Question 1

The best way to directly acquire the shares of a foreign company is through

Accepted Answer

A) International mutual funds. 
B) Global mutual funds. 
C) American Depository Receipts. 
D) Investment in U.S.companies operating internationally. 
E) Eurobonds.

Question 2

Which of the following is not a U.S. government agency?

Accepted Answer

A) Federal National Mortgage Association 
B) Federal Home Loan Bank 
C) Government National Mortgage Association 
D) Government Employees Insurance Company 
E) Federal Housing Administration

Question 3

A bond provision that specifies payments the issuer must make to redeem a given percentage of the outstanding issue prior to maturity is known as

Accepted Answer

A) Call provision 
B) Indenture 
C) Collateralization 
D) Sinking fund 
E) Collateral trust bond

Question 4

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

Question 5

An individual with only $10,000 to invest is most likely better off investing in:

Accepted Answer

A) Mutual funds to increase the expected return 
B) ETFs to increase the diversification 
C) Individual equities to increase portfolio efficiency 
D) Individual bonds and individual equities to increase efficiency 
E) All of the above are rational choices

Question 6

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%

Question 7

Exhibit 3.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
  The annual rate of inflation is 2.5%
-Refer to Exhibit 3.2. What is the small capitalization stock nominal return?

Accepted Answer

A) 3.56% 
B) 5.37% 
C) 6.19% 
D) 9.16% 
E) 11.32%

Question 8

A Eurobond is an international bond

Accepted Answer

A) Sold by an issuer within its own country in that country's currency. 
B) Denominated in a currency not native to where it is issued. 
C) Also known as a Yankee Bond. 
D) Denominated in U.S.dollars but issued by a foreign company. 
E) That is sold only to European investors.

Question 9

A Eurobond is an international bond denominated in a currency other than that of the United States.

Accepted Answer

A) True 
 B)False

Question 10

An investor who purchases a put option:

Accepted Answer

A) Has the right to buy a given stock at a specified price during a designated time period. 
B) Has the right to sell a given stock at a specified price during a designated time period. 
C) Has the obligation to buy a given stock at a specified price during a designated time period. 
D) Has the obligation to sell a given stock at a specified price during a designated time period. 
E) None of the above.

Question 11

If the real return for corporate bonds was 4% and the inflation rate was 2%, what is the nominal return for corporate bonds?

Accepted Answer

A) 1.96% 
B) 2.00% 
C) 4.00% 
D) 6.08% 
E) 6.42%

Question 12

A return series has an arithmetic mean of 12.8% and standard deviation of 7.8%. 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) 12.8% to 20.6% 
B) -10.6% to 36.2% 
C) -2.8% to 28.4% 
D) -12.8% to 20.6% 
E) 10.6% to 36.2%

Question 13

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

Question 14

Exhibit 3.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
  The annual rate of inflation is 2%.
-Refer to Exhibit 3.1. What is the real return on T-bills?

Accepted Answer

A) 1.02% 
B) 3.68% 
C) 4.71% 
D) 11.27% 
E) 13.33%

Question 15

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.

Question 16

Yields on money market funds are often lower than yields available to individuals investing in CD's because of the fees involved.

Accepted Answer

A) True 
 B)False

Question 17

A mutual 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.

Question 18

A return series has an arithmetic mean of 12.8% and standard deviation of 7.8%. Assuming the returns are normally distributed what is the range of returns that an investor would expect to receive 95% of the time?

Accepted Answer

A) 12.8% to 20.6% 
B) -10.6% to 36.2% 
C) -2.8% to 28.4% 
D) -12.8% to 20.6% 
E) 10.6% to 36.2%

Question 19

It is very important when diversifying that the correlation between rates of return for various countries be high and very stable over time.

Accepted Answer

A) True 
 B)False

Question 20

Exhibit 3.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
  The annual rate of inflation is 2.5%
-Refer to Exhibit 3.2. What is the long term Treasury bond nominal return?

Accepted Answer

A) 3.56% 
B) 5.37% 
C) 6.19% 
D) 9.16% 
E) 11.32%

Exam 3: Selecting Investments in a Global Market

The best way to directly acquire the shares of a foreign company is through

Which of the following is not a U.S. government agency?

A bond provision that specifies payments the issuer must make to redeem a given percentage of the outstanding issue prior to maturity is known as

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

An individual with only $10,000 to invest is most likely better off investing in:

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

Exhibit 3.2 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The annual rate of inflation is 2.5% -Refer to Exhibit 3.2. What is the small capitalization stock nominal return?

A Eurobond is an international bond

A Eurobond is an international bond denominated in a currency other than that of the United States.

An investor who purchases a put option:

If the real return for corporate bonds was 4% and the inflation rate was 2%, what is the nominal return for corporate bonds?

A return series has an arithmetic mean of 12.8% and standard deviation of 7.8%. Assuming the returns are normally distributed what is the range of returns that an investor would expect to receive 90% of the time?

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:

Exhibit 3.1 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The annual rate of inflation is 2%. -Refer to Exhibit 3.1. What is the real return on T-bills?

The original maturity of a United States Treasury bill is

Yields on money market funds are often lower than yields available to individuals investing in CD's because of the fees involved.

A mutual fund:

A return series has an arithmetic mean of 12.8% and standard deviation of 7.8%. Assuming the returns are normally distributed what is the range of returns that an investor would expect to receive 95% of the time?

It is very important when diversifying that the correlation between rates of return for various countries be high and very stable over time.

Exhibit 3.2 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The annual rate of inflation is 2.5% -Refer to Exhibit 3.2. What is the long term Treasury bond nominal return?