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| Which of the following countries in the European Union is currently experiencing the most difficulty with their banking system? |
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| Citizens of a country outside the EU hold almost half of the bank deposits in the troubled country noted in question 1. The citizens of the outside country are from: |
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| Investors are worried that the banking troubles will spread to other countries in the EU. Which country presents the most worries? |
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| The unsystematic risk of a stock portfolio is 10%. The beta of the stock is 1 and the variance of the market portfolio is 25%. The total risk of the stock portfolio is... |
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| a passive investment strategy |
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Definition
| Proponents of the Efficient Market Hypothesis typically advocate.... |
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| located on the capital market line to those located on the efficient frontier |
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| Rational risk-adverse investors will always prefer portfolios... |
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Definition
| The standard deviation of return on investment A is .10 while the standard deviation of return on investment B is .05. If the covariance of returns on A and B is .0030, the correlation coefficient between the returns on A and B is.... |
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| Diversification is most effective when security returns are... |
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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? |
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| the returns on the stock and bond portfolio tend to vary independently of each other |
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Definition
| Suppose that a stock portfolio and a bond portfolio have a zero correlation. This means that... |
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| The primary objective of fundamental analysis is to identify.... |
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| When stock returns exhibit positive serial correlation, this means that _____ returns tend to follow ____ returns. |
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| When the market breaks through the moving average line from below, a technical analyst would probably suggest it is a good time to..... |
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| invoice price + flat price + accrued interest |
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Definition
Which of the following statements is true?
invoice price = flat price - accrued interest
invoice price = flat price + accrued interest
flat price = invoice price + accrued interest
invoice price = settlement price - accrued interest |
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Definition
| A convertible bond has a par value of $1,000 but its current market price is $975. The current price of the issuing company's stock is $26 and the conversion ratio is 34 shares. The bond's market conversion value is.... |
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Definition
| The ______ of a bond is computed as the ratio of coupon payments to market price |
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Definition
| The ______ is the document defining the contract between the bond issuer and the bond holder. |
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Definition
| Because of convexity, when interest rates change the actual bond price will _____ the bond price predicted by duration. |
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Definition
| The duration of a 5-year zero coupon bond is ____ years. |
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Definition
| You own a bond that has a duration of 6 years. Interest rates are currently 7% but you believe the Fed is about to increase interest rates by 25 basis points. Your predicted price change on this bond is .... |
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Term
| Brazil, Russia, India, China |
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Definition
| There are four fast growing economies called the BRIC countries. They are.... |
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Definition
| If the futures price of gasoline is about $3.00, we should expect to pay at the pump about... |
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Term
| They are an important part of the global economy |
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Definition
| Investors should be concerned about the economic health of the EU primarily because... |
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Term
| the S&P spot index will probably be up at opening |
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Definition
| If S&P futures prices are up before the market opens, then |
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Definition
| A bond issue is broken up so that some investors will receive interest payments while others will receive principal payments. This is an example of ..... |
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Definition
| A _______ represents an ownership share in a corporation |
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| is unrelated to the value of a related security |
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Definition
| The value of a derivative security.... |
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Term
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Definition
| _____ portfolio management calls for holding diversified portfolios without spending effort or resources attempting to improve investment performance through security analysis. |
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Term
-Security prices approach informational efficiency
-riskier securities are priced to offer higher potential returns
-Investors are unlikely to be able to consistently find under- or overvalued securities |
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Definition
| Active trading in markets and competition among securities analysts helps ensure that... |
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Term
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Definition
real assets in the economy include all but which of the following?
-land -consumer durables
-buildings -common stock |
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Definition
| A _______ gives its holder the right to sell an asset for a specified exercise price on or before a specified expiration date. |
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| a corporate convertible bond gives its holder the right to exchange it for a specified number of the company's common stock |
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Definition
| Which of the following is a true statement regarding corporate bonds? |
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Term
| normally about 80% of the yield on taxable bonds |
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Definition
| The before tax yield on tax-exempt bond is .... |
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Term
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Definition
Which of the following is not a money market instrument?
-Treasury Bill -Preferred Stock
-Commercial Paper -Banker's acceptance |
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Definition
| A dollar denominated deposit at a London bank is called..... |
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Definition
| If an investor places a _____ order the stock will be sold if its prices falls to the stipulated level. If an investor places a ______ order the stock will be bought if its price rises above the stipulated level. |
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Term
$1375
(1003.25-1000.5)*500 |
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Definition
| On a given day a stock dealer maintains a bid price of $1000.50 for a bond and an ask price of $1003.25. The dealer made 10 trades which totaled 500 bonds traded that day. What was the dealer's gross trading profit for this security? |
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Definition
| An order to buy or sell a security at the current price is a .... |
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| Initial Margin requirements on stocks are set by..... |
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Term
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Definition
| Purchase of new issues of stock take place ..... |
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Term
| in proportion to the market value weight of the firm's equity in the S&P 500 |
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Definition
| The Vanguard 500 Index Fund tracks the performance of the S&P 500. To do so the fund buys shares in each S&P 500 company..... |
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| Assume that you have just purchased some shares in an investment company reporting $500 million in assets, $50 million in liabilities, and 50 million shares outstanding. What is the Net Asset Value (NAV) of these shares? |
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Definition
| A contingent deferred sales charge is commonly called a ____. |
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Term
| guaranteed rates of return |
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Definition
Advantages of investment companies to investors include all but which one of the following?
-record keeping and admin
-low cost diversification
-professional mngt
-guaranteed rates of return |
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Term
| market value of assets minus liabilities divided by shares outstanding |
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Definition
| Net Asset Value is defined as.... |
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Term
| Treasury bills, risky assets |
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Definition
| 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. |
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Definition
| The ___ measure of returns ignores compounding. |
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Small Stocks
Large Stocks
Long term Bonds
T-Bills |
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Definition
Rank the following from highest avg historical return to lowest avg historical return from 1926-2008
-Small stocks
-long term bonds
-large stocks
-t-bills |
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Term
Withdrawals after retirement are tax free
you are taxed "up front" |
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Definition
| Malkiel, in "Random Walk....." discusses the Roth IRA. In the Roth IRA... |
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| Low P/E ratios because of increased perception risk |
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Definition
| Malkiel argues that stock returns were very low during the 70s because.... |
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Definition
| If the currency of your country is depreciating, the result should be to _____ exports and to ______imports. |
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| Trade as little as possible |
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Definition
| Some successful principles for stock picking according to Malkiel are: |
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Term
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Definition
| the "normal" range of p/e ratios for the S&P 500 Index is... |
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Term
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Definition
| High p/e ratios tend to indicate that a company will ____, ceteris paribus |
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Term
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Definition
| is equal to (common shareholder's equity/ common shares outstanding) |
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Definition
| _____ are analysts who use information concerning current and prospective profitability of a firm to assess the firm's fair market value. |
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| that real rates of return on stocks are positively correlated with inflation |
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Definition
| Recent empirical research indicates ..... |
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| Construction Machinery Company has an expected ROE of 11%. The dividend growth rate will be ____ if the firms follows a policy of paying 25% of earning in the form of dividends. |
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