The Chairman of the Federal Reserve Board
A. Timothy Geithner
B. Larry Summers
C. Hank Paulson
D. Ben Bernake
D. Ben Bernake
Which of the following is not a money market security?
A. US T-bils
B. Six month maturity CD
C. Common Stock
D. Bankers acceptance
C. Common Stock
____ Assets generate net income to the economy and ____ Assets define allocation of income among investors.
A. Financial, financial
B. Financial, real
C. Real, financial
D. Real, real
C. Real, financial
Asset allocation refers to the _____
A. allocation of the investment portfolio across broad asset classes
B. analysis of the value of securities
c. choice of specifically assets within each asset class
A. allocation of the investment portfolio across broad asset classes
_____ are real assets
A. Bonds
B. Production equipment
C. Stocks
D. Commercial papers
B. Production equipment
_____ is considered to be an emerging market country
A. France
B. Norway
C. Brazil
D, Canada
C. Brazil
Which of the following is a true statement?
A. Dividends on preferred stock are tax-deductible to individual investors but not to corporate investors
B. Common dividends cannot be paid if preferred dividends are in arrears on cumulative preferred stock
C.
B. Common dividends cannot be paid if preferred dividends are in arrears on cumulative preferred stock
The pid price of a T bill is ___
A. the price at which the dealer in t-bills is willing to sell the bill
B. the price at which the dealer in T-bills is willing to buy the bill
C. Greater than the ask price of the t-bill expressed in dollar terms
D. The pr
B. the price at which the dealer in t-bills is wiling to buy the bill
_____ Are examples of financial intermediaries
A. commercial banks
B. insurance companies
c. investment companies
d. all of the answers are financial intermediaries
d. all of the answers are financial intermediaries
Which of the following is not a true statement regarding municipal bonds?
A. a municipal bond is a debt obligation issued by state or local governments
B. Municipal bond is a debt obligation issued by the Federal Government
C. The interest income from a m
B. Municipal bond is a debt obligation issued by the Federal Government
Which of the following is not an example of a broker market
A. residual real estate market
B. Market for large blcok security transactions
C. Primary market for securities
D. NASDAQ
D. NASDAQ
Purchases of new issues of stock take place
A. At the desk of the Fed
B. In the primary market
C. in the secondary market
d. In the money market
B. in the primary market
Initial margin requirements on stock are set by____
A. The Federal Deposit Insurance Corporation
B. The Federal Reserve
C. The NYSE
D. The SEC
B. The federal reserve
Which one of the following types of markets requires the greatest level of trading activity to be cost effective?
A. Broker Market
B. Dealer Market'
C. Continuous auction market
D. Direct search market
C. continuous auction market
An order to buy or sell a security at the current price is a
a. limit order
b. market order
c. stop loss order
d. stop buy order
b. market order
Mutual funds perform the function of _____ for their shareholders
a. diversification
b. professional management
c. record keeping and administration
d. funds provide all these advantages
d. funds provide all these advantages
Rank the following fund category from most risky to least risky
I Equity growth fund
II Balanced fund
III Equity income fund
IV Money market fund
I, III, II, IV
Which of the following results in a taxable event for investors
I capital gains distributions from the fund
II dividends distribution from the fund
III unrealized change in fund NAV
I and II only
Management fees for open-end and close-end funds typically range between ___ and ___
a. .2% and 1.5%
b. .2% and 5%
c. 2 % and 5%
d. 2% and 8%
A. .2% and 1.5%
The primary measurement unit used for assessing the value of one's stake in an investment company is _______
A. net asset value
b. average asset value
c. gross asset value
d. total asset value
a. net asset value
Assume that you have just purchased some shares in an investment company reporting $500 million in assets, $20 in liabilities, 40 million shares. what is the net asset value of these shares?
A. $12
b. $9.33
c. $15.45
d. $1.5
a. $12
The complete portfolio refers to the investment in _____
a. the risk-free asset
b. the risky portfolio
c. the risk free asset and the risky portfolio combined
d. the risky portfolio and the index
c. the risk free asset and the risky portfolio combined
The holding period return on a stock is equal to _____
a. the capital gain yield over the period plus the inflation rate
b. the capital gain yield over the period of time plus the dividend yield
c. the current yield plus the dividend yild
d. the dividend
b. the capital gain yield over the period of time plus the dividend yield
An investment ears 10% the first year, 15% the second year and loses 12% the third year. Your compound return over the three years was ____
a. 41.68%
b. 11.32%
c. 3.64%
d. 13%
b. 11.32%
Suppose you pay $9700 for a $10,000 par T-bill maturing in 3 months. What is the holding period return for this investment
a. 3.01%
b. 3.09%
c. 12.42%
d. 16.71%
3.09%
The market risk premium is defined as ____
a. the difference between the expected return on the market index and the return on t-bills
b. the difference between the return on a small firm mutual fund and the return on the S&P 500
c. the difference between
a. the difference between the expected return on the market index and the return on t-bills
The excess return is the _____
a. rate of return that can be earned with certainty
b. rate of return in excess of the T-bill rate
c. rate of return to risk aversion
d. index return
b. rate of return in excess of the T-bill rate
Which of the following statistics cannot be negative?
a. covariance
b. variance
c. E(r)
d. correlation coefficient
b. varience
Diversification is most effective when security returns are _____.
A. High
B. Negatively correlated
c. positively correlated
D. Uncorrelated
B. Negatively correlated
The variance of a portfolio of risky securities is _____.
A. The sum of the securities covariances
B. the sum of the securities' variance
C. The weighted sum of the securities covariances
D. The weighted sum of the securities' variances
C. The weighted sum of the securities' covariances
The standard deviation of returns on investment A is .1 while teh standard deviatons of return on investment B is .04. If the correlation coefficient between the returns on A and B is -.5, the covariances of returns on A and B is
A. -.0447
B. -.0020
C. .0
B. -.0020
If the price of the Euro goes from $1.35 to $1.45 and relative inflation rates remain unchased we would expect
A. imports from Europe will be more expensive
B. Imports from europe will be less expessive
C. US exports to Europe should increase
D. US export
E. Both A and C
The price of gold is a good hedge agains worldwide inflation because
a. it is commonly used in production
b. it is not easy to increase the quantity available
c. the world price of gold is quoted in dollars
d. Tradition
B. it is not easy to increase the quantity available
To hedge against an increase in gasoline price, you can
A. sell an energy ETF
b. Buy an energy ETF
c. Buy Gold
D. none of the above
b. buy an energy ETF
If pre-market opening futures market prices are up, at market opening we expect
A. the DJIA will be down
B. the DJIA will be up
C. This gives no information about the DJIA
D. The broad indices such as the S&P 500 will be down
B. The DJIA will be up
In order to minimize taxes, I should typically
A. Sell losers are the end of the year
B. Sell winners at the end of the year
C. Sell winners and losers and revise my portfolio
D. none of the above
A. Sell losers are the end of the year
Real estate in the economy includes all but which one of the following?
A. Land
B. Buildings
C. Knowledge
D. Common stock
D. Common stock
____ is not a derivative security.
A. A share of common stock
B. A call option
C. A futures contract
D. All of the above are derivative securities
A. A share of common stock
Which one of the following best describes the purpose of derivatives markets?
A. Transferring risk from one party to another
B. investing for a short time period to earn a small rate of return
C. Investing for retirement
D. Earning interest income
A. Transferring risk from one party to another
Is a mechanism to mitigate potential agency problems
A. Trying income of managers to success of the firm
B. Directors defending top managers
C. Anti takeover strategies
D. straight voting method of electing the board of directors
A. Trying income of managers to success of the firm
In securities markets, there should be a risk-return trade-off with high-risk assets having expected returns over lower-risk assets
A. higher
B. lower
C. the same
D. Can't tell from the information given
A. higher
When computing the bank discount yield in a leap year you should use ____ days in the year
a. 260
b. 360
c.365
d. 366
b. 360
The most actively traded money market security is
A. treasury bills
B. bankers' acceptances
C. certificates of deposits
d. common stock
A. treasury bills
_______ is considered to be an emerging market country
a. france
b. Norway
C. Brazil
D. Canada
C. Brazil
Which one of the following is a true statement?
A. Dividends on preferred stocks are tax-deductible to individual investors but not to corporate
B. common dividends cannot be paid if preferred dividends are in arrears on cumulative preferred stock
C. pref
B. common dividends cannot be paid if preferred dividends are in arrears on cumulative preferred stock
The bid price of a treasury bill is _____ .
A. the price at which the dealer in treasury bills is will to sell teh bill
B. the price at which the dealer in treasury bills is willing to buy the bill
c. Greater than the ask price of the treasury bill expres
B. the price at which the dealer in treasury bills is willing to buy the bill
Under firm commitment underwriting the ____ assumes the full risk that the shares cannot be sold to the public at the stipulated offering price
A. red herring
B. issuing company
C. Initial stockholder
D. underwriter
D. underwriter
Which one of the following statements about IPOs is not true?
a. IPO underpricing represents an opportunity cost of issuing firms
B. IPOs often provide very good initial returns to investors
C. Although US IPOs are typically underpriced, most foreign issu
C. Although US IPOs are typically underpriced, most foreign issues are not
The issue process where investors submit bids for a new issue and the shares in an IPO are allocated to the highest bidders until the entire issue is sold is called a
A. best efforts offer
B. dutch auction
C. Secondary offering
D. firm commitment offer
B. Dutch auction
Which one of the following is not an example of a brokered market?
A. residential real estate market
B. Market for large block security transactions
C. primary market for securities
D. NASDAQ
D. NASDAQ
An order to buy or sell a security at the current price is a _____.
A. Limit order
B. Market order
C. Stop loss order
D. Stop buy order
B. Market order
A ______ is a private investment pool open only to wealthy or institutional investors that is exempt from SEC regulation and can therefore purse more speculative policies than mutual funds.
A. Commingled pool
B. unit trust
C. hedge fund
D. Money market fu
C. Hedge fund
The NAV of _____ is fixed at $1 per share.
A. Equity funds
B. Money market funds
C. Fixed income funds
D. Commingled funds
B. Money market funds
A contingent deferred sales change is commonly called a ____.
A. Front-end load
B. Back-end load
C. 12b -1 Charge
D. Top end sales commission
B. Back-end load
Which of the folowing result in taxable event for investors?
I. capital gains distributions from the fund
II. dividend distributions form the fund
III. unrealized increase in fund NAV
A. I only
B. II only
C. I and II only
D. I, II and III
I and II only
The type of mutual fund that primarily engages in market timing is called a/an
A. Special sector fund
B. Index fund
C. ETF
D. Asset allocation fund
D. Asset allocation fund
The ____ measure of returns ignores compounding.
A. geometric average
B. arithmetic average
C. IRR
D. dollar weighted
B. arithmetic average
The complete portfolio refers to the investment in ____.
A. the risk-free asset
B. the risky portfolio
C. The risk-free asset and the risky portfolio combined
D. the risky portfolio and the index
c. the risk-free asset and the risky portfolio combined
You have calculated the historical dollar weighted return, annual geometric average return and annual arithmetic average return. You always reinvest your dividends and interest earned on the portfolio. Which method provides the best measure of the actual
B. Geometric average return
The holding period return on a stock is equal to _____.
A. the capital gain yield over the period plus the inflation rate
B. the capital gain yield over the period plus the dividend yield
C. the current yield plus the dividend yield
D. The dividend yield
B. the capital gain yield over the period plus the dividend yield
The excess return is the _____.
A. rate of return that can be earned with certainty
B. rate of return in excess of the treasury bill rate
C. rate of return to risk aversion
D. index return
B. rate of return in excess of teh treasury bill rate
The "Volker rule" has proposed to avoid excessive risk taking by banks. Its key features is:
a. to limit the amount of leverage that banks may use
B. to mandate geographical diversification
C. eliminate the ability of banks to make "proprietary trades"
D.
C. eliminate the ability of banks to make "proprietary trades
The sovereign debt of several nations is now currently in danger of default, especially in the PIGS countries the PIGS countries are:
A. poland, Germany, slovakia, and Italy
B. Peru, Great Britain, Slovenia, and Ireland
C. Paraguay, Slovenia, Greece and I
D. Greece, Spain, Portugal and Ireland
We can get a early reading before market opening by looking at
A. forward prices
B. spotlight prices
C. futures prices
D. Deferred prices
C. futures prices
Ben Bernake is
A. the secretary of the treasury
B. chairman of the board of economic advisors
C. chairman of the federal reserve board
D. the NBA commissioner
C. chairman of the federal reserve board
The material wealth of society is determined by the economy's ____, which is a function of the economy's ______.
A. investment bankers, financial assets
B. Investment bankers, real assets
C. productive capacity, financial assets
D. productive capacity, re
D. productive capacity, real assets
Asset allocation refers to the _____.
A. allocation of the investment portfolio across broad asset classes
B. analysis of the value of securities
C. choice of specific assets within each asset class
D. none of the answers defines asset allocation
A. allocation of the investment portfolio across broad asset classes
_____ are real assets.
A. bonds
B. Production equipment
C. stocks
D. commercial paper
B. production equipment
In capitalist systems capital resources are primarily allocated by ______
A. government
B. the SEC
C. financial markets
D. investment bankers
C. financial markets
_____ portfolio management calls for holding diversified portfolios without spending effort or resources attempting to improve investment performance through security analysis
a. active
b. momentum
c. passive
d. market timing
c. passive
Money market securities are sometimes referred to as "cash equivalent" because ____.
A. they are safe and marketable
B. they are not liquid
C. they are high risk
D. they are low denomination
A. they are safe and marketable
The bid price of a treasury bill is____.
A. the price at which the dealer in treasury bills is willing to sell the bill for
B. the price at which the dealer in treasury bills is willing to buy the bill for
C. greater than the ask price of the treasury bil
B. the price at which the dealer in treasury bills is willing to buy the bill
An individual who goes short in a futures position
a. commits to delivering the underlying commodity at contract maturity
b. commits to purchasing the underlying commodity at contract maturity
C. has the right to deliver the underlying commodity at contra
A. commits to delivering the underlying commodity at contract maturity
The maximum maturity on commercial paper is
A. 270 days
B. 180 days
C. 90 days
D. 30 days
A. 270 days
An investor purchases one municipal and one corporate bond that pay rates of return of 5.00% and 6.40% respectively. If the investor is in the 15% tax bracket, his after tax rates of return on the municipal and corporate bonds would be respectively
A. 5.0
B. 5% and %.44%
What would you expect to have happened to the spread between yields on commercial paper and Treasury bills immediately after September 11, 2001?
A. No change, as both yields will remain the same.
B. Increase, the spread usually increases in response to a
B. Increase, the spread usually increases in response to a crisis.
Underwriting is one of the services provided by _____. A. the SEC
B. investment bankers
C. publicly traded companies
D. FDIC
B. investment bankers
Which one of the following is not an example of a brokered market?
A. Residential real estate market
B. Market for large block security transactions
C. Primary market for securities
D. NASDAQ
D. NASDAQ
An order to buy or sell a security at the current price is a ______________.
A. limit order
B. market order
C. stop loss order
D. stop buy order
B. market order
If an investor places a _________ order the stock will be sold if its price falls to the stipulated level. If an investor places a __________ order the stock will be bought if its price rises above the stipulated level.
A. stop?buy; stop?loss
B. market; l
c. stop-loss; stop-buy
The process of polling potential investors regarding their interest in a forthcoming initial public offering (IPO) is called ________.
A. interest building
B. book building
C. market analysis
D. customer identification
B. book building
A __________ is a private investment pool open only to wealthy or institutional investors that is exempt from SEC regulation and can therefore pursue more speculative policies than mutual funds.
A. commingled pool
B. unit trust
C. hedge fund
D. money mark
B. hedge fund
A contingent deferred sales charge is commonly called a ____.
A. front?end load
B. back?end load
C. 12b?1 charge
D. top end sales commission
b. back end load
Mutual funds provide the following for their shareholders: A. Diversification
B. Professional management
C. Record keeping and administration
D. Mutual funds provide diversification, professional management, and record keeping and administration
D. mutual funds provide diversification, professional management, and record keeping and administration
A fund that invests in securities worldwide, including the United States is called a/an ______.
A. international fund
B. emerging market fund
C. global fund
D. regional fund
C. Global fund
Which of the following ETFs tracks the S&P 500 index?
A. Qubes
B. Diamonds
C. Vipers
D. Spiders
D. Spiders
Advantages of ETFs over mutual funds include all but which one of the following?
A. ETFs trade continuously so investors can trade throughout the day
B. ETFs can be sold short or purchased on margin, unlike fund shares
C. ETF providers do not have to sell
D. ETF dividends are sometimes paid only once per year
You put up $50 at the beginning of the year for an investment. The value of the investment grows 4% and you earn a dividend of $3.50. Your HPR was ____.
A. 4.00%
B. 3.50%
C. 7.00%
D. 11.00%
D. 11%
The complete portfolio refers to the investment in _________.
A. the risk?free asset
B. the risky portfolio
C. the risk?free asset and the risky portfolio combined
D. the risky portfolio and the index
C. the risk?free asset and the risky portfolio combined
he market risk premium is defined as __________.
A. the difference between the return on an index fund and the return on Treasury bills
B. the difference between the return on a small firm mutual fund and the return on the Standard and Poor's 500 index
C.
A. the difference between the return on an index fund and the return on Treasury bills
he excess return is the _________.
A. rate of return that can be earned with certainty
B. rate of return in excess of the Treasury bill rate
C. rate of return to risk aversion
D. index return
A. rate of return in excess of the T-bill rate
Your investment has a 20% chance of earning a 30% rate of return, a 50% chance of earning a 10% rate of return and a 30% chance of losing 6%. What is your expected return on this investment?
A. 12.8%
B. 11.0%
C. 8.9%
D. 9.2%
D. 9.2%
Historical returns have generally been __________ for stocks of small firms as/than for stocks of large firms.
A. the same
B. lower
C. higher
D. There is no evidence of a systematic relationship between returns on small firm stocks and returns on small fi
C. Higher
In the mean?standard deviation graph, the line that connects the risk?free rate and the optimal risky portfolio, P, is called _________.
A. the capital allocation line
B. the indifference curve
C. the investor's utility line
D. the security market line
A. the capital allocation line
Which of the following statistics cannot be negative?
A. Covariance
B. Variance
C. E[r]
D. Correlation coefficient
...
Diversification is most effective when security returns are _________.
A. high
B. negatively correlated
C. positively correlated
D. uncorrelated
B. negatively correlated
The term "complete portfolio" refers to a portfolio consisting of _________________.
A. the risk?free asset combined with at least one risky asset
B. the market portfolio combined with the minimum variance portfolio
C. securities from domestic markets com
A. the risk?free asset combined with at least one risky asset
According to historical data, over the long run which of the following assets has the best chance to provide the best after inflation, after tax rate of return?
A. Long term Treasury bonds
B. Corporate bonds
C. Common stocks
D. Preferred stocks
C. Common stocks
Which of the following are correct arguments supporting passive investment strategies?
I. Active trading strategies may not guarantee higher returns but guarantee higher costs
II. Passive investors can free ride on the activity of knowledge investors whos
B. I and II only
If you are promised a nominal return of 12% on a one year investment, and you expect the rate of inflation to be 3%, what real rate do you expect to earn? Use the exact formula.
A. 5.48%
B. 8.74%
C. 9.00%
D. 12.00%
B. 8.74%
The BRIC countries are
A. Britain, Russia, Italy, Canada
B. Brazil, Romania, Ireland, China
C. Brazil, Russia, India, China
D. Bolivia, Romania, India, China
C. Brazil, Russia, India, China
Which of the following is not a money market security?
A. US T-bill
B. six month maturity CD
C. Common stock
D. Banker's acceptance
C. common stock
Which of the the following best describes the purpose of derivatives markets?
A. Transferring risk from one party to another
B. investing for a short time period to earn a small rate of return
C. investing for retirement
D. earning interest income
A. transferring risk from one party to another