Question 1

Which of the following is not a characteristic of a warrant?

Accepted Answer

A) The right to buy common stock in a corporation. 
B) Issued by the corporation or an individual. 
C) Typically valid for longer time periods than options. 
D) Similar to a call option with respect to a striking price. 
E) All of the above statements are characteristics of a warrant. 
A) The right to buy common stock in a corporation. 
B) Issued by the corporation or an individual. 
C) Typically valid for longer time periods than options. 
D) Similar to a call option with respect to a striking price. 
E) All of the above statements are characteristics of a warrant.

Question 2

Which of the following statements concerning historical investment risk and return is false?

Accepted Answer

A) The geometric mean of the rates of return was always lower than the arithmetic mean of the rates of return. 
B) The rates of return on long-term U.S. government bonds were lower than on stocks. 
C) Real estate investments consistently provide higher rates of return than those provided by common stock. 
D) Stocks and bonds experienced results in the middle of the art and antiques series. 
E) none of the above (that is, all are true statements) 
A) The geometric mean of the rates of return was always lower than the arithmetic mean of the rates of return. 
B) The rates of return on long-term U.S. government bonds were lower than on stocks. 
C) Real estate investments consistently provide higher rates of return than those provided by common stock. 
D) Stocks and bonds experienced results in the middle of the art and antiques series. 
E) none of the above (that is, all are true statements)

Question 3

An agreement that provides for the future delivery or receipt of an asset at a specified date for a specified price is a

Accepted Answer

A) Eurobonds contract. 
B) Futures contract. 
C) Put option contract. 
D) Call option contract. 
E) Warrant contract. 
A) Eurobonds contract. 
B) Futures contract. 
C) Put option contract. 
D) Call option contract. 
E) Warrant contract.

Question 4

A U.S. investor who ignores foreign markets reduces overall number of investment choices.

Accepted Answer

A) True 
 B)False

Question 5

Foreign equities can be acquired by purchasing all of the following except

Accepted Answer

A) American Depository Receipts (ADRs) 
B) American shares 
C) Foreign shares listed on a U.S. or foreign stock exchange 
D) Global Exchange-Traded Funds (GETFs) 
E) All of the above are ways to purchase foreign equities. 
A) American Depository Receipts (ADRs) 
B) American shares 
C) Foreign shares listed on a U.S. or foreign stock exchange 
D) Global Exchange-Traded Funds (GETFs) 
E) All of the above are ways to purchase foreign equities.

Question 6

Rank the following four investments in increasing order of historical risk.

Accepted Answer

A) Art, T-bills, corporate bonds, and common stock 
B) T-bills, common stock, corporate bonds, art 
C) Corporate bonds, T-bills, common stock, art 
D) Common stock, corporate bonds, T-bills, art 
E) T-bills, corporate bonds, common stock, art 
A) Art, T-bills, corporate bonds, and common stock 
B) T-bills, common stock, corporate bonds, art 
C) Corporate bonds, T-bills, common stock, art 
D) Common stock, corporate bonds, T-bills, art 
E) T-bills, corporate bonds, common stock, art

Question 7

Convertible bonds are bonds

Accepted Answer

A) That are convertible into more bonds. 
B) That are convertible from unsecured to secured status. 
C) That are convertible into company stock. 
D) That are convertible into specific assets. 
E) That have an option attached. 
A) That are convertible into more bonds. 
B) That are convertible from unsecured to secured status. 
C) That are convertible into company stock. 
D) That are convertible into specific assets. 
E) That have an option attached.

Question 8

Subordinated bondholders have claim to the assets of the firm only after the firm has satisfied the claims of all senior secured and debenture bondholders.

Accepted Answer

A) True 
 B)False

Question 9

The original maturity of a United States Treasury bill is

Accepted Answer

A) Zero years to five years. 
B) Six months to ten years. 
C) One year or less. 
D) One year to ten years. 
E) Over ten years. 
A) Zero years to five years. 
B) Six months to ten years. 
C) One year or less. 
D) One year to ten years. 
E) Over ten years.

Question 10

If you are considering investing in German stocks as a means to reduce the risk of your portfolio, the initial factor that you should examine is:

Accepted Answer

A) The average rate of return of the portfolio when you combine U.S. and German stocks. 
B) The standard deviation of the German stocks. 
C) The standard deviation of the German stocks compared to the standard deviation of U.S. stocks. 
D) The correlation between the rates of return for German stocks and U.S. stocks. 
E) The coefficient of variation (CV) of rates of return for German stocks versus the CV of rates of return for U.S. stocks. 
A) The average rate of return of the portfolio when you combine U.S. and German stocks. 
B) The standard deviation of the German stocks. 
C) The standard deviation of the German stocks compared to the standard deviation of U.S. stocks. 
D) The correlation between the rates of return for German stocks and U.S. stocks. 
E) The coefficient of variation (CV) of rates of return for German stocks versus the CV of rates of return for U.S. stocks.

Question 11

A return series has an arithmetic mean of 10.5% and standard deviation of 13%. Assuming the returns are normally distributed what is the range of returns that an investor would expect to receive 90% of the time?

Accepted Answer

A) 10.5% to 13% 
B) -2.5% to 23.5% 
C) -28.5 to 49.5% 
D) -15.5% to 36.5% 
E) 0% to 10.5% 
A) 10.5% to 13% 
B) -2.5% to 23.5% 
C) -28.5 to 49.5% 
D) -15.5% to 36.5% 
E) 0% to 10.5%

Question 12

Which of the following is not a type of investment company?

Accepted Answer

A) Money market funds 
B) Common stock funds 
C) Balanced funds 
D) Bond funds 
E) None of the above 
A) Money market funds 
B) Common stock funds 
C) Balanced funds 
D) Bond funds 
E) None of the above

Question 13

Warrants are options often issued in connection with the sale of fixed income securities.

Accepted Answer

A) True 
 B)False

Question 14

Certificates of ownership issued by a U.S. bank that represent indirect ownership of a certain number of shares of a specific foreign firm on deposit in a bank in the firm's home country are known as:

Accepted Answer

A) American Depository Receipts (ADRs) 
B) Exchange Traded Funds (ETFs) 
C) Warrants 
D) Options 
E) Futures 
A) American Depository Receipts (ADRs) 
B) Exchange Traded Funds (ETFs) 
C) Warrants 
D) Options 
E) Futures

Question 15

Income bonds are considered as safe as debentures because they pay higher rates of interest.

Accepted Answer

A) True 
 B)False

Question 16

What type of mutual fund issues "redeemable securities" meaning that the fund stands ready to buy or sell the shares at their net asset value with a transaction fee?

Accepted Answer

A) No-load, closed-end fund 
B) No-load, open-end fund 
C) Load, closed-end fund 
D) Load, open-end fund 
E) None of the above 
A) No-load, closed-end fund 
B) No-load, open-end fund 
C) Load, closed-end fund 
D) Load, open-end fund 
E) None of the above

Question 17

An ETF (exchange traded fund):

Accepted Answer

A) Is priced once a day at the opening of trading. 
B) Is priced once a day at the close of trading. 
C) Is priced continuously during the trading day. 
D) Is priced at the open and close of trading. 
E) None of the above. 
A) Is priced once a day at the opening of trading. 
B) Is priced once a day at the close of trading. 
C) Is priced continuously during the trading day. 
D) Is priced at the open and close of trading. 
E) None of the above.

Question 18

What is the 95 percent confidence interval for an investment with an expected return of 9 percent and a standard deviation of 15%?

Accepted Answer

A) 9% to 15% 
B) -6% to 24% 
C) -15% to 32% 
D) -21% to 39% 
E) -36% to 56% 
A) 9% to 15% 
B) -6% to 24% 
C) -15% to 32% 
D) -21% to 39% 
E) -36% to 56%

Question 19

All of the following are considered fixed income investments except

Accepted Answer

A) Corporate bonds. 
B) Preferred stock. 
C) Treasury bills, notes, and bonds. 
D) Money market mutual funds. 
E) Certificates of deposit (CDs). 
A) Corporate bonds. 
B) Preferred stock. 
C) Treasury bills, notes, and bonds. 
D) Money market mutual funds. 
E) Certificates of deposit (CDs).

Question 20

Which of the following would be considered a low liquidity investment?

Accepted Answer

A) Warrants 
B) Call options 
C) Zero coupon bonds 
D) Balanced mutual funds 
E) Diamonds 
A) Warrants 
B) Call options 
C) Zero coupon bonds 
D) Balanced mutual funds 
E) Diamonds

Exam 3: Selecting Investments in a Global Market

Which of the following is not a characteristic of a warrant?

Which of the following statements concerning historical investment risk and return is false?

An agreement that provides for the future delivery or receipt of an asset at a specified date for a specified price is a

A U.S. investor who ignores foreign markets reduces overall number of investment choices.

Foreign equities can be acquired by purchasing all of the following except

Rank the following four investments in increasing order of historical risk.

Convertible bonds are bonds

Subordinated bondholders have claim to the assets of the firm only after the firm has satisfied the claims of all senior secured and debenture bondholders.

The original maturity of a United States Treasury bill is

If you are considering investing in German stocks as a means to reduce the risk of your portfolio, the initial factor that you should examine is:

A return series has an arithmetic mean of 10.5% and standard deviation of 13%. Assuming the returns are normally distributed what is the range of returns that an investor would expect to receive 90% of the time?

Which of the following is not a type of investment company?

Warrants are options often issued in connection with the sale of fixed income securities.

Certificates of ownership issued by a U.S. bank that represent indirect ownership of a certain number of shares of a specific foreign firm on deposit in a bank in the firm's home country are known as:

Income bonds are considered as safe as debentures because they pay higher rates of interest.

What type of mutual fund issues "redeemable securities" meaning that the fund stands ready to buy or sell the shares at their net asset value with a transaction fee?

An ETF (exchange traded fund):

What is the 95 percent confidence interval for an investment with an expected return of 9 percent and a standard deviation of 15%?

All of the following are considered fixed income investments except

Which of the following would be considered a low liquidity investment?

The Investment Setting

The Asset Allocation Decision

Organization and Functioning of Securities Markets

Security-Market Indexes

Efficient Capital Markets

An Introduction to Portfolio Management

An Introduction to Asset Pricing Models

Multifactor Models of Risk and Return

Analysis of Financial Statements

Introduction to Security Valuation

Macroanalysis and Microvaluation of the Stock Market

Industry Analysis

Company Analysis and Stock Valuation

Technical Analysis

Equity Portfolio Management Strategies

Bond Fundamentals

The Analysis and Valuation of Bonds

Bond Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward and Futures Contracts

Option Contracts

Swap Contracts, Convertible Securities, and Other Embedded Derivatives

Professional Money Management, Alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

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