________ are real assets. A) Options B) Factories C) Mortgage bonds D) None of the above ch2 1 Which of the following is(are) characteristic of common stock ownership?

A) Nothing B) Adjusting the divisor C) Adjusting the numerator D) None of the above 3 A10-year annual coupon bond issued by the State of New York has a yield to maturity of 7%. If you are in the 25% tax bracket this bond would provide you with an equivalent taxable yield of __________ A) 7.00% B) 9.33% C) 8.75% D) None of the above 4 The asked discount yield on a treasury bill is 3%. The ask price of the bill is ________ if it matures in 90 days and has a face value of $1,000. A) $992.50 B) $994.67 C) $952.38 D) indeterminable 5 The price which the owner of a put option will receive from selling the stock named in the option contract is called the __________ A) put price B) exercise price C) expiration price D) None of the above 6 A bond that has no collateral is called __________. A) a straight bond B) a mortgage bond C) a debenture C) Taiwan D) None of the above D) New Zealand 7 The Nikkei reflects market performance on which of 8 In the event of the company's bankruptcy, __________. the following major stock markets? A) Japan the firm's bondholders are personally liable for the firm's obligations B) Singapore B) the most shareholders can lose is their original investment in the firm's stock plus any legal costs C) common shareholders are the last in line to receive their claims on the firm's assets D) bondholders have claim to what is left from the __________ to __________ a specific stock, on or before liquidation of the firm's assets after paying shareholdersa specific date, of a put option entitles the owner to the 9 Ownership at a specific price. A) obligation, buy B) obligation, sell C) right, sell D) right, buy 10 The effective annual yield of a treasury bill that has a face value of $10,000, a current selling price of $9,900, and a maturity of 75 days is __________. A) 5.01% B) 4.67% C) 5.42% ch3 D) 6.96%

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stock ownership? A) voting rights B) double taxation C) residual claimant D) All of the above are characteristics of stock ownership 2 Which of the following method is used to adjust for a stock split in calculating the standard and Poor's 500 Index? ch3 D) 6.96% 1 Assume you purchased 500 shares of ABC common stock on margin at $40 per share from your broker. If the initial margin is 70%, the amount you borrowed from the broker is __________. A) $4,000 B) $6,400 C) $9,600 D) $6,000

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2 Purchases of newly issued stock take place __________. A) in the primary market B) in the open market C) in the secondary market D) in the over the counter market 3 The _________ price is the price at which an investor pays to a dealer to purchase a security. A) market B) ask C) bid D) None of the above 4 The Nasdaq Stock Market is an example of A) a primary market B) a secondary market C) the third market D) All of the above __________ determines the initial margin requirements on 5 stocks. A) The Securities and Exchange Commission B) Stock broker C) The Federal Reserve D) The Federal Deposit Insurance Corporation 6 You purchased 400 shares of XYZ common stock on margin at $20 per share. Assume the initial margin is 60% and the maintenance margin is 30%. You would get a margin call if the stock price is below __________. Assume the stock pays no dividend and ignore interest on margin. A) $15.71 B) $11.43 C) $13.57 D) $10.14 7 You purchased 200 shares of AAA common stock on __________ if you sell the stock at $35 per share. A) 21% margin for $40 per share. The initial margin is 60% and B) stock the13% pays no dividend. Your rate of return would be C) -13% D) -21% 8 You purchased ABC stock at $50 per share. The stock is currently selling at $49. Your potential loss could be reduced by placing a __________. A) limit-buy order B) limit-sell order C) market order D) stop-loss order __________. 9 Short selling a stock is profitable when the stock price A) does not change B) goes down C) goes up D) None of the above 10 You sold short 200 shares of XYZ common stock at $40 per share. The initial margin is 70%. Your initial investment was __________. A) $4,000 B) $2,400 C) $8,000 D) $5,600 ch4 1 Money market fund's NAV is fixed at _____ per share. A) $1 B) $2

2 What is the rate of return on a mutual fund that has $500 million in assets at the start of the year, 20 million shares outstanding, a gross return on assets of 12%, and a total expense ratio of 1%? A) 12% B) 11% C) 13% D) There is not sufficient information to answer this question 3 Mutual funds are ______________________. A) specialty investment companies B) open-end investment companies C) international investment companies D) closed-end investment companies 4 A mutual fund reports $150 million in assets, $25 million in liabilities, and has 12.5 million shares outstanding. What is the Net Asset Value (NAV) of these shares? A) $20 B) $25 C) $15 __________ as long as they distribute 95% of their D) $10 taxable income to shareholders. 5 Real estate investment trusts are exempt from A) taxes B) regulations C) auditing D) All of the above 6 Investors who wish to buy some shares of a closed-end fund may ______. A) buy the shares at a premium B) buy the shares from the company C) buy the shares the at net asset value from other investors D) None of the above 7 Mutual funds that hold both stocks and bonds in ____________________. relatively stable income funds called A) growth and proportions are B) safe funds C) asset allocation funds D) balanced funds 8 The most common benchmark for comparing the performance of equity mutual funds is the __________. A) Standard & Poor's 500 Index B) New York Composite Index C) Dow Jones Industrial Index D) NASDAQ Composite Index _________________. 9 Sector mutual funds concentrate their investments in A) different geographical regions of the US B) geographical segments of the real estate market C) securities issued by firms in a particular segment of the economy D) government securities 10 Mutual funds perform the function of __________ for their shareholders. A) investment insurance B) tax preparation C) record keeping and administration D) All of the above ch5 1 What was the beginning price of a stock if its ending price was $23, its cash dividend was $1, and the holding period return on a stock was 20%?

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C) $3 D) None of the above

A) $20 B) $24 C) $21

D) $18 2 You purchased 100 shares of stock for $25. One year later you received $2 cash dividend and sold the shares for $22 each. Your holding-period return was ____. A) 4% B) 8.33% C) 8% D) -4% __________. 3A) 0% The geometric average of 10%, -20% and 10% is B) 1.08% C) -1.08% D) -2% 4 An investor invests 80% of her funds in a risky asset with an expected rate of return of 12% and a standard deviation of 20% and 20% in a treasury bill that pays 3%. Her portfolio's expected rate of return and standard deviation are __________ and __________ respectively. A) 12%, 20% B) 7.5%, 10% C) 9.6%, 10% D) 10.2%, 16% 5 The sample standard deviation of returns of 12%, 15%, -10% and 20% is ______. A) 9.25% B) 13.25% C) 11.482% D) 20% 6 Suppose stock ABC has an average return of 12% and a standard deviation of 20%. Determine the range of returns that ABC's actual returns will fall within 95% of the time. A) Between -28% and 52% B) Between -8% and 32% C) Between 12% and 20% D) None of the above 7 What is the expected real rate of return on an investment that has expected nominal return of 20%, assuming the expected rate of inflation to be 6%? A) 14% B) 13.2% C) 20% D) 18.4% 8 What is the ending price of a stock if its beginning price was $30, its cash dividend was $2, and the holding period return on a stock was 20%? A) $32 B) $34 C) $36 D) $28 9 Historical returns have generally been __________ for stocks than for bonds. A) the same B) lower C) higher D) none of the above 10 ch6Geometric average returns are generally __________ 1 Some diversification benefits can be achieved by arithmetic average returns. combining securities in a portfolio as long as the A) the same as correlation coefficient between the securities is B) lower than ________________. C) higher than D) none of the above

A) less than or equal to 0 B) 1 C) between 0 and 1 D) less than 1 2 Which of the following is correct concerning efficient portfolios? A) They have zero risk. B) They have the lowest risk. C) They have the highest risk/return tradeoff. D) They have the highest expected return. 3 The standard deviation of return on stock A is 0.25 while the standard deviation of return on stock B is 0.30. If the covariance of returns on A and B is 0.06, the __________. correlation coefficient between the returns on A and B is A) 0.2 B) 0.6 C) 0.7 D) 0.8 4 reward-to-variability ratio of a high-risk stock is _______ that of a low-risk stock. A) the same as B) higher than C) lower than D) none of the above 5 According to the systematic risk principle, which one of the following risks is rewarded? A) Unsystematic risk. B) Total risk. C) Systematic risk. D) Industry risk. 6 Which one of the following statements is correct concerning a two-stock portfolio? A) Portfolio return is a weighted average of the two stocks returns if the stocks have a positive correlation coefficient. B) Portfolio standard deviation can be a weighted average of the two stocks standard deviations in theory. C) Portfolio standard deviation is zero if the two stocks have a correlation coefficient of 0. D) None of the above is correct. 7 The standard deviation of return on investment A is ________. 0.2 while the standard deviation of return on investment A) 0.3. If B is -0.048 the correlation coefficient between the returns on A and B is -0.8, the covariance of returns on A and B is B) -0.06 C) 0.06 D) portfolio is composed of two stocks, A and B. Stock A 8 A0.048 has a standard deviation of return of 20% while stock B has a standard deviation of return of 30%. Stock A comprises 40% of the portfolio while stock B comprises 60% of the portfolio. What is the standard deviation of return on the portfolio if the correlation coefficient between the returns on A and B is 0.5? A) 23.1% B) 25% C) 26% D) 24.7% 9 A portfolio is composed of two stocks, A and B. Stock A has an expected return of 10% while stock B has an expected return of 18%. What is the proportion of stock A in the portfolio so that the expected return of the portfolio is 16.4%? A) 0.2 B) 0.8 C) 0.4 D) 0.6

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D) 0.6

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