Question 1
1. The best index to assess the performance of a portfolio diversified among several asset classes such as stocks, bonds and real estate is
Question 2
1. Lipper indexes are to assess the performance of
I and II only
I and III only
I, II and III only
I, II, III and IV
Question 3
1. Which one of the following provides the greatest reduction in total risk?
Question 4
1. A moderate asset allocation alternative might include
I and II only
I, III and IV only
I, II and III only
I, II, III and IV
Question 5
1. To compute the holding period return on a bond investment, the investor should divide the purchase price of the bond into
Question 6
1. Asset allocation should focus on
Question 7
1. Which of the following is a good reason to invest in convertible bonds?
Question 8
1. Investors who buy mutual funds that have had large gains over the last few years are exhibiting a tendency known as
Question 9
1. When a bond is called, the bondholder generally faces a rate of return that is lower than expected.
True
False
Question 10
1. Which of the following accurately reflect appropriate investment guidelines?
I and II only
III and IV only
I, III and IV only
I, II, III and IV
Question 11
1. One type of mutual fund spreads investors' money across equity markets, bond markets, and money markets. Moreover, as market conditions change, the amount of money invested in each market sector will change. This type of mutual fund is known as a(n)
socially responsible fund.
fiscally responsible fund.
growth-and-income fund.
asset allocation fund.
Question 12
1. The longer the time to maturity, the less sensitive a bond's price will be to changes in interest rates.
True
False
Question 13
1. Which one of the following statements concerning interest rates is correct?
A decrease in the money supply will cause interest rates to decline.
A federal budget surplus will cause interest rates to decline.
Economic expansions will cause interest rates to decline.
Rising interest rates in foreign countries will cause U.S. interest rates to decline.
Question 14
1. Mutual fund investors are primarily exposed to ________ and ________ risks.
market; financial
market; inflation
business; financial
business; inflation
Question 15
1. "Baby blues" is a term used to refer to telecom stocks.
True
False
Question 16
1. A portfolio with a beta of 1.06
Question 17
1. From October 2007 to March 2009, stock prices as measured by the S&P 500 Index
Question 18
1. The Capital Asset Pricing Model (CAPM) includes which of the following in its base assumptions?
I and III only
II and IV only
I, II and III only
I, III and IV only
Question 19
1. Jobs in which of the following fields require an understanding of the investment environment?
I and IV only
I, II and IV only
II, III and IV only
I, II, III and IV
Question 20
1. Short-term investments generally provide liquidity, safety, and a high rate of return.
True
False
Question 21
1. If the S&P 500 index is at 1,461, then the cash value of an S&P 500 index option is
$14.61.
$1,461.
$14,610.
$146,100.
Question 22
1. Writing covered calls protects the writer from losses if the price of the underlying stock declines.
True
False
Question 23
1. The value of an interest rate call option
Question 24
1. ETF options are settled in
cash.
ETF shares.
share of the companies in the index.
The writer has the choice of settling in either cash or ETF shares.
Question 25
1. The longer the time to expiration, the lower the option time premium tends to be.
True
False
Question 26
1. One reason that writing options can be a viable and profitable investment strategy is that
Question 27
1. LEAPS is an acronym for
Question 28
1. A put has fundamental value as long as
Question 29
1. Which of the following affect the value of puts and calls written on shares of common stock?
I and II only
I, II and III only
II, III and IV only
I, II, III and IV
Question 30
1. The buyer of a put expects the price of the underlying stock to rise.
True
False
Question 31
1. Rights and warrants are the riskiest types of options.
True
False
Question 32
1. The three steps in determining a stock's intrinsic value are
III and IV only
I, II and IV only
I, III and IV only
Question 33
1. MBA Inc. will pay a dividend for the first time at the end of 2013. It projects the following dividend per share:
Beginning with 2016 dividends will grow at 4% per year. The required rate of return is 12%. The intrinsic value of MBA shares is
$25.37.
$27.85.
$28.96.
$38.50.
Question 34
1. A company has an annual dividend growth rate of 5% and a retention rate of 40%. The company's dividend payout ratio is
35%.
40%.
45%.
60%.
Question 35
1. If the market multiple is 23.0 and the P/E ratio of a company is 27.4, then the stock's relative P/E is
0.84.
1.19.
3.21.
4.40.
Question 36
1. The governmental agency that oversees the capital markets is the
Federal Trade Commission.
Federal Reserve.
Securities and Exchange Commission.
Fair Trade and Banking Agency.
Question 37
1. Crossing markets are those that
Question 38
1. Individuals can use the Internet to
I and IV only
II and III only
I, III and IV only
I, II, III and IV
Question 39
1. Which of the following indexes would best reflect the performance of a large, diversified portfolio with equal amounts of money invested in each company.
the S&P 500 Index
the Russell 3000
the NASDAQ 100
the Value Line Composite Index
Question 40
1. Over a period of time if an investment has not met its return objective, it should be sold.
True
False
Question 41
1. Sharpe's measure of portfolio performance compares the risk premium on a portfolio to
Question 42
1. A portfolio has a total return of 14.5%, a beta of 1.54, and a standard deviation of 17.6%. If the risk free rate is 4.5% and the market return is 10.2%, then Treynor's measure of this portfolio's performance is
2.8%.
3.7%.
6.5%.
9.4%.
Question 43
1. Ella owns a stock with a beta of 1.34 and a standard deviation of 16.4%. The stock has a total return of 14.8%. The market risk premium is 8.5%, while the return on the market portfolio was 12.0%. What is the value of Sharpe's measure for Ella's portfolio?
0.21
0.38
0.69
0.90
Question 44
1. The constant-ratio plan
requires the establishment of trigger points for portfolio rebalancing.
utilizes a predetermined ratio between desired current yield and expected capital gains.
strictly adheres to a buy-and-hold strategy.
is an attempt to time the cyclical movements of the market.
Question 45
1. An investor adopts a policy of investing in both an aggressive mutual fund and a short-term bond fund. When the value of the aggressive fund exceeds 65% of the portfolio value, shares of that fund are sold such that the aggressive fund represents only 45% of the portfolio. This is an example of a ________ plan.
constant-dollar
dollar-cost averaging
constant-ratio
variable-ratio
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