Question 1

In calculating the Dow Jones Industrial Average,the adjustment for a stock split occurs _________.

Accepted Answer

A)  automatically 
B)  by adjusting the divisor 
C)  by adjusting the numerator 
D)  by adjusting the market value weights 
A)  automatically 
B)  by adjusting the divisor 
C)  by adjusting the numerator 
D)  by adjusting the market value weights

Question 2

______ voting of common stock gives minority shareholders the most representation on the board of directors.

Accepted Answer

A)  Majority 
B)  Cumulative 
C)  Rights 
D)  Proxy 
A)  Majority 
B)  Cumulative 
C)  Rights 
D)  Proxy

Question 3

Three stocks have share prices of $12,$75,and $30 with total market values of $400 million,$350 million and $150 million respectively.If you were to construct a price-weighted index of the three stocks what would be the index value?

Accepted Answer

A)  300 
B)  39 
C)  43 
D)  30 
A)  300 
B)  39 
C)  43 
D)  30

Question 4

The Hydro Index is a price weighted stock index based on the 5 largest boat manufacturers in the nation.The stock prices for the five stocks are $10,$20,$80,$50 and $40.The price of the last stock was just split 2 for 1 and the stock price was halved from $40 to $20.What is the new divisor for a price weighted index?

Accepted Answer

A)  5.00 
B)  4.85 
C)  4.50 
D)  4.75 
A)  5.00 
B)  4.85 
C)  4.50 
D)  4.75

Question 5

The most actively traded money market security is

Accepted Answer

A)  Treasury bills 
B)  Bankers' Acceptances 
C)  Certificates of Deposit 
D)  Common stock 
A)  Treasury bills 
B)  Bankers' Acceptances 
C)  Certificates of Deposit 
D)  Common stock

Question 6

Investors will earn higher rates of returns on TIPS than equivalent default risk standard bonds if _______________.

Accepted Answer

A)  inflation is lower than anticipated over the investment period 
B)  inflation is higher than anticipated over the investment period 
C)  the U.S. dollar increases in value against the euro 
D)  the spread between commercial paper and Treasury securities remains low 
A)  inflation is lower than anticipated over the investment period 
B)  inflation is higher than anticipated over the investment period 
C)  the U.S. dollar increases in value against the euro 
D)  the spread between commercial paper and Treasury securities remains low

Question 7

Which of the following is used to back international sales of goods and services?

Accepted Answer

A)  Certificate of deposit 
B)  Banker's acceptance 
C)  Eurodollar deposits 
D)  Commercial paper 
A)  Certificate of deposit 
B)  Banker's acceptance 
C)  Eurodollar deposits 
D)  Commercial paper

Question 8

A dollar denominated deposit at a London bank is called _____.

Accepted Answer

A)  eurodollars 
B)  LIBOR 
C)  fed funds 
D)  banker's acceptance 
A)  eurodollars 
B)  LIBOR 
C)  fed funds 
D)  banker's acceptance

Question 9

A bond issued by the State of Alabama is priced to yield 6.25%.If you are in the 28% tax bracket this bond would provide you with an equivalent taxable yield of _________.

Accepted Answer

A)  4.50% 
B)  7.25% 
C)  8.68% 
D)  none of the above 
A)  4.50% 
B)  7.25% 
C)  8.68% 
D)  none of the above

Question 10

All but which one of the following indices is value weighted?

Accepted Answer

A)  Nasdaq Composite 
B)  S&P 500 
C)  Wilshire 5000 
D)  DJIA 
A)  Nasdaq Composite 
B)  S&P 500 
C)  Wilshire 5000 
D)  DJIA

Question 11

The purchase of a futures contract gives the buyer _________.

Accepted Answer

A)  the right to buy an item at a specified price 
B)  the right to sell an item at a specified price 
C)  the obligation to buy an item at a specified price 
D)  the obligation to sell an item at a specified price 
A)  the right to buy an item at a specified price 
B)  the right to sell an item at a specified price 
C)  the obligation to buy an item at a specified price 
D)  the obligation to sell an item at a specified price

Question 12

TIPS are ______.

Accepted Answer

A)  Treasury bonds that pay a variable rate of interest 
B)  U.K. bonds that protect investors from default risk 
C)  securities that trade on the Toronto stock index 
D)  Treasury bonds that protect investors from inflation 
A)  Treasury bonds that pay a variable rate of interest 
B)  U.K. bonds that protect investors from default risk 
C)  securities that trade on the Toronto stock index 
D)  Treasury bonds that protect investors from inflation

Question 13

A T-bill quote sheet has 90 day T-bill quotes with a 4.92 bid and a 4.86 ask.If the bill has a $10,000 face value an investor could buy this bill for

Accepted Answer

A)  $10,000.00 
B)  $9,878.50 
C)  $9,877.00 
D)  $9,880.16 
A)  $10,000.00 
B)  $9,878.50 
C)  $9,877.00 
D)  $9,880.16

Question 14

The German stock market is measured by which market index?

Accepted Answer

A)  FTSE 
B)  Dow Jones 30 
C)  DAX 
D)  Nikkei 
A)  FTSE 
B)  Dow Jones 30 
C)  DAX 
D)  Nikkei

Question 15

What would you expect to have happened to the spread between yields on commercial paper and Treasury bills immediately after September 11,2001?

Accepted Answer

A)  No change, as both yields will remain the same. 
B)  Increase, the spread usually increases in response to a crisis. 
C)  Decrease, the spread usually decreases in response to a crisis. 
D)  No change, as both yields will move in the same direction. 
A)  No change, as both yields will remain the same. 
B)  Increase, the spread usually increases in response to a crisis. 
C)  Decrease, the spread usually decreases in response to a crisis. 
D)  No change, as both yields will move in the same direction.

Question 16

Ownership of a call option entitles the owner to the __________ to __________ a specific stock,on or before a specific date,at a specific price.

Accepted Answer

A)  right, buy 
B)  right, sell 
C)  obligation, buy 
D)  obligation, sell 
A)  right, buy 
B)  right, sell 
C)  obligation, buy 
D)  obligation, sell

Question 17

Which one of the following is a true statement?

Accepted Answer

A)  Dividends on preferred stocks 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)  Preferred stockholders have voting power 
D)  Investors can sue managers for nonpayment of preferred dividends 
A)  Dividends on preferred stocks 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)  Preferred stockholders have voting power 
D)  Investors can sue managers for nonpayment of preferred dividends

Question 18

In a ___________ index changes in the value of the stock with the greatest market value will move the index value the most everything else equal.

Accepted Answer

A)  value weighted index 
B)  equal weighted index 
C)  price weighted index 
D)  bond price index 
A)  value weighted index 
B)  equal weighted index 
C)  price weighted index 
D)  bond price index

Question 19

Which of the following is not a characteristic of a money market instrument?

Accepted Answer

A)  Liquidity 
B)  Marketability 
C)  Low risk 
D)  Maturity greater than one year 
A)  Liquidity 
B)  Marketability 
C)  Low risk 
D)  Maturity greater than one year

Question 20

______ would not be included in the EAFE index.

Accepted Answer

A)  Australia 
B)  Canada 
C)  France 
D)  Japan 
A)  Australia 
B)  Canada 
C)  France 
D)  Japan

Exam 2: Asset Classes and Financial Instruments

In calculating the Dow Jones Industrial Average,the adjustment for a stock split occurs _________.

______ voting of common stock gives minority shareholders the most representation on the board of directors.

Three stocks have share prices of $12,$75,and $30 with total market values of $400 million,$350 million and $150 million respectively.If you were to construct a price-weighted index of the three stocks what would be the index value?

The most actively traded money market security is

Investors will earn higher rates of returns on TIPS than equivalent default risk standard bonds if _______________.

Which of the following is used to back international sales of goods and services?

A dollar denominated deposit at a London bank is called _____.

A bond issued by the State of Alabama is priced to yield 6.25%.If you are in the 28% tax bracket this bond would provide you with an equivalent taxable yield of _________.

All but which one of the following indices is value weighted?

The purchase of a futures contract gives the buyer _________.

TIPS are ______.

A T-bill quote sheet has 90 day T-bill quotes with a 4.92 bid and a 4.86 ask.If the bill has a $10,000 face value an investor could buy this bill for

The German stock market is measured by which market index?

What would you expect to have happened to the spread between yields on commercial paper and Treasury bills immediately after September 11,2001?

Ownership of a call option entitles the owner to the __________ to __________ a specific stock,on or before a specific date,at a specific price.

Which one of the following is a true statement?

In a ___________ index changes in the value of the stock with the greatest market value will move the index value the most everything else equal.

Which of the following is not a characteristic of a money market instrument?

______ would not be included in the EAFE index.

Investments: Background and Issues

Securities Markets

Mutual Funds and Other Investment Companies

Risk and Return: Past and Prologue

Efficient Diversification

Capital Asset Pricing and Arbitrage Pricing Theory

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Bond Prices and Yields

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation

Financial Statement Analysis

Options Markets

Option Valuation

Futures Markets and Risk Management

Portfolio Performance Evaluation

Globalization and International Investing

Hedge Funds

Taxes,inflation,and Investment Strategy

Investors and the Investment Process

Filters

Ownership of a call option entitles the owner to the to a specific stock,on or before a specific date,at a specific price.