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114 Cards in this Set
- Front
- Back
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All else the same, an ______ style option will be ______ valuable than a ______ style option.
A. American, more, European B. American, less, European C. American, more, Canadian D. American, less, Canadian |
A. American, more, European
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At contract maturity the value of a call option is ___________ where X equals the option's strike price and ST is the stock price at contract expiration.
A. Max(0, ST - X) B. Min(0, ST - X) C. Max(0, X - ST) D. Min(0, X - ST) |
A. Max(0, ST - X)
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You purchase a call option on a stock. The profit at contract maturity of the option position is ___________ where X equals the option's strike price, ST is the stock price at contract expiration and C0 is the original purchase price of the option.
A. Max(-C0, ST - X - C0) B. Min(-C0, ST - X - C0) C. Max(C0, ST - X + C0) D. Max(0, ST - X - C0) |
A. Max(-C0, ST - X - C0)
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You buy a call option on Merritt Corp. with an exercise price of $50 and an expiration date in July and write a call option on Merritt Corp. with an exercise price of $55 with an expiration date in July. This is called a ________.
A. time spread B. long straddle C. short straddle D. money spread |
D. money spread
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The value of a listed call 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, III and IV only B. I, III and IV only C. I, II and III only D. I, II, III and IV |
C. I, II and III only
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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. II only B. I and III only C. II and III only D. I, II and III |
B. I and III only
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You purchase one IBM July 120 call contract for a premium of $5. You hold the option until the expiration date when IBM stock sells for $123 per share. You will realize a ______ on the investment.
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Long Call Profit = Max[0,($123 - $120)(100)] - $500 = -$200
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You purchase one IBM March 120 put contract for a put premium of $10. The maximum profit that you could gain from this strategy is _________.
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Profit = 100(120 - 10) = 11,000.00
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You buy one Hewlett Packard August 50 call contract and one Hewlett Packard August 50 put contract. The call premium is $1.25 and the put premium is $4.50. Your highest potential loss from this position is _________.
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Loss = 100(1.25 + 4.50) = 575.00 if stock price is $50 at expiration.
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You sell one Hewlett Packard August 50 call contract and sell one Hewlett Packard August 50 put contract. The call premium is $1.25 and the put premium is $4.50. Your strategy will pay off __________ in August.
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only if the stock price is between $44.25 and $55.75
You have positive profit in the range $50 - ($1.25 + $4.50) and $50 + ($1.25 + $4.50) |
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Suppose you purchase one Texas Instruments August 75 call contract quoted at $8.50 and write one Texas Instruments August 80 call contract quoted at $6. If, at expiration, the price of a share of Texas Instruments stock is $79, your profit would be _________.
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Profit = 100 [(79 - 75)] - 8.50 + 6.00] = $150
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A call option on Juniper Corp. stock with an exercise price of $75 and an expiration date one year from now is worth $3.00 today. A put option on Juniper Corp. stock with an exercise price of $75 and an expiration date one year from now is worth $2.50 today. The risk-free rate of return is 8% and Juniper Corp. pays no dividends. The stock should be worth __________ today.
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s0=3.00+(75)e^-(.08)(1) -2.50=69.73
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Exchange traded stock options expire on the _______________ of the expiration month.
A. second Monday B. third Wednesday C. second Thursday D. third Friday |
D. third Friday
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Each listed stock option contract gives the holder the right to buy or sell __________ shares of stock.
A. 1 B. 10 C. 100 D. 1,000 |
C. 100
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A put option on Snapple Beverage has an exercise price of $30. The current stock price of Snapple Beverage is $24.25. The put option is _________.
A. at the money B. in the money C. out of the money D. knocked out |
B. in the money
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You buy a call option on Summit Corp. with an exercise price of $40 and an expiration date in September and write a call option on Summit Corp. with an exercise price of $40 and an expiration date in October. This strategy is called a _________.
A. time spread B. long straddle C. short straddle D. money spread |
A. time spread
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Which one of the statements about margin requirements on option positions is not correct?
A. The margin required will be higher if the option is in the money. B. If the required margin exceeds the posted margin the option writer will receive a margin call. C. A buyer of a put or call option does not have to post margin. D. Even if the writer of a call option owns the stock the writer will have to meet the margin requirement in cash. |
D. Even if the writer of a call option owns the stock the writer will have to meet the margin requirement in cash.
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The September 14, 2009 price quotation for a Boeing call option with a strike price of $50 due to expire in November is $3.50 while the stock price of Boeing is $51. The premium on one Boeing November 50 call contract is _________.
A. $1 B. $2.50 C. $250.00 D. $350.00 |
D. $350.00
Premium=100(3.50)=350.00 |
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A put on Sanders stock with a strike price of $35 is priced at $2 per share while a call with a strike price of $35 is priced at $3.50. The maximum per share loss to the writer of an uncovered put is __________ and the maximum per share gain to the writer of an uncovered call is _________.
A. $33.00; $3.50 B. $33.00; $31.50 C. $35.00; $3.50 D. $35.00; $35.00 |
A. $33.00; $3.50
Maximum per share loss to put writer = -(35 - 0) + 2 = -33.00 if stock price is $0 at expiration. Maximum per share gain to call writer = 3.50 if stock price is below $40 at expiration. |
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An investor purchases a long call at a price of $2.50. The expiration price is $35.00. If the current stock price is $35.10, what is the break even point for the investor?
A. $32.50 B. $35.00 C. $37.50 D. $37.60 |
C. $37.50
Break even = 35.00 + 2.50 = 37.50 |
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You are convinced that a stock's price will move by at least 15% over the next three months. You are not sure which way the price will move, but you believe that the results of a patent hearing are definitely going to have a major effect on the stock price. You are somewhat more bullish than bearish however. Which one of the following options strategies best fits this scenario?
A. Buy a strip B. Buy a strap C. Buy a straddle D. Write a straddle |
B. Buy a strap
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You purchase one IBM July 90 call contract for a premium of $4. The stock has a 2 for 1 split prior to the expiration date. You hold the option until the expiration date when IBM stock sells for $48 per share. You will realize a ______ on the investment
A. $300 profit B. $100 loss C. $400 loss D. $200 profit |
D. $200 profit
Long Call Profit = 2Max[0,($48 - ($90/2)(100)] - $400 = $200 |
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You sell one IBM July 90 call contract for a premium of $4 and two puts for a premium of $3 each. You hold the position until the expiration date when IBM stock sells for $95 per share. You will realize a ______ on this strip.
A. $300 profit B. $100 loss C. $500 profit D. $200 profit |
C. $500 profit
Selling an IBM July 90 strip entails selling two IBM July 90 puts and one IBM July 90 call. Initial income = C90 + 2P90 = (4 + 2(3))(100) = $1000. If the final stock price is $95 the position value is found as Profit = [-Max($0,$95 - 90) + 2Max($0,$90 - $95)](100) + $1000 = -$500 + $1000 = $500 |
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The Black-Scholes option pricing formula was developed for __________.
A. American options B. European options C. Tokyo options D. out-of-the-money options |
B. European options
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A 45 call option on a stock priced at $50 is priced at $6.50. This call has an intrinsic value of ______ and a time value of _____.
A. $6.50; $0 B. $5.00; $1.50 C. $1.50; $5.00 D. $0; $6.50 |
B. $5.00; $1.50
Intrinsic value = Max(0,50 - 45) = $5; Time value = Call premium - Intrinsic value = $6.50 - $5 = $1.50 |
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The percentage change in the stock call option price divided by the percentage change in the stock price is the __________ of the option.
A. delta B. elasticity C. gamma D. theta |
B. elasticity
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If you have an extremely "bullish" outlook on the stock market, you could attempt to maximize your rate of return by ________________.
A. purchasing out-of-the-money call options B. purchasing at-the-money bull spreads C. purchasing in-the-money call options D. purchasing at-the-money call options |
A. purchasing out-of-the-money call options
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You are considering purchasing a put option on a stock with a current price of $33. The exercise price is $35, and the price of the corresponding call option is $2.25. According to the put-call parity theorem, if the risk-free rate of interest is 4%, and there are 90 days until expiration, the value of the put should be ____________.
A. $2.25 B. $3.91 C. $4.05 D. $5.52 |
B. $3.91
P=2.25-33+(35)e^-(.04)(90/365)=3.91 |
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The stock price of Atlantis Corp. is $43 today. The risk-free rate of return is 10% and Atlantis Corp. pays no dividends. A call option on Atlantis Corp. stock with an exercise price of $40 and an expiration date six months from now is worth $5.00 today. A put option on Atlantis Corp. stock with an exercise price of $40 and an expiration date six months from now should be worth __________ today.
A. $0.05 B. $0.14 C. $2.00 D. $3.95 |
A. $0.05
P=5-43+40e^(-0.1*0.5)=0.049 |
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A call option on Juniper Corp. stock with an exercise price of $75 and an expiration date one year from now is worth $3.00 today. A put option on Juniper Corp. stock with an exercise price of $75 and an expiration date one year from now is worth $2.50 today. The risk-free rate of return is 8% and Juniper Corp. pays no dividends. The stock should be worth __________ today.
A. $69.73 B. $71.69 C. $73.12 D. $77.25 |
A. $69.73
S0=3.00+(75)e^-(.08)(1) -2.50=69.73 |
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The invoice price of a bond is the ______.
A. stated or flat price in a quote sheet plus accrued interest B. stated or flat price in a quote sheet minus accrued interest C. bid price D. average of the bid and ask price |
A. stated or flat price in a quote sheet plus accrued interest
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Floating rate bonds have a __________ that is adjusted with current market interest rates.
A. maturity date B. coupon payment date C. coupon rate D. dividend yield |
C. coupon rate
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You buy a TIPS at issue at par for$1,000. The bond has a 3% coupon. Inflation turns out to be 2%, 3% and 4% over the next three years. The total annual coupon income you will receive in year three is
A. $30.00 B. $33.00 C. $32.78 D. $30.90 |
B. $32.78
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The bonds of Elbow Grease Dishwashing Company have received a rating of "C" by Moody's. The "C" rating indicates the bonds are _________.
A. high grade B. intermediate grade C. investment grade D. junk bonds |
D. junk bonds
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Everything else equal the _____ the maturity of a bond and the _______ the coupon the greater the sensitivity of the bond's price to interest rate changes.
A. longer; higher B. longer; lower C. shorter; higher D. shorter; lower |
B. longer; lower
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A coupon bond which pays interest of 4% annually, has a par value of $1,000, matures in 5 years, and is selling today at $785. The actual yield to maturity on this bond is _________.
A. 7.2% B. 8.8% C. 9.1% D. 9.6% |
D. 9.6%
N=5, FV=$1,000, PV=-$785, PMT=$1,000*4%=$40 CPT 1/Y=9.62% |
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A callable bond pays annual interest of $60, has a par value of $1,000, matures in 20 years but is callable in 10 years at a price of $1,100, and has a value today of $1055.84. The yield to call on this bond is _______.
A. 6.00% B. 6.58% C. 7.20% D. 8.00% |
A. 6.00%
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A coupon bond which pays interest annually, has a par value of $1,000, matures in 5 years and has a yield to maturity of 12%. If the coupon rate is 9%, the intrinsic value of the bond today will be approximately ______.
A. $856 B. $892 C. $926 D. $1,000 |
B. $892
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A coupon bond pays semi-annual interest is reported as having an ask rice of 117% of its $1,000 par value in the Wall Street Journal. If the last interest payment was made 2 months ago and the coupon rate is 6%,the invoice price of the bond will be ______.
A. $1,140 B. $1,170 C. $1,180 D. $1,200 |
C. $1,180
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A zero-coupon bond has a yield to maturity of 5% and a par value of $1,000. If the bond matures in 16 years, it should sell for a price of _______ today.
A. $458.00 B. $641.00 C. $789.00 D. $1,100.00 |
A. $458.00
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One, two and three year maturity, default-free, zero-coupon bonds have yields-to-maturity of 7%, 8% and 9% respectively. What is the implied one-year forward rate in the second year?
A. 2.0% B. 8.0% C. 9.0% D. 11.1% |
C. 9.0%
(1.08^2/1.07)-1 |
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A corporate bond has a 10 year maturity and pays interest semiannually. The quoted coupon rate is 6% and the bond is priced at par. The bond is callable in 3 years at 110% of par. What is the bond's yield to call?
A. 6.72% B. 9.17% C. 4.49% D. 8.98% |
D. 8.98%
N=3*2=6, FV=$1,100, PV=-$1,000, PMT=$1,000*6%/2=$30 CPT 1/Y=4.489% YTM=4.489% * 2=8.978% |
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Given its time to maturity the duration of a zero coupon bond is _________.
A. higher when the discount rate is higher B. higher when the discount rate is lower C. lowest when the discount rate is equal to the risk free rate D. the same regardless of the discount rate |
D. the same regardless of the discount rate
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If the coupon rate on a bond is 4.50% and the bond is selling at a premium, which of the following is the most likely yield to maturity on the bond?
A. 4.30% B. 4.50% C. 5.20% D. 5.50% |
A. 4.30%
A bond sells at premium when coupon rate > YTM |
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A bond pays annual interest. Its coupon rate is 8%. Its value at maturity is $1,000. It matures in three years. Its yield to maturity is currently 10%. The duration of this bond is _______ years.
A. 2.64 B. 2.78 C. 3.00 D. 3.55 |
B. 2.78
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A bond has a yield to maturity of 8% and a duration of 9 years. If the yield to maturity falls to 7.84%, there will be a ________in the bond’s price.
A. 1.33% decrease B. 1.44% decrease C. 1.33% increase D. 1.44% increase |
C. 1.33% increase
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All other things equal, a bond's duration is _________.
A. higher when the coupon rate is higher B. lower when the coupon rate is higher C. the same when the coupon rate is higher D. indeterminate when the coupon rate is high |
B. lower when the coupon rate is higher
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You have a 15 year maturity 4% coupon, 6% yield bond with duration of 10.5 years and a convexity of 128.75. The bond is currently priced at $805.76. If interest rate were to increase 200 basis points your predicted new price for the bond (including convexity) is _________.
A. $638.85 B. $642.54 C. $666.88 D. $705.03 |
C. $666.88
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Banks and other financial institutions can best manage interest rate risk by _____________.
A. maximizing the duration of assets and minimizing the duration of liabilities. B. minimizing the duration of assets and maximizing the duration of liabilities C. matching the duration's of their assets and liabilities D. matching the maturities of their assets and liabilities |
C. matching the duration's of their assets and liabilities
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A pension fund has an average duration of its liabilities equal to 15 years. The fund is looking at 5 year maturity zero coupon bands and 4% yield perpetuities to immunize its interest rate risk. How much of its portfolio should it allocate to the zero coupon bonds to immunize if there are no other assets funding the plan?
A. 52% B. 48% C. 33% D. 25% |
A. 52%
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A bond has a maturity of 12 years, a duration of 9.5 years at a promised yield rate of 8%. What is the bond's modified duration?
A. 12 years B. 11.1 years C. 9.5 years D. 8.8 years |
D. 8.8 years
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Immunization of coupon paying bonds is not a passive strategy because
I. the portfolio must be rebalanced every time interest rates change II. the portfolio must be rebalanced over time even if interest rates don't change III. convexity implies duration based immunization strategies don't work A. I only B. I and II only C. II only D. I, II and III |
B. I and II only
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A perpetuity pays $100 each and every year forever. The duration of this perpetuity will be _____ if its yield is 9%.
A. 7 B. 9 C. 9.39 D. 12.11 |
D. 12.11
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A coupon bond which pays interest of $60 annually, has a par value of $1,000, matures in 5 years, and is selling today at a $75.25 discount from par value. The current yield on this bond is _________.
A. 6.00% B. 6.49% C. 6.73% D. 7.00% |
B. 6.49%
Current yield = 60 / (1000 – 75.25) = 6.49% |
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A bond has a current price of $1,030. The yield on the bond is 8.00%. If the yield changes from 8.00% to 8.10%, the price of the bond will go down to $1,025.88. The modified duration of this bond is _____.
A. 4.32 B. 4.00 C. 3.25 D. 3.75 |
B. 4.00
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The ________ measure of returns ignores compounding.
A. geometric average B. arithmetic average |
B. arithmetic average
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The arithmetic average of -11%, 15% and 20% is ________.
A. 15.67% B. 8.00% C. 11.22% D. 6.45% |
B. 8.00%
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You have a $50,000 portfolio consisting of Intel, GE and Con Edison. You put $20,000 in Intel, $12,000 in GE and the rest in Con Edison. Intel, GE and Con Edison have betas of 1.3, 1.0, and .8 respectively. What is your portfolio beta?
A. 1.048 B. 1.033 C. 1.000 D. 1.037 |
A. 1.048
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The expected rates of return of stocks A and B are _______and, respectively.
A. 13.2%; 9%. B. 14%; 10% C. 13.2%; 7.7% D. 7.7%; 13.2% E. none of the above |
C. 13.2%; 7.7%
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The standard deviations of stocks A and B are _______and, respectively.
A. 1.50%; 1.91% B. 2.50%; 1.10% C. 3.25%; 2.00% D. 1.47%; 1.10% E. none of the above |
D. 1.47%; 1.10%
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The coefficient of correlation between A and B is
A. 0.47. B. 0.60. C. 0.58 D. 1.20. E. none of the above. |
A. 0.47.
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Consider the CAPM. The risk-free rate is 6% and the expected return on the market is 18%. What is the expected return on a stock with a beta of 1.3?
A. 6% B. 15.6% C. 18% D. 21.6% |
D. 21.6%
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An investor's degree of risk aversion will determine his or her ______.
A. optimal risky portfolio B. risk-free rate C. optimal mix of the risk-free asset and risky asset D. capital allocation line |
C. optimal mix of the risk-free asset and risky asset
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__________ 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% |
C. 45%
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A portfolio that has an expected value in one year of $1,100 could be formed if you _________.
A. Place 40% of your money in the risky portfolio and the rest in the risk free asset B. Place 55% of your money in the risky portfolio and the rest in the risk free asset C. Place 60% of your money in the risky portfolio and the rest in the risk free asset D. Place 75% of your money in the risky portfolio and the rest in the risk free asset |
A. Place 40% of your money in the risky portfolio and the rest in the risk free asset
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The slope of the capital allocation line formed with the risky asset and the risk-free asset is _________.
A. 1.40 B. 0.80 C. 0.50 D. 0.40 |
C. 0.50
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Suppose you pay $9,700 for a $10,000 par Treasury bill maturing in three months. What is the holding period return for this investment?
A. 3.01% B. 3.09% C. 12.42% D. 16.71% |
C. 12.42%
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The rate of return on _____ is known at the beginning of the holding period while the rate of return on _____ is not known until the end of the holding period.
A. risky assets, Treasury bills B. Treasury bills, risky assets C. excess returns, risky assets D. index assets, bonds |
B. Treasury bills, risky assets
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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%
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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?
A. 5.48% B. 8.74% C. 9.00% D. 12.00% |
B. 8.74%
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Consider two perfectly negatively correlated risky securities, A and B. Security A has an expected rate of return of 16% and a standard deviation of return of 20%. B has an expected rate of return of 10% and a standard deviation of return of 30%. The weight of security Bin the minimum variance portfolio is ______.
A. 10% B. 20% C. 40% D. 60% |
C. 40%
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One of the main problems with the arbitrage pricing theory is __________.
A. its use of several factors instead of a single market index to explain the risk-return relationship B. the introduction of non-systematic risk as a key factor in the risk-return relationship C. that the APT requires an even larger number of unrealistic assumptions than the CAPM D. the model fails to identify the key macroeconomic variables in the risk-return relationship |
D. the model fails to identify the key macroeconomic variables in the risk-return relationship
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You invest $10,000 in a complete portfolio. The complete portfolio is composed of a risky asset with an expected rate of return of 15% and a standard deviation of 21% and a treasury bill with a rate of return of 5%. How much money should be invested in the risk asset to form a portfolio with an expected return of 11%?
A. $6,000 B. $4,000 C. $7,000 D. $3,000 |
A. $6,000
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Consider the multi-factor APT with two factors. Portfolio A has a beta of 0.5 on factor 1 and a beta of 1.25 on factor 2. The risk premiums on the factors 1 and 2 portfolios are 1% and 7% respectively. The risk-free rate of return is 7%. The expected return on portfolio A is __________ if no arbitrage opportunities exist.
A. 13.5% B. 15.0% C. 16.25% D. 23.0% |
C. 16.25%
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Two investment advisors are comparing performance. Advisor A averaged a 20% return with a portfolio beta of 1.5 and Advisor B averaged a 15% return with a portfolio beta of 1.2. If the T-bill rate was 5% and the market return during the period was 13%, which advisor was the better stock picker?
A. Advisor A was better because he generated a larger alpha B. Advisor B was better because he generated a larger alpha C. Advisor A was better because he generated a higher return D. Advisor B was better because he achieved a good return with a lower beta |
A. Advisor A was better because he generated a larger alpha
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You invest $600 in security A with a beta of 1.5 and $400 in security B with a beta of .90. The beta of this portfolio is _________.
A. 1.14 B. 1.20 C. 1.26 D. 1.50 |
C. 1.26
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A stock has a correlation with the market of 0.45. The standard deviation of the market is 21% and the standard deviation of the stock is 35%. What is the stock's beta?
A. 1.00 B. 0.75 C. 0.60 D. 0.55 |
B. 0.75
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Diversification is most effective when security returns are _________.
A. high B. negatively correlated C. positively correlated D. uncorrelated |
B. negatively correlated
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In the context of the capital asset pricing model, the systematic measure of risk is captured by _________.
A. unique risk B. beta C. standard deviation of returns D. variance of returns |
B. beta
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Which of the following correlations coefficients will produce the least diversification benefit?
A. -0.6 B. -0.3 C. 0.0 D. 0.8 |
D. 0.8
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The standard deviation of return on investment A is .10 while the standard deviation of return on investment B is .04. If the correlation coefficient between the returns on A and B is -.50, the covariance of returns on A and B is _________.
A. -.0447 B. -.0020 C. .0020 D. .0447 |
B. -.0020
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The risk that can be diversified away is __________.
A. beta B. firm specific risk C. market risk D. systematic risk |
B. firm specific risk
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The optimal risky portfolio can be identified by finding ____________.
I. the minimum variance point on the efficient frontier II. the maximum return point on the efficient frontier III. the tangency point of the capital market line and the efficient frontier IV. the line with the steepest slope that connects the risk free rate to the efficient frontier A. I and II only B. II and III only C. III and IV only D. I and IV only |
C. III and IV only
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Suppose that the risk free rate is 7% and a well-diversified portfolio V, with beta 1.3 and alpha 2%; another portfolio U, with beta of 0.8 and alpha 1%. We go long on V and short on U to create the zero beta portfolio. What are the weights on U and V?
A. 2.6;-1.6 B. -1.6;-2.6 C. -1.6;2.6 |
A. 2.6;-1.6
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Real assets in the economy include all but which one of the following?
A. Land B. Buildings C. Consumer durables D. Common stock |
D. Common stock
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Security selection refers to the ________.
A. allocation of the investment portfolio across broad asset classes B. analysis of the value of securities C. choice of specific securities within each asset class D. top down method of investing |
C. choice of specific securities within each asset class
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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
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Money Market securities are characterized by ________.
I. maturity less than one year II. safety of the principal investment III. low rates of return A. I only B. I and II only C. I and III only D. I, II and III |
D. I, II and III
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An example of a derivative security is _________.
A. a common share of General Motors B. a call option on Intel stock C. a Ford bond D. a U.S. Treasury bond |
B. a call option on Intel stock
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Which of the following indices are market-value weighted?
I. The NYSE Composite II. The S&P 500 III. The Wilshire 5000 A. I and II only B. II and III only C. I and III only D. I, II and III |
D. I, II and III
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Preferred stock is like long-term debt in that ______.
A. it gives the folder voting power regarding the firm's management B. it might promise to pay to its holder a fixed stream of income each year. C. the preferred dividend is a tax-deductible expense for the firm D. in the event of bankruptcy preferred stock has equal status with debt. |
B. it might promise to pay to its holder a fixed stream of income each year.
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A stock quote indicates a stock price of $60 and a dividend annual yield of 3%. The firm pays quarterly dividends in a year. The latest quarterly dividend received by stock investors must have been ____ per share.
A. $0.55 B. $1.80 C. $0.45 D. $1.25 |
C. $.045
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The Chompers Index is a price weighted stock index based on the 3 largest fast food chains. The stock prices for the three stocks are $54, $23, and $44. What is the price weighted index value of the Chompers Index?
A. 23.43 B. 35.36 C. 40.33 D. 49.58 |
C. 40.33
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Eurodollars are __________.
A. dollar denominated deposits at any foreign bank or foreign branch of an American bank B. dollar denominated bonds issued by firms outside their home market. C. currency issued by Euro Disney and traded in France D. dollars that wind up in banks as a result of money laundering activities |
A. dollar denominated deposits at any foreign bank or foreign branch of an American bank
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A tax free municipal bond provides a yield of 3.2%. What is the equivalent taxable yield on the bond given a 35% tax bracket?
A. 3.20% B. 3.68% C. 4.92% D. 5.00% |
C. 4.92%
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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% |
C. 4.31%
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Suppose you tax bracket is 15%. Would you prefer to earn
A. a 6% taxable return B. a 5% tax-free yield |
A. a 6% taxable return
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Historically, September usually has low stock returns in a year. However, in an efficient market, an investor's investment decision _____ be affected by the historical data, if he believes the stock market is efficient.
A. should B. should not |
B. should not
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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; limit C. stop-loss; stop-buy D. limit; market |
C. stop-loss; stop-buy
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The difference between the price at which a dealer is willing to buy, and the price at which a dealer is willing to sell, is called the _____.
A. market spread B. bid-ask spread C. bid-ask gap D. market variation |
B. bid-ask spread
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Assume you purchased 500 shares of XYZ common stock on margin at $40 per share from your broker. If the initial margin is 60%, the amount you borrowed from the broker is _____.
A. $20,000 B. $12,000 C. $8,000 D. $15,000 |
C. $8,000
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You purchased 100 shares of ABC common stock on margin at $60 per share. Assume the initial margin is 60% and the maintenance margin is 30%. You will get a margin call if the stock drops below _______.
A. $26.55 B. $34.29 C. $28.95 D. $30..77 |
B. $34.29
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You purchased 250 shares of common stock on margin for $25 per share. The initial margin is 65% and the stock pays no dividend. Your rate of return would be ______if you sell the stock at $32 per share.
A. 35% B. 39% C. 43% D. 28% |
C. 43%
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You sell short 100 shares of ABC company which are currently selling at $50 per share. You post the 60% margin required on the short sale. If your broker requires a 30% maintenance margin, at what stock price will you get a margin call?
A. $61.54 B. $70.72 C. $62.98 D. $64.50 |
A. $61.54
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You sell short 200 shares of Doggie Treats Inc. which are currently selling at $25 per share. You post the 50% margin required on the short sale. If your broker requires a 30% maintenance margin, at what stock price will you get a margin call?
A. $28.85 B. $35.71 C. $31.50 D. $32.25 |
A. $28.85
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The margin requirement on a stock purchase is 25%. You fully use the margin allowed to purchase 100 shares of MSFT at $25. If the price drops to $22, what is your percentage loss?
A. 9% B. 15% C. 48% D. 57% |
C. 48%
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Which one of the following is a common term for the market consensus value of the required rate of return on a stock?
A. Dividend payout ratio B. Intrinsic value C. Market capitalization rate D. Plowback ratio |
C. Market capitalization rate
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___________ 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 C. Market value per share D. Tobin's Q |
B. Liquidation value per share
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Stockholders of Dog's R Us Pet Supply expect a 12% rate of dividend yield on their stock. Management has consistently been generating a ROE of 15% over the last 5 years but now believes that ROE will be 12% for the next five years. Given this the firm's optimal dividend payout ratio is now_____.
A. 0% B. 100% C. between 0% and 50% D. between 50% and 100% |
B. 100%
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You are considering acquiring a common share of Sahali Shopping Center Corporation that you would like to hold for one year. You expect to receive both $1.25 in dividends and $35 from the sale of the share at the end of the year. The maximum price you would pay for a share today is _____ if you wanted to earn a 12% return.
A. $31.25 B. $32.37 C. $38.47 D. $41.32 |
B. $32.37
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The market capitalization rate on the stock of Aberdeen Wholesale Company is 10%. Its expected ROE is 12% and its expected EPS is $5.00. If the firm's plow-back ratio is 60%, its P/E ratio will be ______.
A. 7.14 B. 14.29 C. 16.67 D. 22.22 |
B. 14.29
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Gagliardi Way Corporation has an expected ROE of 15%. If it pays out 30% of its earnings as dividends, its dividend growth rate will be _____.
A. 4.5% B. 10.5% C. 15.0% D. 30.0% |
B. 10.5%
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Todd Mountain Development Corporation is expected to pay a dividend of $3.00 in the upcoming year. Dividends are expected to grow at the rate of 8% per year. The risk-free rate of return is 5% and the expected return on the market portfolio is 17%. The stock of Todd Mountain Development Corporation has a beta of 0.75. Using the constant growth DDM, the intrinsic value of the stock is ______________.
A. 4.00 B. 17.65 C. 37.50 D. 50.00 |
D. 50.00
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Ace Frisbee Corporation produces a good that is very mature in their product life cycles.Ace Frisbee Corporation is expected to pay a dividend in year 1 of $3.00, a dividend in year 2 of $2.00, and a dividend in year 3 of $1.00. After year 3, dividends are expected to decline at the rate of 2% per year. An appropriate required return for the stock is 8%. Using the multistage DDM, the stock should worth _____ today.
A. $13.07 B. $13.58 C. $18.25 D. $18.78 |
A. $13.07
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