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1) The trading of stock that was previously issued takes place A) in the secondary market. B) in the primary market. C) usually with the assistance of an investment banker. D) in the secondary and primary markets.

10) In 2018, ____________ was the most significant asset of U.S. households in terms of total value. A) real estate B) mutual fund shares C) debt securities D) life insurance reserves E) pen sion reserves

10) Investors in closed -end funds who wish to liquidate their positions must A) sell their shares through a broker. B) sell their shares to the issuer at a discount to net asset value. C) sell their shares to the issuer at a premium to net asset value. D) sell their shares to the issuer for net asset value. E) hold their shares to maturity.

12) According to the mean -variance criterion, which one of the following investments dominates all others? A) E(r) = 0.15; Variance = 0.20 B) E(r) = 0.10; Variance = 0.20 C) E(r) = 0.10; Variance = 0.25 D) E(r) = 0.15; Variance = 0.25 E) None of these options dominates the other alternatives.

12) In 2018, which of the following financial assets make up the second highest proportion of the financial assets held by U.S. households? A) Corporate equity B) Life insurance reserves C) Mutual fund shares D) Debt securitie s E) Personal trusts

12) The expected return of a portfolio of risky securities A) is a weighted average of the securities' returns. B) is the sum of the securities' returns. C) is the weighted sum of the securities' variances and covariances. D) is a weighted average of the securities' returns and the weighted sum of the securities' vari ances and covariances. E) None of the options are correct.

13) Ceteris paribus, a decrease in the demand for loans A) drives the interest rate down. B) drives the interest rate up. C) might not have any effect on interest rates. D) results from an increase in business prospects and a decrease in the level of savings.

34) Which of the following portfolio construction methods starts with asset allocation? A) Top -down B) Bottom -up C) Middle -out D) Buy and hold E) Asset allocat ion

20) You sold short 300 shares of common stock at $55 per share. The initial margin is 60%. At what stock price would you receive a margin call if the maintenance margin is 35%? A) $51.00 B) $65.19 C) $35.22 D) $40.36

21) Assume you sold short 100 shares of common stock at $50 per share. The initial margin A) 40% B) 33% C) 35% D) 25%

22) Consider the following three stocks: Stock Price Number of shares outstanding Stock A $ 40 200 Stock B $ 70 500 Stock C $ 10 600 The price -weighted index constructed with the three stocks is A) 30. B) 40. C) 50. D) 60. E) 70.

23) According to the mean -variance criterion, which of the statements below is correct? Investment E(r) Standard Deviation A 10 % 5 % B 21 % 11 % A) Investment B dominates investment A. B) Investment B dominates investment C. C) Investment D dominates all of the other investments. D) Investment D dominates only investment B. E) Investment C dominates investment A.

23) Shares for short transactions A) are usually borrowed from other brokers. B) are typically shares held by the short seller's broker in street name. C) are borrowed from commercial banks. D) are typically shares held by the short seller's broker in street name and are borrowed from commercial banks.

24) Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10 % 8 % 2 0.20 13 % 7 % 3 0.20 12 % 6 % 4 0.30 14 % 9 % 5 0.20 15 % 8 % The variances of stocks A and B are _____ and _____, respectively. A) 1.5%; 1.9% B) 2.2%; 1.2% C) 3.2%; 2.0% D) 1.5%; 1.1%

5) If the annual real rate of interest is 6%, and the expected inflation rate is 2%, the nominal rate of interest would be approximately A) 1%. B) 8%. C) 20%. D) 15%.

5) T-bills are financial instruments initially sold by ________ to raise funds. A) commercial banks B) the U.S. government C) state and local governments D) agencies of the federal government E) the U.S. government and agencies of the federal government

6) Financial assets A) directly contribute to the country's productive capacity. B) indirectly contribute to the country's productive capacity. C) contribute to the country's productive capacity, both directly and indirectly. D) do not contribute to the country's productive capacity, either directly or indirectly. E) are of no value to anyone.

6) If the annual real rate of interest is 3.0%, and the expected inflation rate is 4.0%, the nominal rate of interest would be approximately A) 3.7%. B) 7.0%. C) 2.5%. D) âˆ'1.2%.

6) The bid price of a T -bill in the secondary market i s A) the price at which the dealer in T -bills is willing to sell the bill. B) the price at which the dealer in T -bills is willing to buy the bill. C) greater than the asked price of the T -bill. D) the price at which the investor can buy the T -bill. E) never quoted in the financial press.

60) Consider the following probability distribution for stocks A and B: 1 0.15 8 % 8 % 2 0.20 13 % 7 % 3 0.15 12 % 6 % 4 0.30 14 % 9 % 5 0.20 16 % 11 % The standard deviations of stocks A and B are _____ and _____, respectively. A) 1.56%; 1.99% B) 2.45%; 1.66% C) 3.22%; 2.01% D) 1.54%; 1.11%

60) When comparing investments with different horizons, the ____________ provides the more accurat e comparison. A) arithmetic average B) effective annual rate C) average annual return D) historical annual average

30) An investor invests 25% of his wealth in a risky asset with an expected rate of return of 0.17 and a variance of 0.08 and 60% in a T -bill that pays 4.5%. His portfolio's expected return and standard deviation are __________ and __________, respectively. A) 0.114; 0.126 B) 0.087; 0.068 C) 0.076; 0.071 D) 0.087; 0.124 E) None of the options are correct.

31) Asset allocation refers to A) choosing which securities to hold based on their valuation. B) investing on ly in "safe" securities. C) the allocation of assets into broad asset classes. D) bottom -up analysis.

31) Consider two perfectly negatively correlated risky securities A and B. A has an expected rate of return of 10% and a standard deviation of 16%. B has an expected rate of return of 8% and a standard deviation of 12%. The risk -free portfolio that can be formed with the two securities will earn a(n) _____ rate of return. A) 8.5% B) 9.0% C) 8.9% D) 9.9%

32) Which of the following statements regarding the Dow Jones Industrial Average (DJIA) is false ? A) The DJIA is a measure of the performance of the stock market. B) The DJIA consists of 30 blue chip stocks. C) The DJIA is affected equally by changes in low - and high -priced stocks. D) The DJIA divisor needs to be adjusted for stock splits. E) The value of the DJIA is much higher than individual stock prices.

33) The index that includes the l argest number of actively -traded stocks is A) the NASDAQ Composite Index. B) the NYSE Composite Index. C) the Wilshire 5000 Index. D) the Value Line Composite Index. E) the Russell Index.

33) You invest $100 in a risky asset with an expected rate of return of 0.12 and a standard deviation of 0.15 and a T -bill with a rate of return of 0.05. What percentages of your money must be invested in the risk -free asset and the risky asset, respectively, to form a portfolio with a standard deviation of 0.06? A) 30% and 70% B) 50% and 50% C) 60% and 40% D) 40% and 60% E) Cannot be determined.

50) You purchased 100 shares of common stock on margi n at $40 per share. Assume the initial margin is 50%, and the stock pays no dividend. What would the maintenance margin be if a margin call is made at a stock price of $25? Ignore interest on margin. A) 0.33 B) 0.55 C) 0.20 D) 0.23 E) 0.25

51) In order for you to be indifferent between the after -tax returns on a corporate bond paying 9% and a tax -exempt municipal bond paying 7%, what would your tax bracket need to be? A) 17.6% B) 27% C) 22.2% D) 19. 8% E) Cannot be determined from the information given.

51) Your client, Bo Regard, holds a complete portfolio that consists of a portfolio of risky assets ( P) and T -Bills. The information below refers to these assets. E(Rp) 12.00 % Standard Deviation of P 7.20 % T-Bill rate 3.60 % Proportion of Complete Portfolio in P 80 % Proportion of Complete Portfolio in T -Bills 20 % Composition of P: Stock A 40.00 % Stock B 25.00 % Stock C 35.00 % Total 100.00 % A) 40%, 25%, 35% B) 8%, 5%, 7% C) 32%, 20%, 28% D) 16%, 10%, 14% E) 20%, 12.5%, 17.5%

52) Over the past year, you earned a nominal rate of interest of 3.6% on your money. The inflation rate was 3.1% over the same period. The exact actual growth rate of yo ur purchasing A) 3.6%. B) 3.1%. C) 0.48%. D) 6.7%.

54) Assume you sell short 1,000 shares of common stock at $35 per share, with initial margin at 50%. What would be your rate of return if you repurchase the stock at $25 per share? The stock paid no dividends during the period, and you did not remove any money from the account before making th e offsetting transaction. A) 20.47% B) 25.63% C) 57.14% D) 77.23%

55) Of the following types of ETFs, an investor who wishes to invest in a diversified portfolio that tracks the Nasdaq 100 should choose A) SPY. B) DIA. C) QQQ. D) IWM. E) VTI.

56) You invest $100 in a risky asset with an expected rate of return of 0.11 and a standard deviation of 0.20 and a T -bill with a rate of return of 0.03. What percentages of your money must be invested in the risky asset and the risk -free asset, respectively, to form a portfolio with an expected return of 0.08? A) 85% and 15% B) 75% and 25% C) 62.5% and 37.5% D) 57% and 43% E) Cannot be determined.

57) A major problem experienced by cryptocurrency, which makes it problematic to store value is _____________. A) distributed ledgers B) blockchain C) price volatility D) transaction security E) All of the options

57) You invest $100 in a risky asset with an expected rate of return of 0.11 and a standard deviation of 0.20 and a T -bill with a rate of return of 0.03. What percentages of your money must be invested in the risk -free asset and the risky asset, respectively, to form a portfolio with a standard deviation of 0.08? A) 30% and 70% B) 50% and 50% C) 60% and 40% D) 40% and 60% E) Can not be determined.

57) You want to purchase IBM stock at $130 from your broker using as little of your own money as possible. If initial margin is 50% and you have $19,500 to invest, how many shares can A) 150 shares B) 200 shares C) 300 shares D) 500 shares E) 25 shares

59) Of the following types of ETFs, an investor who wishes to invest in a diversified portfolio that tracks the MSCI France Index should choose A) SPY. B) EWJ. C) EWQ. D) IWM. E) VTI.

6) Diversified Portfolios had year -end assets of $279,000,000 and liabilities of $43,000,000. If Diversified's NAV was $42.13, how many shares must have been held in the fund? A) 43,000,000 B) 6,488,372 C) 5,601,709 D) 1,182,203

61) Consider the following probability distribution for stocks A and B:State Probability Return on Stock A Return on Stock B 1 0.15 8 % 8 % 2 0.20 13 % 7 % 3 0.15 12 % 6 % 4 0.30 14 % 9 % 5 0.20 16 % 11 % A) 0.474. B) 0.612. C) 0.590. D) 1.206.

61) The ____ index represents the performance of the Japanese stock market. A) DAX B) FTSE C) Nikkei D) Hang Seng

61) You sold short 100 shares of common stock at $75 per share. The initial margin is 50%. At what stock price would you receive a margin call if the maintenance margin is 30%? A) $90.23 B) $88.52 C) $86.54 D) $87.12

62) Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.15 8 % 8 % 2 0.20 13 % 7 % 3 0.15 12 % 6 % 4 0.30 14 % 9 % 5 0.20 16 % 11 % If you invest 35% of your money in A and 65% in B, what would be your portfolio's expected rate of return and standard deviation? A) 9.9%; 3% B) 9.9%; 1.1% C) 10%; 1.7% D) 10%; 3%

64) The ____ index represents the performance of the Canadian stock market. A) DAX B) FTSE C) TSX D) Hang Seng

64) You invest $100 in a risky asset with an expected rate of return of 0.11 and a standard deviation of 0.21 and a T -bill with a rate of return of 0.045. A) investing $100 in the risky asset. B) investing $80 in the risky asset and $20 in the risk -free asset. C) borrowing $46 at the risk -free rate and investing the total amount $146 in the risky asset. D) investing $43 in the ris ky asset and $57 in the risk -free asset. E) Such a portfolio cannot be formed.

65) You invest $100 in a risky asset with an expected rate of return of 0.11 and a standard deviation of 0.21 and a T -bill with a rate of return of 0.045. The slope of the capital allocation line formed with the risky asset and the risk -free asset is equal to A) 0.4667. B) 0.8000. C) 0.3095. D) 0.41667. E) Cannot be determined.

67) Skewness is a measure of A) how fat the tails of a distribution are. B) the downside risk of a distribution. C) the symmetry of a distribution. D) the dividend yield of the distribution. E) None of the options are correct.

67) The expected return of a two asset portfolio with a correlation coefficient of .35 will be A) below B) above C) equal to D) None of the options are correct

69) What was the name of the system that introduced the NYSE to electronic trading? A) International Exchange B) NYSE Hybrid Market C) Designated O rder Turnaround D) NYSE Euronext

7) In 2018, ____________ was the most significant real asset of U.S. households in terms of total value. A) consumer durables B) automobiles C) real estate D) mutual fund shares E) bank loans

7) Pinnacle Fund had year -end assets of $825,000,000 and liabilities of $25,000,000. If Pinnacle's NAV was $32.18, how many shares must have been held in the fund? A) 21,619,346.92 B) 22,930,546.28 C) 24,860,161.59 D) 25,693,645.25

70) Certificates of deposit are insured for up to ____________ in the event of bank insolvency. A) $10,000 B) $100,000 C) $250,000 D) $500,000

70) When a di stribution is negatively skewed, A) standard deviation overestimates risk. B) standard deviation correctly estimates risk. C) standard deviation underestimates risk. D) the tails are fatter than in a normal distribution.

71) What kind of entity will often sell a company via an initial public offering, when the firm gets too big for similar entities to purchase? A) Underwriter B) Investment banking C) Private Equity D) Broker Test name: Chapter 03 Test Bank - Static

73) If a portfolio had a return of 12%, the risk -free asset return was 4%, and the standard deviation of the portfolio's excess returns was 25%, the Sharpe measure would be A) 0.12. B) 0.04. C) 0.32. D) 0.16. E) 0.25.

78) You purchased a futures contract on corn at a futures price of 350, and at the time of expiration, the price was 352. What was your profit or loss? A) $2.00 B) âˆ'$2.00 C) $100 D) âˆ'$100

79) Practitioners oft en use a ________% VaR, meaning that ________% of returns will exceed the VaR, and ________% will be worse. A) 25; 75; 25 B) 75; 25; 75 C) 1; 99; 1 D) 95; 5; 95 E) 80; 80; 20

81) You sold a futures contract on corn at a futures price of 331, and at the time of expiration, the price was 343. What was your profit or loss? A) âˆ'$12.00 B) $12.00 C) âˆ'$600 D) $600

84) Which combination of returns and standard deviation provides the highest Sharpe ratio? Assume a 3% risk free rate. A) return = 12%, standard deviation = 20% B) return = 15%, standard deviation = 22% C) return = 21%, standard deviation = 25% D) return = 25%, standard deviation = 35%

85) A(n) ____________________ can be used to show the poss ible outcomes from a normal distribution function. A) bell curve B) cumulative normal function C) event tree D) confidence level

88) An investor pays $104,280 for a treasury bond. The price mostly listed in the Wall Street Journal show as the ask price will be _________. A) 98.20 B) 100.00 C) 104.28 D) 106.33 E) 108.00 Test name: Chapter 02 Test Bank - Static

9) Pools of money invested in a portfolio that is fixed for the life of the fund are called A) closed -end f unds. B) open -end funds. C) unit investment trusts. D) REITS. E) redeemable trust certificates.

11) A portfolio has an expected rate of return of 0.15 and a standard deviation of 0.15. The risk-free rate is 6%. An investor has the following utility function: U = E(r) âˆ' (A/2)s2. Which value of A makes this investor indifferent between t he risky portfolio and the risk -free asset? A) 5 B) 6 C) 7 D) 8

11) Closed -end funds are frequently issued at a ______ to NAV and subsequently trade at a __________ to NAV. A) discount; discount B) discount; premium C) premium; premium D) premium; discount E) No consistent relationship has b een observed.

11) Which of the following statement(s) is(are) true? A) Inflation has no effect on the nominal rate of interest. B) The realized nominal rate of interest is always greater than the real rate of interest. C) Certificates of deposit offer a guaranteed real rate of interest. D) None of the options are true.

11) Which one of the following statements regarding orders is false ? A) A market order is simply an order to buy or sell a stock immediately at the prevailing market price. B) A limit -sell order is where investors specify prices at which they are willing to sell a security. C) If stock ABC is selling at $50, a limit -buy order may instruct the broker to buy the stock if and when the share price falls below $45. D) A market order is a n order to buy or sell a stock on a specific exchange (market).

12) Restrictions on trading involving insider information apply to the following, except A) corporate officers. B) corporate directors. C) major stockholders. D) All of the individuals. E) None of the options.

13) Deposits of commercial banks at the Federal Reserve Bank are called A) bankers' acceptances. B) repurchase agreements. C) time deposits. D) federal funds. E) reserve requirements.

13) Other things equal, diversification is most effective when A) securities' returns are uncorrelated. B) securities' returns are positively correlated. C) se curities' returns are high. D) securities' returns are negatively correlated. E) securities' returns are positively correlated and high.

31) You have been given this probability distribution for the holding -period return for Cheese, Inc. stock: Stock of the Economy Probability HPR Boom 0.20 24 % Assuming that the expected return on Cheese's stock is 14.35%, what is the standard deviation of these returns? A) 4.72% B) 6.30% C) 4.38% D) 5.74% E) None of the options are correct.

32) A program trade is A) a trade of 10,000 (or more) shares of a stock. B) a trade of many shares of one stock for one other stock. C) a trade of analytic programs between financial analysts. D) a coordinated purchase or sale of an entire portfolio of stocks. E) not feasible with current technology but is expected to be popular in the near future.

32) Given an optimal risky portfolio with expected return of 6%, standard deviation of 23%, and a risk free rate of 3%, what is the slope of the best feasible CAL? A) 0.64 B) 0.39 C) 0.08 D) 0.13 E) 0.36

32) You invest $100 in a risky asset with an expected rate of return of 0.12 and a standard deviation of 0.15 and a T -bill with a rate of return of 0.05. What per centages of your money must be invested in the risky asset and the risk -free asset, A) 85% and 15% B) 75% and 25% C) 67% and 33% D) 57% and 43% E) Cannot be dete rmined.

49) You have been given this probability distribution for the holding -period return for a stock: Stock of the Economy Probability HPR Boom 0.40 22 % Normal growth 0.35 11 % Recession 0.25 â€" 9 % What is the expected standard deviation for the stock? A) 2.07% B) 9.96% C) 7.04% D) 1.44% E) None of the options are correct.

81) When assessing tail risk by looking at the 5% worst -case scenario, the most realistic view of downside exposure would be A) expected sh ortfall. B) value at risk. C) conditional tail expectation. D) expected shortfall and value at risk. E) expected shortfall and conditional tail expectation.

82) A portfolio generates a Sharpe ratio of 0.83. Which of the following benchmark Sharpe ration would be considered show the portfolio over performed? A) 0.81 B) 0.79 C) 0.65 D) 0.62 E) All of them

86) What interest rate have US regulators proposed be the new short term benchmark rate? A) SONIA B) LIBOR C) Tokyo Interbank rate D) Euribor E) US Treasury Repo

9) In 2018, ____________ was the most significant financial asset of U.S. households in terms of total value. A) real estate B) mutual fund shares C) debt securities D) life insurance reserves E) pension reserves

14) The efficient frontier of risky assets is A) the portion of the minimum -variance p ortfolio that lies above the global minimum variance portfolio. B) the portion of the minimum -variance portfolio that represents the highest standard deviations. C) the portion of the minimum -variance portfolio that includes the portfolios with th e lowest standard deviation. D) the set of portfolios that have zero standard deviation.

15) Historical records regarding return on stocks, Treasury bonds, and Treasury bills between 1926 and 2018 show that A) stocks offered investors greater rates of return than bonds and bills. B) stock returns were less volatile than those of bonds and bills. C) bonds offered investors greater rates of return than stocks and bills. D) bills outperformed stocks and bonds. E) Treasury bills always offered a rate of return greater than inflation .

17) In 2018, the proportion of mutual funds (based on total assets) specializing in bonds was A) 21.7%. B) 28.0%. C) 54.1%. D) 73.4%. E) 63.5%.

17) You have been given this probability distribution for the holding -period return for KMP stock: Stock of the Economy Probability HPR Boom 0.30 18 % Normal growth 0.50 12 % What is the expected holding -period return for KMP stock? A) 10.40% B) 9.32% C) 11.63% D) 11.54% E) 10.88%

19) You have been given this probability distribution for the holding -period return for KMP stock: Normal growth 0.50 12 % Recession 0.20 â€" 5 % What is the expected variance for KMP stock? A) 66.04% B) 69.96% C) 77.04% D) 63.72% E) 78.45%

2) Systematic risk i s also referred to as A) market riskor nondiversifiable risk. B) market riskor diversifiable risk. C) unique riskor nondiversifiable risk. D) unique riskor diversifiable risk. E) None of the options are correct.

21) The value of a derivative security A) depends on the value of the related security. B) is unable to be calculated. C) is unrelated to the value of the related security. D) has been enhanced due to the recent misuse and negative publicity regarding these instruments. E) is worthless today.

21) Which of the following statem ent(s) is(are) false regarding the selection of a portfolio from those that lie on the capital allocation line?I) Less risk -averse investors will invest more in the risk -free security and less in the optimal risky portfolio than more risk -averse investors. II) More risk -averse investors will invest less in the optimal risky portfolio and more in the risk -free security than less risk -averse investors.III) Investors choose the portfolio that maximizes their expected utility. A) I only B) II only C) III only D) I and II E) I and III

22) If a portfolio had a return of 18%, the risk -free asset return was 5%, and the standard deviation of the portfolio's excess returns was 34%, the risk premium would be A) 13%. B) 18%. C) 49%. D) 12%. E) 29%.

22) The certainty equivalent rate of a portfolio is A) the rate that a risk -free investment would need to offer with certainty to be considered equally attractive as the risky portfolio. B) the rate that the investor must earn for certain to give up the use of his mone y. C) the minimum rate guaranteed by institutions such as banks. D) the rate that equates " A" in the utility function with the average risk aversion coefficient for all risk -averse investors. E) represented by the scaling factor " -0.005" in the utility function.

23) Investors' Choice Fund had NAV per share of $37.25 on January 1, 2018. On December 31 of the same year, the fund s rate of return for the year was 17.3%. Income distributions were $1.14, and the fund had capital gain distributions of $1.35. Without considering taxes and transactions costs, what ending NAV would you calculate for Investors' Choice? A) $41.20 B) $33.88 C) $43.69 D) $42.03 E) $46.62

24) The ____________ refers to the potential conflict between management and shareholders. A) agency problem B) diversification problem C) liquidity problem D) solvency problem E) regulatory problem

25) Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10 % 8 % 2 0.20 13 % 7 % 3 0.20 12 % 6 % 5 0.20 15 % 8 % The coefficient of correlation between A and B is (Do not round intermediate calcuations.) A) 0.47. B) 0.60. C) 0.58. D) 1.20.

25) The capital allocation line can be described as the A) investment opportunity set formed with a risky asset and a risk -free asset. B) investment opportunity set formed with two risky assets. C) line on which lie all portfolios that offer the same utility to a particular investor. D) line on which lie all portfolios with the same expected rate of return and different standard deviations.

27) As of 2018, which class of mutual funds had the largest amount of assets invested? A) Equity funds B) Bond funds C) Mixed asset classes, such as asset allocation funds D) Money market funds E) Global funds

27) In words, the real rate of interest is approximately equal to A) the nominal rate minus the inflation rate. B) the inflation rate minus the nominal rate. C) the nominal rate times the inflation rate. D) the inflation rate divided by the nominal rate. E) the nominal rate plus the inflation rate.

31) An investor invests 60% of his wealth in a risky asset with an expected rate of return of 0.15 and a variance of 0.04 and 40% in a T -bill that pays 5%. His portfolio's expected return and standard deviation are __________ and __________, respectively. A) 0.110; 0.12 B) 0.087; 0.06 C) 0.295; 0.12 D) 0.087; 0.12

32) An investor purchased a bond 45 days ago for $985. He received $15 in interest and sold the bond for $980. What is the holding -period return on his investment? A) 1.02% B) 0.50% C) 1.92% D) 0.01%

32) Assume that you purchased 200 shares of Super Performing mutual fund at a net asset value of $21 per sh are. During the year, you received dividend income distributions of $1.50 per share and capital gains distributions of $2.85 per share. At the end of the year, the shares had a A) 30.24% B) 25.37% C) 27.19% D) 22.44% E) 29.18%

32) Security selection refers to A) choosing which securities to hold based on their valuation. B) investing only in "safe" securities. C) the allocation of assets into broad asset classes. D) top -down analysis.

34) Which one of the following portfolios cannot lie on the efficient frontier as described by Mark owitz? Portfolio Expected Return Standard Deviation W 9 % 21 % X 5 % 7 % Y 15 % 36 % Z 12 % 15 % A) Only portfolio W cannot lie on the efficient frontier. B) Only portfolio X cannot lie on the efficient frontier. C) Only portfolio Y cannot lie on the efficient frontier. D) Only portfolio Z cannot lie on the efficient frontier. E) Cannot be determined from the information given.

35) If the market prices of eac h of the 30 stocks in the Dow Jones Industrial Average (DJIA) all change by the same percentage amount during a given day, which stock will have the greatest A) The stock trading at the highest dollar price per share B) The stock having the greatest amount of debt in its capital structure C) The stock having the greatest amount of equity in its capital structure D) The stock having the lowest volatility

35) Over the past year, you earned a nominal rate of interest of 14% on your money. The inflation rate was 2% over the same period. The exact actual growth rate of your purchasing power was A) 11.76%. B) 16.00%. C) 15.02%. D) 14.32%.

35) You invest $100 in a risky asset with an expected rate of return of 0.12 and a standard deviation of 0.15 and a T -bill with a rate of return of 0.05. The slope of the capital allocation line formed with the risky asset and the risk -free a sset is equal to A) 0.4667. B) 0.8000. C) 2.14. D) 0.41667. E) Cannot be determined.

36) You want to purchase KO stock at $60 from your broker using as little of your own money as possible. If initial margin is 50% and you have $3,000 to invest, how many shares can A) 100 shares B) 200 shares C) 50 shares D) 500 shares E) 25 shares

37) A year ago, you invested $1,000 in a savings account that pays an annual interest rate of 6%. What is your approximate annual real rate of return if the rate of inflation was 2% over the year? A) 4% B) 2% C) 6% D) 3%

39) A year ago, you invested $2,500 in a savings account that pays an annual interest rate of 5.7%. What is your approximate annual real rate of return i f the rate of inflation was 1.6% over the year? A) 4.1% B) 2.5% C) 2.9% D) 1.6%

39) In 2018, ____________ was(were) the most significant financial asset(s) of U.S. commercial banks in terms of total value. A) loans and leases B) cash C) real estate D) deposits E) investment securities

4) A year ago, you invested $10,000 in a savings account that pays an annual interest rate of 5%. What is your approximate annual real rate of return if the rate of inflation was 1.5% over the year? A) 3. 5% B) 10% C) 7% D) 4% E) None of the options are correct.

4) Multiple Mutual Funds had year -end assets of $457,000,000 and liabilities of $17,000,000. There were 24,300,000 shares in the fund at year end. What was Multiple Mutual's A) $18.11 B) $18.81 C) $69.96 D) $7.00 E) $181.07

40) You are considering investing $1,000 in a T -bill that pays 0.05 and a risky portfolio, P, constructed with two risky securities, X and Y. The weights of X and Y in P are 0.60 and 0.40, respect ively. X has an expected rate of return of 0.14 and variance of 0.01, and Y has an expected rate of return of 0.10 and a variance of 0.0081. What would be the dollar value of your positions in X, Y, and the T -bills, respectively, if you decide to hold a portfolio that has an expected outcome of $1,120? A) $568; $378; $54 B) $568; $54; $378 C) $378; $54; $568 D) $108; $514; $378 E) Cannot be determined.

41) A mutual fund had year -end assets of $521,000,000 and liabilities of $63,000,000. If the fund NAV was $26.12, how many shares must have been held in the fund? A) 17,534,456 B) 16,488,372 C) 18,601,742 D) 17,542,515

41) The individual investor's optimal portfolio is designated by A) the point of tangency with the indifference curve and the capital allocation line. B) the point of highest reward to variability ratio in the opportunity set. C) the point of tangency with the opportunity set and th e capital allocation line. D) the point of the highest reward to variability ratio in the indifference curve. E) None of the options are correct.

42) If the annual real rate of interest is 2.5%, and the expected inflation rate is 1.0%, the nominal rate of interest would be a pproximately A) 3.5%. B) 2.5%. C) 1%. D) 6.8%. E) None of the options are correct.

43) A mutual fund had year -end assets of $437,000,000 and liabilities of $37,000,000. If the fund NAV was $60.12, how many shares must have been held in the fund? A) 6,653,360 B) 8,412,642 C) 10, 165,476 D) 9,165,414 E) 9,219,160

43) If the annual real rate of interest is 2.5%, and the expected inflation rate is 3.4%, the nominal rate of interest would be app roximately A) 5.9%. B) 0.9%. C) â€"0.9%. D) 7%. E) None of the options are correct.

43) The first major step in asset allocation is A) assessing risk tolerance. B) analyzing financial statements. C) estimating security betas. D) identifying market anomalies.

44) If the annual real rate of interest is 4%, and the expected inflation rate is 2%, the nominal rate of interest would be approxim ately A) 6%. B) 3%. C) 1%. D) 5%. E) None of the options are correct.

44) In a typical underwriting arrangement, the investment -banking firm I) sells shares to the public via an underwriting syndicate. II) purchases the securities from the issuing company. III) assumes the full risk that the shares may not be sold at the offering price. IV) agrees to help the firm sell the issue to the publ ic but does not actually purchase the securities. A) I, II, and III B) I, III, and IV C) I and IV D) II and III E) I and II

44) What does the ter m negotiable mean, with regard to negotiable certificates of deposit? A) The CD can be sold to another investor if the owner needs to cash it in before its maturity date. B) The rate of interest on the CD is subject to negotiation. C) T he CD is automatically reinvested at its maturity date. D) The CD has staggered maturity dates built in. E) The interest rate paid on the CD will vary with a designated market rate.

45) In 2018, ____________ was(were) the least significant f inancial asset(s) of U.S. nonfinancial businesses in terms of total value. A) cash and deposits B) trade credit C) trade debt D) inventory E) marketable securities

46) A mutual fund had NAV per share of $26.25 on January 1, 2018. On December 31 of the same year, the fund's rate of r eturn for the year was 16.4%. Income distributions were $1.27, and the fund had capital gain distributions of $1.85. Without considering taxes and transactions costs, what ending NAV would you calculate? A) $27.44 B) $33.88 C) $24.69 D) $42.03 E) $16.62

46) New issues of securities are sold in the _____ ___ market(s). A) primary B) secondary C) over -the-counter D) primary and secondary

47) You purchased a share of stock for $65. One year later, you received $2.37 as a dividend and sold the share for $63. What was your holding -period return? A) 0.57% B) âˆ'0.2550% C) âˆ'0.89% D) 1.63% E) None of the options are correct.

48) A mutual fund had NAV per share of $36.15 on January 1, 2018. On December 31 of the same year, the fund's rate of return for the year was 14.0%. Income distributions were $1.16, and the fund had capital gain distributions of $2.12. Without considering taxes and transactions costs, A) $37.93 B) $34.52 C) $44.69 D) $47.25 E) $36.28

48) You purchased 100 shares of KO common stock on margin at $60 per share. Assume the initial margin is 50%, and the maintenance margin is 30%. Below what stock price level would you get a margin call? Assume the stock pays no div idend; ignore interest on margin. A) $42.86 B) $50.75 C) $49.67 D) $80.34

48) Your client, Bo Regard, holds a complete portfolio that consists of a portfolio of risky assets (P) and T -Bills. The information below refers to these assets. E(Rp) 12.00 % Standard Deviation of P 7.20 % T-Bill rate 3.60 % Proportion of Complete Portfolio in P 80 % Proportion of Complete Portfolio in T -Bills 20 % Composition of P: Stock A 40.00 % Stock B 25.00 % Stock C 35.00 % Total 100.00 % What is the expected return on Bo's complete portfolio? A) 10.32% B) 5.28% C) 9.62% D) 8.44% E) 7.58%

52) Of the following types of mutual funds, an investor who wishes to invest in a diversified portfolio of foreign stocks (excluding the U.S.) should choose A) international funds. B) global funds. C) regional funds. D) emerging -market funds.

53) Of the following types of ETFs, an investor who wishes to invest in a diversified portfolio that tracks the S&P 500 should choose A) SPY. B) DIA. C) QQQ. D) IWM. E) VTI.

54) An investor invests 35% of his wealth in a risky asset with an expected rate of return of 0.18 and a variance of 0.10 and 65% in a T -bill that pays 4%. His portfolio's expected return and standard deviation are __________ and __________, respectively. A) 0.089; 0.111 B) 0.087; 0.063 C) 0.096; 0.126 D) 0.087; 0.144

55) Assume you sell short 100 shares of common stock at $30 per share, with initial margin at 50%. What would be your rate of return if you repurchase t he stock at $35 per share? The stock paid no dividends during the period, and you did not remove any money from the account before making the offsetting transaction. A) âˆ'33.33% B) âˆ'25.63% C) âˆ'57.14% D) âˆ'77.23%

55) For a taxpayer in the 24% marginal tax bracket, a 20 -year municipal bond currently yielding 5.5% would offer an equivalent ta xable yield of A) 7.24%. B) 10.75%. C) 5.5%. D) 4.125%.

55) ________ are, in essence, an insurance contract against the default of one or more A) Credit default swaps B) CMOs C) ETFs D) Collateralized debt obligations E) All of the options

58) The separation property refers to the conclusion that A) the dete rmination of the best risky portfolio is objective, and the choice of the best complete portfolio is subjective. B) the choice of the best complete portfolio is objective, and the determination of the best risky portfolio is objective. C) the choi ce of inputs to be used to determine the efficient frontier is objective, and the choice of the best CAL is subjective. D) the determination of the best CAL is objective, and the choice of the inputs to be used to determine the efficient frontier is su bjective. E) investors are separate beings and will, therefore, have different preferences regarding the risk -return tradeoff.

58) Which country has banned initial coin offerings? A) China B) Germany C) Japan D) USA E) All of the options

59) You invest $1,000 in a risky asset with an expected rate of return of 0.17 and a standard deviation of 0.40 and a T-bill with a rate of return of 0.04. What percentages of your money must be invested in the risky asset and the risk -free asset, A) 53.8% and 46.2% B) 75% and 25% C) 62.5% and 37.5% D) 46.2% and 53.8% E) Cannot be determined.

6) In a "firm commitment," the investment banker A) buys the stock from the company and resells the issue to the public. B) agrees to help the firm sell the stock at a favorable price. C) f inds the best marketing arrangement for the investment -banking firm. D) agrees to help the firm sell the stock at a favorable price and finds the best marketing arrangement for the investment -banking firm.

60) The ____ index represents the performance of the Germa n stock market. A) DAX B) FTSE C) Nikkei D) Hang Seng

60) You sold short 100 shares of common stock at $45 per share. The initial margin is 50%. At what stock price would you receive a margin call if the maintenance margin is 35 %? A) $50 B) $65 C) $35 D) $40

61) Annual percentage rates (APRs) are computed using A) simple interest. B) compound i nterest. C) either simple interest or compound interest. D) best estimates of expected real costs. E) None of the options are correct.

61) You invest $1,000 in a risky asset with an expected rate of return of 0.17 and a standard deviation of 0.40 and a T -bill with a rate of return of 0.04. The slope of the capital allocation line formed with the risky asset and the ri sk-free asset is equal to A) 0.325. B) 0.675. C) 0.912. D) 0.407. E) Cannot be determined.

62) A mutual fund had average daily assets of $4.0 billion in 2018. The fund sold $1.5 billion worth of stock and purchased $1.6 billion worth of stock during the year. The fund's turnover ratio is A) 37.5%. B) 22%. C) 15%. D) 45%. E) 20%.

62) The preliminary prospectus is referred to as a(n) A) red herring. B) indenture. C) greenmail. D) tombstone. E) headstone.

62) You invest $100 in a risky asset with an expected rate of return of 0.11 and a standard deviation of 0.21 and a T -bill with a rate of return of 0.045. What percentages of your money must be invested in the risky asset and the risk -free asset, respectively, to form a portfolio with an expected return of 0.13? A) 130.77% and âˆ'30.77% B) âˆ'30.77% and 130.77% C) 67.67% and 33.33% D) 57.75% and 42.25% E) Cannot be determined.

63) The securities act of 1933 I) requires full disclosure of relevant information relating to the issue of new securities. II) requires registration of new securities. III) requires issuance of a prospectus detailing financial prospects of the firm. IV) established th e SEC. V) requires periodic disclosure of relevant financial information. VI) empowers SEC to regulate exchanges, OTC trading, brokers, and dealers. A) I, II, and III B) I, II, III, IV, V, and VI C) I, II, and V D) I, II, and IV E) IV only

65) The ultimate stock index in the U.S. is the A) Wilshire 5000. B) DJIA. C) S&P 500. D) Russell 2000.

66) According to the CFA Institute Standards of Professional Conduct, CFA Institute members have responsibilities to all of the following, except A) the government. B) the profess ion. C) the public. D) the employer. E) clients and prospective clients.

66) Given an optimal risky portfolio with expected return of 16%, standard deviation of 20%, A) 0.60 B) 0.14 C) 0.08 D) 0.36 E) 0.31

66) The standard deviation of a two asset portfolio with a correlation coefficient of .35 will be _______________ the weighted average standard deviation of the portfolio. A) below B) above C) equal to D) None of the options are correct

67) You purchased shares of a mutual fund at a price of $20 per share at the beginning of the year and paid a front -end load of 6.0%. If the securities in which the fund invested increased in value by 10% during the year, and the fund's expense ratio was 1.5%, your return if you sold the A) 1.99%. B) 2.32%. C) 1.65%. D) 2.06%. E) None of the options are correct.

68) For ca pital investments where the forecasted return is below the investor â€™s required return and above the capital market line, the investment is likely ________________. A) overvalued B) undervalued C) properly values D) None of the optio ns are correct

68) Kurtosis is a measure of A) how fat the tails of a distribution are. B) the downside risk of a distribution. C) the normality of a distribution. D) the dividend yield of the distribution.

68) The phrase _____________________ is used to describe ETFs that, like actively managed mutual funds, attempt to outperform passive indexes. A) non -transparent B) growth C) value D) hedge

68) Who purchased the NYSE in 2013? A) International Exchange B) NYSE Hybrid Market C) Designated Order Turnaround D) NYSE Euronext

69) When a distribution is po sitively skewed, A) standard deviation overestimates risk. B) standard deviation correctly estimates risk. C) standard deviation underestimates risk. D) the tails are fatter than in a normal distribution.

70) A type of REIT that invests primarily in construc tion loans would be classified as a ______________. A) mortgage trust B) equity trust. C) revocable trust D) bond trust E) All of the options are true.

70) The process of marketing a public offering is usually referred to as ____________. A) Underwriting B) Investment banking C) Brokerage D) Discounting E) IPO

70) The reduction in standard deviation from a well diversified portfolio of 100 stocks will ______________ than that of a 200 stock portfolio. A) not be statistically significa ntly different B) be statistically significantly different C) equal to D) None of the options are correct Test name: Chapter 06 Test Bank - Static

71) The maximum maturity of commercial paper tha t can be issued without SEC registration is A) 270 days. B) 180 days. C) 90 days. D) 30 days.

73) A U.S. dollar -denominated bond that is sold in Singapore is a(n) A) Eurobond. B) Yankee bond. C) Samurai bond. D) Bulldog bond.

74) A municipal bond issued to finance an airport, hospital, turnpike, or port authority is typically a A) revenue bond. B) general -obligation bond. C) industrial -development bond. D) revenue bond or general -obligation bond.

75) If a portfolio had a return of 12%, the risk -free asset return was 4%, and the standard deviation of the portfolio's excess returns was 25%, the risk premium would be A) 8%. B) 16%. C) 37%. D) 21%. E) 29%.

8) The risk that can be diversified away is A) firm -specific risk. B) beta. C) systematic risk. D) market risk.

82) You purchased a futures contract on oats at a futures price of 233.75, and at the time of expiration, the price was 261.25. What was your profit or loss? A) $1375.00 B) âˆ'$1375.00 C) âˆ'$27.50 D) $27.50

85) What interest rate have British regulators proposed be the new short term benchmark A) SONIA B) LIBOR C) To kyo Interbank rate D) Euribor E) US Treasury Repo

9) Assume an investor with the following utility function: U = E(r)âˆ' 0.60( s2). To maximize her expected utility, she would choose the asset with an expected rate of return of _______ and a standard deviation of ________, respectively. A) 12%; 20% B) 10%; 15% C) 10%; 10% D) 8%; 10%

9) The largest com ponent of the fixed -income market is _______ debt. A) Treasury B) asset -backed C) corporate D) tax -exempt E) mortgage -backed

19) Efficient portfolios of N risky securities are portfolios that A) are formed with the securities that have the highest rates of return regardless of their standard deviations. B) have the highest rates of return for a given level of risk. C) are selected from those securities with the lowest standard deviations regardless of their returns. D) have the highest risk and rates of return an d the highest standard deviations. E) have the lowest standard deviations and the lowest rates of return.

20) The presence of risk means that A) investors will lose money. B) more than one outcome is possible. C) the standard deviation of the payoff is larger than its expected value. D) final wealt h will be greater than initial wealth. E) terminal wealth will be less than initial wealth.

20) Which of the following indices is (are) market -value weighted?I) The New York Stock Exchange Composite IndexII) The Standard and Poor's 500 Stock IndexIII) The Dow Jones Industrial Average A) I only B) I and II only C) I and III only D) I, II, and III E) II and III on ly

37) The measure of risk in a Markowitz efficient frontier is A) specific risk. B) standard deviation of returns. C) reinvestment risk. D) beta.

1) Market risk is also referred to as A) systematic risk or diversifiable risk. B) systematic riskor nondiversifiable risk. C) unique riskor nondiversifiable risk. D) unique riskor diversifiable risk.

1) The material wealth of a society is a function of A) all financial assets. B) all real assets. C) all financial and real assets. D) all physical assets.

10) Which of the following statement(s) is(are) true?I) The real rate of interest is determined by the supply and demand for funds.II) The real rate of interest is determined by the expected rate of inflation.III) The real rate of interest can be affected by actions of the Fed.IV) The real A) I and II only B) I and III only C) III and IV only D) II and III only E) I, II, III, and IV only

11) In 2018, ____________ were the most significant liability of U.S. households in terms of A) credit cards B) mortgages C) bank loans D) student loans E) other forms of debt

12) At issue, offering prices of open -end funds will often be A) less than NAV due to loads. B) greater than NAV due to loads. C) less than NAV due to limited demand. D) greater than NAV due to excess dem and. E) less than or greater than NAV with no apparent pattern.

12) Other things equal, an increase in the government budget deficit A) drives the interest rate down. B) drives the interest rate up. C) might not have any effect on interest rates. D) increases business prospects.

14) The holding -period return (HPR) on a share of stock is equal to A) the capital gain yield during the period plus the inflation rate. B) the capital gain yield during the period plus the dividend yield. C) the current yield plus the dividend yield. D) the dividend yield plus the risk premium. E) th e change in stock price.

14) The largest compone nt of domestic net worth in 2018 was A) nonresidential real estate. B) residential real estate. C) inventories. D) consumer durables. E) equipment and software.

16) Consider an investment opportunity set formed with two securities that are perfectly negatively correlated. The global -minimum variance portfolio has a standard deviation that is A) greater than zero. B) equal to zero. C) equal to the sum of the securities' standard deviations. D) equal to âˆ'1.

16) Use the below information to answer the following question. Investment Expected Return E(r) Standard Deviation 1 0.12 0.13 2 0.15 0.15 3 0.21 0.16 4 0.24 0.21 U = E(r) âˆ' (A/2)s2, where A = 4.0. The variable ( A) in the utility function represents the A) investor's return requirement. B) investor's aversion to risk. C) certainty -equivalent rate of the portfolio. D) minimum required utility of the portfolio.

16) You purchased 100 shares of IBM common stock on margin at $130 per share. Assume the initial margin is 50%, and the maintenance margin is 30%. Below what stock price level would you get a margin call? Assume the stock pays no dividend; ignore interest on margin. A) $21.24 B) $92.86 C) $49.52 D) $80.33

17) A fixed -income security pays A) a fixed level of income for the life of the owner. B) a fixed stream of income or a strea m of income that is determined according to a specified formula for the life of the security. C) a variable level of income for owners on a fixed income. D) a fixed or variable income stream at the option of the owner.

18) You have been given this probability distribution for the holding -period return for KMP stock: Stock of the Economy Probability HPR Boom 0.30 18 % Normal growth 0.50 12 % Recession 0.20 â€" 5 % What is the expected standard deviation for KMP stock? A) 6.91% B) 8.13% C) 7.79% D) 7.25% E) 8.85%

24) Steve is more risk -averse than Edie. On a graph that shows Steve and Edie's indifference curves, which of the following is true? Assume that the graph shows expected return on the vertical axis and standard deviation on the horizontal axis. I) Steve and Edie's indifference curv es might intersect. II) Steve's indifference curves will have flatter slopes than Edie's. III) Steve's indifference curves will have steeper slopes than Edie's. IV) Steve and Edie's indifference curves will not intersect. V) Steve's indifference curves will be downward sloping, and Edie's will be upward sloping. A) I and V B) I and III C) III and IV D) I and II E) II and IV

25) The p rice quotations of Treasury bonds in the Wall Street Journal show an ask price of 104.25 and a bid price of 104.125. As a buyer of the bond, what is the dollar price you expect to A) $1,048.00 B) $1,042.50 C) $1,044.00 D) $1,04 1.25 E) $1,040.40

26) Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10 % 8 % 2 0.20 13 % 7 % 3 0.20 12 % 6 % 4 0.30 14 % 9 % 5 0.20 15 % 8 % If you invest 40% of your money in A and 60% in B, what would be your portfolio's expected rate of return and standard deviation? A) 9.9%; 3% B) 9.9%; 1.1% C) 11%; 1.1% D) 11%; 3% E) None of the options are correct.

27) An investor purchases one municipal and one corporate bond that pay rates of return of 8% and 10%, respectively. If the investor is in the 22% marginal tax bracket, h is or her after -tax rates of return on the municipal and corporate bonds would be ________ and ______, respectively. A) 8%; 10% B) 8%; 7.8% C) 6.4%; 8% D) 6.4%; 10% E) 10%; 10%

27) Which of the following orders instructs the broker to sell at or below a specified price? A) Limit -sell order B) Stop -loss C) Limit -buy order D) Stop -buy order E) Market order

28) An investor invests 40% of his wealth in a risky asset with an expected rate of return of 0.15 and a variance of 0.04 and 70% in a T -bill that pays 6%. His portfolio's expected return and standard deviation are __________ and __________, respectively. A) 0.114; 0.12 B) 0.096; 0.08 C) 0.295; 0.06 D) 0.087; 0.12 E) None of the options are correct.

28) An investor purchases one municipal and one corporate bond that pay rates of return of 7.5% and 10.3%, respectively. If the investor is in the 24% marginal tax bracket, his or her after -tax rates of return on the municipal and corporate bonds would be ________ and ______, A) 7.5%; 10.3% B) 7.5%; 7.83% C) 5.63%; 7.73% D) 5.63%; 10.3% E) 10%; 10%

28) If the Federal Reserve lowers the Fed Funds rate, ceteris paribus, the equilibrium levels of fu nds lent will __________, and the equilibrium level of real interest rates will ___________. A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease E) reverse direction from their previous trends ; reverse direction from their previous trends

29) If a Treasury note has a bid price of $975, the quoted bid price in the Wall Street Journal would be A) 97:50. B) 9 7:16. C) 97:80. D) 94:24. E) 97:75.

3) Firms raise capital by issuing stock A) in the secondary market. B) in the primary market. C) to unwary investors. D) only on days when the market is up.

3) Nondiversifiable risk is also referred to as A) systematic riskor unique risk. B) systematic riskor market risk. C) unique riskor market risk. D) unique riskor firm -specific risk.

30) If a Treasury note has a bid price of $995, the quoted bid price in the Wall Street Journal would be A) 99:50. B) 99:16. C) 99:80. D) 99:24. E) 99:32.

31) In calculating the Standard and Poor's stock price indices, the adjustment for stock split occurs A) by adjusting the divisor. B) automatically. C) by adjusting the numerator. D) quarterly on the last trading day of each quarter.

31) Patty O Furniture purchased 100 shares of Green Isle mutual fund at a net asset value of $42 per share. During the year, Patty received dividend income distributions of $2.00 per share and capital gains distributions of $4.30 per share. At the end of the year, the shares had a net asset value of $40 per share. What was Patty's rate of return on this investment? A) 5.43% B) 10.24% C) 7.19% D) 12.44% E) 9.18%

33) An investor purchased a bond 63 days ago for $980. He received $17 in interest and sold the bond for $987. What is the holding -period return on his investment? A) 1.52% B) 2.45% C) 1.9 2% D) 2.68%

33) Assume that you purchased shares of High Flying mutual fund at a net asset value of $12.50 per share. During the year, you received dividend income distribu tions of $0.78 per share and capital gains distributions of $1.67 per share. At the end of the year, the shares had a net asset value of $13.87 per share. What was your rate of return on this investment? A) 29.43% B) 30.56% C) 31.19% D) 32.44% E) 29.18%

33) Which of the following portfolio construction methods starts with security analysis? A) Top -down B) Bottom -up C) Middle -out D) Buy and hold E) Asset allocation

34) A 5.5%, 20 -year munici pal bond is currently priced to yield 7.2%. For a taxpayer in the 33% marginal tax bracket, this bond would offer an equivalent taxable yield of A) 8.46%. B) 10.75%. C) 12.40%. D) 3.58%.

34) Over the past year, you earned a nominal rate of interest of 8% on your money. The inflation rate was 3.5% over the same period. The exact actual growth rate of your purchasing A) 15.55%. B) 4.35% . C) 5.02%. D) 4.81%. E) 15.04%.

36) A mutual fund had year -end assets of $560,000,000 and liabilities of $26,000,000. There were 23,850,000 shares in the fund at year end. What was the mutual fund's net asset value? A) $22.87 B) $22.39 C) $22.24 D) $17.61 E) $19.25

36) Portfolio theory as described by Mark owitz is most concerned with A) the elimination of systematic risk. B) the effect of diversification on portfolio risk. C) the identification of unsystematic risk. D) active portfolio management to enhance returns.

37) A sale by IBM of new stock to the public would be a(n) A) short sale. B) seasoned equity offering. C) private placement. D) seco ndary -market transaction. E) initial public offering.

37) You are considering investing $1,000 in a T -bill that pays 0.05 and a risky portfolio, P, constructed with two risky securities, X and Y. The weights of X and Y in P are 0.60 and 0.40, respectively. X has an expected rate of return of 0.14 and variance of 0.01, and Y has an expected rate of return of 0.10 and a variance of 0.0081. If you want to form a portfolio with an expected rate of return of 0.11, w hat percentages of your A) 0.25; 0.75 B) 0.19; 0.81 C) 0.65; 0.35 D) 0.50; 0.50 E) Cannot be determined.

37) ________ specialize in helping companies raise capital by selling securities. A) Commercial bankers B) Investment bankers C) Investment issuers D) Credit raters

38) A year ago, you invested $10,000 in a savings account that pays an annual interest rate of 3%. What is your approximate annual real rate of return if the rate of inflation was 4% over the year? A) 1% B) âˆ'1% C) 7% D) 3%

38) Commercial banks differ fr om other businesses in that both their assets and their liabilities are mostly A) illiquid. B) financial. C) real. D) owned by the government. E) regulated.

39) A form of short -term borrowing by dealers in government securities is (are) A) reserve requirements. B) repurchase agreements. C) bankers' acceptances. D) commerc ial paper. E) brokers' calls.

39) A mutual fund had year -end assets of $750,000,000 and liabilities of $7,500,000. There were 40,000,000 shares in the fund at year end. What was the mutual fund's net asset value? A) $9.63 B) $18.56 C) $16.42 D) $17.87 E) $17.26

39) The unsystematic risk of a specific security A) is likely to be higher in an increasing market . B) results from factors unique to the firm. C) depends on market volatility. D) cannot be diversified away.

40) A year ago, you invested $2,500 in a savings account that pays an annual interest rate of 3.5%. What is your approximate annual real r ate of return if the rate of inflation was 5.5% over the year? A) 0.9% B) âˆ'2.0% C) 5.9% D) 3.4%

41) A reward -to-volatility ratio is useful in A) m easuring the standard deviation of returns. B) understanding how returns increase relative to risk increases. C) analyzing returns on variable -rate bonds. D) assessing the effects of inflation. E) None of the options are correct.

41) You sell short 100 shares of Loser Co. at a market price of $45 per share. Your maximum possible loss is A) $4,500. B) unlimited. C) zero. D) $9,000. E) Ca nnot be determined from the information given.

42) In 2018, ____________ was(were) the least significant real asset (s) of U.S. nonfinancial businesses in terms of total value. A) equipment and software B) inventory C) real estate D) trade credit E) marketable securities

42) The change from a straight to a kinked capital allocation line is a result of A) reward -to-volatility ratio increasing. B) borrowing rate exceeding lending rate. C) an investor's risk tolerance decreasing. D) increase in t he portfolio proportion of the risk -free asset.

42) You buy 300 shares of Qualitycorp for $30 per share and deposit initial margin of 50%. The next day, Qualitycorp's price drops to $25 per share. What is your actual margin? A) 50% B) 40% C) 33% D) 60% E) 25%

43) In 2018, ____________ was(were) the least significant liability(ies) of U.S. nonfinancial businesses in terms of total value. A) bonds and mortgages B) bank loans C) inventories D) trade debt E) marketable securities

43) In a two -security minimum variance portfolio where the correlation between securities is greater than âˆ'1.0, A) the security with the higher standard deviation will be weighted more heavily. B) the security with the higher standard deviation will be weighted less heavily. C) the two securities will be equally weighted. D) the risk will be zero. E) the return will be zero.

43) When a firm markets new securities, a preliminary registration statement must be filed with A) the exchange on which the security will be listed. B) the Securities and Exchange Commission. C) the Federal Reserve. D) all other companies in the same line of business. E) the Federal Deposit Insurance Corporation.

45) Freddie Mac and Ginnie Mae were organized to pro vide A) a primary market for mortgage transactions. B) liquidity for the mortgage market. C) a primary market for farm loan transactions. D) liquidity for the farm loan market. E) a source of funds for government agencies.

46) In the mean -standard deviati on graph, the line that connects the risk -free rate and the optimal risky portfolio, P, is called A) the security market line. B) the capital allocation line. C) the indifference curve. D) the investor's utility line.

47) Investors trade previously issued securities in the ________ market(s). A) primary B) secondary C) primary and secondary D) derivatives

47) When two risky securities that are positively correlated but not perfectly correlated are held in a portfolio, A) the portfolio standard deviation will be greater than the weighted averag e of the individual security standard deviations. B) the portfolio standard deviation will be less than the weighted average of the individual security standard deviations. C) the portfolio standard deviation will be equal to the weighted average of the individual security standard deviations. D) the portfolio standard deviation will always be equal to the securities' covariance.

49) Bond market indexes can be difficult to construct because A) they cannot be based on firms' market values. B) bonds ten d to trade infrequently, making price information difficult to obtain. C) there are so many different kinds of bonds. D) prices cannot be obtained for companies that operate in emerging markets. E) corporations are not required to disclose the details of their bond issues.

49) Given an optima l risky portfolio with expected return of 12%, standard deviation of 26%, and a risk free rate of 5%, what is the slope of the best feasible CAL? A) 0.64 B) 0.27 C) 0.08 D) 0.33 E) 0.36

49) Until 1999, the ________ Act(s) prohibited banks in the United States from both accepting deposits and underwriting securities. A) Sarbanes -Oxley B) Glass -Steagall C) SEC D) Sarbanes -Oxley and SEC E) None of the options

50) Your client, Bo Regard, holds a complete portfolio that consists of a portfolio of risky assets ( P) and T-Bills. The information below refers to these assets. E(Rp) 12.00 % Standard Deviation of P 7.20 % T-Bill rate 3.60 % Proportion of Complete Portfolio in P 80 % Proportion of Complete Portfolio in T -Bills 20 % Composition of P: Stock A 40.00 % Stock B 25.00 % Stock C 35.00 % Total 100.00 % A) E(rC) = 7.2 + 3.6 Ã— Standard Deviation of P B) E(rC) = 3.6 + 1.167 Ã— Standard Deviation of P C) E(rC) = 3.6 + 12.0 Ã— Standard Deviation of P D) E(rC) = 0.2 + 1.167 Ã— Standard Deviation of P E) E(rC) = 3.6 + 0.857 Ã— Standard Deviation of P

51) Of the following types of mutual fu nds, an investor who wishes to invest in a diversified A) international funds. B) global funds. C) regional funds. D) emerging -market funds.

51) You purchased 1,000 shares of common stock on margin at $30 per share. Assume the initial margin is 50%, and the stock pays no dividend. What would the maintenance margin be if a margin call is made at a stock price of $24? Ig nore interest on margin. A) 0.33 B) 0.375 C) 0.20 D) 0.23 E) 0.25

52) In order for you to be indifferent between the after -tax returns on a corporate bond paying 7% and a tax -exempt municipal bond paying 5.5%, what would your tax bracket need to be? A) 22.6% B) 21.4% C) 26.2% D) 19.8% E) Cannot be determined from the information given.

52) The sale of a mortgage portfolio by setting up mortgage pass -through securities is an example of A) credit enhancement. B) credit swap. C) unbundling. D) derivatives.

53) In words, the covariance considers the probability of each scenario happening and the interaction between A) securities' returns relative to their variances. B) securities' returns relative to their mean returns. C) securities' returns relative to other securities' returns. D) the level of return a security has in that scenario and the overall portfolio return. E) the variance of the security's return in that scenario and the overall portfolio variance.

53) Which of the following is true about mortgage -backed securities? I) They aggregate individual home mortgages into homogeneous pools.II) The purchaser receives monthly interest and principal payments received from payme nts made on the pool.III) The banks that originated the mortgages maintain ownership of them.IV) The banks that originated the mortgages may continue to service them. A) II, III, and IV B) I, II, and IV C) II and IV D) I, III, and IV E) I, II, III, and IV

54) An investor purchases one municipal and one corporate bond that pay rates of return of 7.2% and 9.1%, respectively. If the investor is in the 12% marginal tax bracket, his or her after -tax rates of return on the municipal and corporate bonds would be ________ and ______, A) 7.2%; 9.1% B) 7.2%; 8.008% C) 6.12%; 7.735% D) 8.471%; 9.1%

54) Of the following types of ETFs, an investor who wishes to invest in a diversified portfolio that tracks the Dow Jones Industrials should choose A) SPY. B) DIA. C) QQQQ. D) IWM. E) VTI.

55) An investor invests 30% of his wealth in a risky asset with an expected rate of return of 0.11 and a variance of 0.12 and 70% in a T -bill that pays 3%. His portfolio's expected return and standard deviation are __________ and __________, respectively. A) 0.086; 0.242 B) 0.054; 0.104 C) 0.295; 0.123 D) 0.087; 0.182 E) None of the options are correct.

56) The technology behind cryptocurrencies that is ideal for secure digital transactions is called ______________. A) bitcoin B) blockchain C) distribut ed ledgers D) ethereum E) All of the options

56) You want to purchase GM stock at $40 from your broker using as little of your own money as possible. If initial margin is 50% and you have $4,000 to invest, how many shares can you buy? A) 100 shares B) 200 shares C) 50 shares D) 500 sh ares E) 25 shares

58) A call option allows the buyer to A) sell the underlying asset at the exercise price on or before the expiration date. B) buy the underlying asset at the exercise price on or before the expiration date. C) sell the option in the open market prior to expiration. D) sell the underlying asset at the exercise price on or before the expiration date and sell the option in the open market prior to expiration. E) buy the underlying asset at the exercise price on or before the expiration date and sell the option in the open market prior to expiration.

58) Assume you sold short 100 shares of common stock at $40 per share. The initial margin is 50%. What would be the maintenance margin if a margin call is made at a stock p rice of $50? A) 40% B) 20% C) 35% D) 25%

58) Of the following types of ETFs, an investor who wishes to invest in a diversified A) SPY. B) EWJ. C) QQQQ. D) IWM. E) VTI.

58) You have been given this probability distribution for the holding -period return for GM stock: Stock of the Economy Probability HPR Boom 0.40 30 % Normal growth 0.40 11 % Recession 0.20 â€" 10 % What is the expected variance for GM stock? A) 200.00% B) 221.04% C) 246.37% D) 14.87% E) 16.13%

59) A put option allows the holder to A) buy the underlying asset at the strike price on or before the expiration date. B) sell the underlying asset at the strike price on or before the expiration date. C) sell the option in the open market prior to expiration. D) sell the underlying asset at the strike price on or before the expiration date and sell the option i n the open market prior to expiration. E) buy the underlying asset at the strike price on or before the expiration date and sell the option in the open market prior to expiration.

59) Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.15 8 % 8 % 2 0.20 13 % 7 % 3 0.15 12 % 6 % 4 0.30 14 % 9 % 5 0.20 16 % 11 % The expected rates of return of stocks A and B are _____ and _____, respectively. A) 13.2%; 9% B) 13%; 8.4% C) 13.2%; 7.7% D) 7.7%; 13.2%

59) You purchase a share of CAT stock for $90. One year later, after receiving a dividend of $4, you sell the stock for $97. What was your holding -period return? A) 14.44% B) 12.22% C) 13.33% D) 5.56%

15) The smallest component of domestic net worth in 2 018 was A) nonresidential real estate. B) residential real estate. C) inventories. D) consumer durables. E) equipment and software.

60) You invest $1,000 in a risky asset with an expected rate of return of 0.17 and a standard deviation of 0.40 and a T -bill with a rate of return of 0.04. What percent ages of your money must be invested in the risk -free asset and the risky asset, respectively, to form a portfolio with a standard deviation of 0.20? A) 30% and 70% B) 50% and 50% C) 60% and 40% D) 40% and 60% E) Cannot be determ ined.

62) The ____ index represents the performance of the U.K. stock market. A) DAX B) FTSE C) Nikkei D) Hang Seng

63) If an investment provides a 1.25% return quarterly, its effective annual rate is A) 5.23%. B) 5.09%. C) 4.02%. D) 4.04%.

64) Consider two perfectly negatively correlated risky securities A and B. A has an expected rate of return of 12% and a standard deviation of 17%. B has an expected rate of return of 9% and a standard deviation of 14%. The risk -free portfolio that can be formed with the two securities will earn _____ rate of return. A) 9.5% B) 10.4% C) 10.9% D) 9.9%

64) You purchased shares of a mutual fund at a price of $20 per share at the beginning of the year and paid a front -end load of 5.75%. If the securities in which the fund invested increased in value by 11% during the year, and the fund's expense ratio was 1.25%, your return if you sold A) 4.33%. B) 3.44%. C) 2.45%. D) 6.87%.

65) Security X has expected return of 14% and standard deviation of 22%. Security Y has expected return of 16% and stand ard deviation of 28%. If the two securities have a correlation coefficient of 0.8, what is their covariance? A) 0.038 B) 0.049 C) 0.018 D) 0.013 E) 0.054

65) Which of the following is not required under the CFA Institute Standards of Professional Conduct? A) Knowledge of all applicable laws, rules, and regulations B) Disclosure of all personal investments, whether or not they may conflict with a client's investments C) Disclosure of all conflicts to clients and prospects D) Reasonable inquiry into a client's financial situation E) All of the options a re required under the CFA Institute standards.

66) The ____ is an example of a U.S. index of large firms. A) Wilshire 5000 B) DJIA C) DAX D) Russell 2000 E) All of the options.

66) You purchased shares of a mutual fund at a price of $17 per share at the beginning of the year and paid a front -end load of 5.0%. If the securities in which the fund invested increased in value by 12% during the year, and the fund's expense ratio was 1.0%, your return if you sold the fund at the end of t he year would be A) 4.75%. B) 5.45%. C) 5.65%. D) 4.39%.

67) The introduction of the ___________________allowed brokers to send orders either for immediate electronic execution or to the specialist, who could seek price improvement from another trader. A) International Exchange B) NYSE Hybrid Market C) Designated Order Turnaround D) NYSE Euronext

69) For capital investments where the forecasted return is above the investor â€™s required return and below the capital market line, the investment is likely ________________. A) overvalued B) undervalued C) p roperly values D) None of the options are correct

69) These kind of money market funds must calculate net asset values, which may differ from $1.00. A) Prime B) Prime institutional C) Government D) Cash equivalents

7) You purchased a share of stock for $25. One year later, you received $1 as a dividend and A) 45% B) 20% C) 5% D) 40% E) None of the options are correct.

72) Compared to mutual funds, hedge funds may require investors to _______________. A) Cover transaction costs B) Lock -up their investment for an extended period of time C) Invest in a mixture of equities, debt, and international securities D) Use specific trading protocols Test name: Chapter 04 Test Bank - Static

72) Which of the following is used extensively in foreign trade when the creditworthiness of one trader is unknown to the tr ading partner? A) Repos B) Bankers' acceptances C) Eurodollars D) Federal funds

77) Corporations can exclude ____________% of the dividends received from preferred stock from taxes. A) 50 B) 70 C) 20 D) 15 E) 62

78) The most common measure of loss associated with extremely negative returns is A) lower partial standard deviation. B) value at risk. C) expected shortfall. D) standard deviation.

8) Initial margin requirements are determined by A) the Securities and Exchange Commission. B) the Federal Reserve System. C) the New York Stock Exchange. D) the Federal Reserve System and the New York Stock Exchange.

8) The smallest component of the fixed -income market is _______ debt. A) Treasury B) other asset -backed C) corporate D) tax -exempt E) mortgage -backed

8) You purchased a share of stock for $68. One year later, you received $5.00 as a dividend and sold the share for $74.50. What was your holding -period return? A) 12.5% B) 16.9% C) 13.6% D) 11.8%

83) You sold a futures contract on oats at a futur es price of 233.75, and at the time of expiration, the price was 261.25. What was your profit or loss? A) $1375.00 B) âˆ'$1375.00 C) âˆ'$27.50 D) $27.50

84) What short term interest rate was proposed to be phased out by 20 21? A) SONIA B) LIBOR C) Tokyo Interbank rate D) Euribor E) US Treasury Repo

86) In a two tailed normal distribution function, what is the confidence level created at 2 standard deviations? A) 68.26% B) 95.44% C) 99.74% D) 86.85% E) 72.50% Test name: Chapter 05 Test Bank - Static

87) A corporate bond is listed in the Wall Street Journal and shows an ask price of 98.62. If the corporate bonds have a par value of $1,000, what dollar amount should a buyer expect to pay? A) $98.62 B) $986.20 C) $1,000.00 D) $1,081.25 E) $1,140.40

14) Use the below information to answer the following question. Investmen t Expected Return E(r) Standard Deviation 1 0.12 0.13 2 0.15 0.15 3 0.21 0.16 4 0.24 0.21 U = E(r)âˆ' (A/2)s2, where A = 4.0. Based on the utility function above, which investment would you select? A) 1 B) 2 C) 3 D) 4 E) Cannot be determined from the information given.

16) In 2018, the proportion of US mutual funds (based on total assets) specializing in common stocks was A) 21.7%. B) 28.0%. C) 55.0%. D) 73.4%. E) 63.5%.

15) The capital allocation line provided by a risk -free security and N risky securities is A) the line that connects the risk -free rate an d the global minimum -variance portfolio of the risky securities. B) the line that connects the risk -free rate and the portfolio of the risky securities that has the highest expected return on the efficient frontier. C) the line tangent to the effi cient frontier of risky securities drawn from the risk -free rate. D) the horizontal line drawn from the risk -free rate.

1) Which of the following statements regarding risk -averse investors is true? A) They only care about the rate of return. B) They accept investments that are fair games. C) They only accept risky investments that offer risk premiums over t he risk -free rate. D) They are willing to accept lower returns and high risk. E) They only care about the rate of return, and they accept investments that are fair games.

1) Which one of the following statements regarding open -end mutual funds is false? A) The funds redeem shares at net asset value. B) The funds offer investors professional management. C) The funds offer investors a guaranteed rate of retur n. D) The funds redeem shares at net asset value and offer investors professional management.

10) Assume an investor with the following utility function: U = E(r) âˆ' 0.60( s2). To maximize her expected utility, which one of the following investment alternatives would she A) A portfolio that pays 10% with a 60% probability or 5% with 40% proba bility. B) A portfolio that pays 10% with 40% probability or 5% with a 60% probability. C) A portfolio that pays 12% with 60% probability or 5% with 40% probability. D) A portfolio that pays 12% with 40% probability or 5% with 60% probability.

10) The variance of a portfolio of risky se curities A) is a weighted sum of the securities' variances. B) is the sum of the securities' variances. C) is the weighted sum of the securities' variances and covariances. D) is the sum of the securities' covariances. E) None o f the options are correct.

10) Which of the following is not a component of the money market? A) Repurchase agreements B) Eurodollars C) Real estate investment trusts D) Money market mutual funds E) Commercial paper

10) You sold AAPL stock short at $190 per share. Your losses could be minimized by placing a A) limit -sell order. B) limit -buy order. C) stop -buy order. D) day -order. E) None of the options are correct.

11) Commercial paper is a short -term security issued by ________ to raise funds. A) the Federal Reserve Bank B) commercial banks C) large, well -known companies D) the New York Stock Exchange E) state and local governments

11) The standard deviation of a portfolio of risky securities is A) the square root of the weighted sum of the securities' variances. B) the square root of the sum of the securities' variances. C) the square root of the weighted sum of the securities' variances and covariances. D) the square root of the sum of the securities' covariances.

12) Which one of the following terms best describes Eurodollars? A) Dollar -denominated deposits only in European banks. B) Dollar -denominated deposits at branches of foreign banks in the U.S. C) Dollar -denominated deposits at foreign banks and branches of American banks outside the U.S. D) Dollar -denominated deposits at American banks in the U.S. E) Dollars that have been exchanged for European currency.

13) Consider a risky portfolio, X, with an expected rate of return of 0. 15 and a standard deviation of 0.15, that lies on a given indifference curve. Which one of the following portfolios might lie on the same indifference curve for a risk averse investor? A) E(r) = 0.15; Standard deviation = 0.20 B) E(r) = 0.1 5; Standard deviation = 0.10 C) E(r) = 0.10; Standard deviation = 0.10 D) E(r) = 0.20; Standard deviation = 0.15 E) E(r) = 0.10; Standard deviation = 0.20

14) The interest rate charged by banks with excess reserves at a Federal Reserve Bank to banks needing overnight loans to meet reserve requirements is called the A) prime rate. B) discount rate. C) federal funds rate. D) call money rate. E) money market rate.

17) Which of the following statement(s) is(are) true regarding the variance of a portfolio of two risky securities?I) The higher the coefficient of correlation between securities, the greater the reduction in the portfolio variance.II) There is a linear relati onship between the securities' coefficient of correlation and the portfolio variance.III) The degree to which the portfolio variance is reduced depends on the degree of correlation between securities. A) I only B) II only C) III only D) I and II E) I and III

18) Which of the following is true regarding a firm's securities? A) Common dividends are paid before preferred dividends. B) Preferred stockholders have voting rights. C) Pr eferred dividends are usually cumulative. D) Preferred dividends are contractual obligations. E) Common dividends can usually be paid if preferred dividends have been skipped.

19) Assume you sell short 100 shares of common stock at $45 per share, with initial margin at 50%. What would be your rate of return if you repurchase the stock at $40 per share? The stock paid no dividends during the period, and you did not remove any money from the account before making the offsetting transaction. A) 20.03% B) 25.67% C) 22.22% D) 77.46%

2) Over the past year, you earned a nominal rate of interest of 9% on your money. The inflation rate was 3% over the same period. The exact actual growth rate of your purchasing power was A) 15.5%. B) 10.0%. C) 5.8%. D) 4.8%. E) 15.0%.

2) Which of the following statements is(are) true?I) Risk -avers e investors reject investments that are fair games.II) Risk -neutral investors judge risky investments only by the expected returns.III) Risk -averse investors judge investments only by their riskiness.IV) Risk -loving investors will not engage in fair games. A) I only B) II only C) I and II only D) II and III only E) II, III, and IV only

21) The Dow Jones Industrial Average (DJIA) is computed by A) adding the prices of 30 large "blue -chip" stocks and dividing by 30. B) calculating the total market value of the 30 firms in the index and dividing by 30. C) adding the prices of the 30 stocks in the index and dividing by a divisor. D) adding the prices of the 500 stocks in the index and dividing by a divisor. E) adding the prices of the 30 stocks in the index and dividing by the value of these stocks as of some base date period.

22) Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10 % 8 % 2 0.20 13 % 7 % 3 0.20 12 % 6 % 4 0.30 14 % 9 % 5 0.20 15 % 8 % The expected rates of return of stocks A and B are _____ and _____, respectively. A) 13.2%; 9% B) 14%; 10% C) 13.2%; 7.7% D) 7.7%; 13.2%

23) Consider the following three stocks: Stock Price Number of shares outstanding Stock A $ 40 200 Stock B $ 70 500 The value -weighted index constructed with the three stocks using a divisor of 100 is A) 1.2. B) 1200. C) 490. D) 4900. E) 49.

24) Which of the following is not an advantage of owning mutual funds? A) They offer a variety of investment styles. B) They offer small investors the benefits of diversification. C) They treat income as "passed through" to the investor for tax purposes. D) All of the options are advantages of mutual funds. E) None of the options are an advantage of mutual funds.

25) A disadvantage of using stock options to compensate managers is that A) it encourages managers to undertake projects that will increase stock price. B) it encourages managers to engage in empire building. C) it can create an incentive for managers to manipulate information to prop up a stock price temporarily, giving them a chance to cash o ut before the price returns to a level reflective of the firm's true prospects. D) All of the above.

25) Which of the following factors would not be expected to affect the nominal interest rate? A) The supply of loans B) The demand for loans C) The coupon rate on previously issued government bonds D) The expect ed rate of inflation E) Government spending and borrowing

26) The price quotations of Treasury bonds in the Wall Street Journal show an ask price of 104.25 and a bid price of 104.125. As a seller of the bond, what is the dollar price you expect to receive? A) $1,048. 00 B) $1,042.50 C) $1,041.25 D) $1,041.75 E) $1,040.40

26) Which of the following are mechanisms that have evolved to mitigate potential agency problems? I) Using the firm's stock options fo r compensationII) Hiring bickering family members as corporate spiesIII) Boards of directors forcing out underperforming managementIV) Security analysts monitoring the firm closelyV) Takeover threats A) II and V B) I, III, and IV C) I, III, IV, and V D) III, IV, and V E) I, III, and V

26) Which of the following characteristics apply to unit investment trusts? I) Most are invested in fixed -income portfolios.II) They are actively -managed portfolios.III) The sponsor pools securities, then sells public shares in the trust.IV) The portfolio is fixed for the life of the fund. A) I and IV B) I and II C) I, III, and IV D) I, II, and III E) I, II, III, and IV

26) Which of the following orders instructs the broker to buy at or below a specified price? A) Limit -loss order B) Discretionary order C) Limit -buy order D) Stop -buy order E) Market order

28) Which of the following orders instructs the broker to sell at or above a specified price? A) Limit -buy order B) Discretionary order C) Limit -sell order D) Stop -buy order E) Market order

29) Consid er the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10 % 8 % 2 0.20 13 % 7 % 3 0.20 12 % 6 % 4 0.30 14 % 9 % 5 0.20 15 % 8 % Which of the following portfolio(s) is(are) on the efficient frontier? A) The portfolio with 20 percent in A and 80 percent in B. B) The portfolio with 15 percent in A and 85 percent in B. C) The portfolio with 26 percent in A and 74 p ercent in B. D) The portfolio with 10 percent in A and 90 percent in B. E) A and B are both on the efficient frontier.

3) A year ago, you invested $1,000 in a savings account that pays an annual interest rate of 9%. What is your approximate annual real rate of return if the rate of inflation was 2% over the year? A) 5% B) 10% C) 7% D) 3%

31) Block transactions are transactions for more than _______ shares, and they account for about _____ percent of all trading on the NYSE. A) 1,000; 5 B) 500; 10 C) 100,000; 50 D) 10,000; 30 E) 5,000; 23

34) Assume that you purchased shares of a mutual fund at a net asset value of $14.50 per share. During the year, you received dividend income distributions of $0.27 per share and capital gains distributions of $0.65 per share. At the end of the year, the shares had a net asset value of $13.74 per share. What was your rate of return on this investment? A) 2.91% B) 3.07% C) 1.10% D) 1.78% E) âˆ'1.18%

34) You invest $100 in a risky asset with an ex pected rate of return of 0.12 and a standard deviation of 0.15 and a T -bill with a rate of return of 0.05. A portfolio that has an expected outcome of $115 is formed by A) investing $100 in the risky asset. B) investing $80 in the risky asset and $20 in the risk -free asset. C) borrowing $43 at the risk -free rate and investing the total amount ($143) in the risky asset. D) investing $43 in the risky asset and $57 in the riskless asset. E) Such a portfolio cannot be formed.

35) You want to buy 100 shares of Hotstock Inc. at the best possible price as quickly as possible. You would most likely place a A) stop -loss order. B) stop -buy order. C) market order. D) limit -sell order. E) limit -buy order.

36) Consider a T -bill with a rate of return of 5% and the following risky securities: Security A: E(r) = 0.15; Variance = 0.04 Security B: E(r) = 0.10; Variance = 0.0225 Security C: E(r) = 0.12; Variance = 0.01 Security D: E(r) = 0.13; Variance = 0.0625 From which set of portfolios, formed with the T -bill and any one of the four risky securities, would a risk -averse investo r always choose his portfolio? A) The set of portfolios formed with the T -bill and security A. B) The set of portfolios formed with the T -bill and security B. C) The set of portfolios formed with the T -bill and security C. D) The se t of portfolios formed with the T -bill and security D. E) Cannot be determined.

36) Over the past year, you earned a nominal rate of interest of 12.5% on your money. The inflation rate was 2.6% over the same period. The exact actual growth rate of your purchasi ng power was A) 9.15%. B) 9.90%. C) 9.65%. D) 10.52%.

36) The stocks on the Dow Jones Industrial Aver age A) have remained unchanged since the creation of the index. B) include most of the stocks traded on the NYSE. C) are changed occasionally as circumstances dictate. D) consist of stocks on which the investor cannot lose money. E) include most of the stocks traded on the NYSE and are changed occasionally as circumstances dictate.

38) The finalized registration statement for new securities approved by the SEC is called A) a red herring. B) the preliminary statement. C) the prospectus. D) a best -efforts agreement. E) a firm commitment.

38) You are considering investing $1,000 in a T -bill that pays 0.05 and a risky portfolio, P, constructed with two risky securities, X and Y. The weights of X and Y in P are 0.60 and 0.40, respectively. X has an expected rate of return of 0.14 and variance of 0.01, and Y has an expected rate of return of 0.10 and a variance of 0.0081. If you want to form a portfolio with an expected rate of return of 0.10, what percentages of your money must you invest in the T -bill, X, and Y, respectively, if you keep X and Y in the same proportions to each other as in portfolio P? A) 0.25; 0.45; 0.30 B) 0.19; 0.49; 0.32 C) 0.32; 0.41; 0.27 D) 0.50; 0.30; 0.20 E) Cannot be determined.

39) One outcome from the SEC investigation of the "Flash Crash of 2010" was A) a prohibition of short selling. B) higher margin requirements. C) approval of new circuit b reakers. D) establishment of electronic communications networks (ECNs). E) passage of the Sarbanes -Oxley Act.

4) In the mean -standard deviation graph, an indifference curve has a ________ slope. A) negative B) zero C) positive D) vertical E) Cannot be determined.

41) A year ago, you invested $12,000 in an investment that produced a return of 16%. What A) 18% B) 2% C) 12% D) 15%

41) In 2018, ____________ was(were) the most significant real asset(s) of U.S . nonfinancial businesses in terms of total value. A) equipment and software B) inventory C) real estate D) trade credit E) marketable securities

42) Which of the following is not a mortgage -related government or government -sponsored agency? A) The Federal Home Loan Bank B) The Federal National Mortgage Association C) The U.S. Treasury D) Freddie Mac E) Ginnie Mae

44) Which of the following is not a source of systematic risk? A) The business cycle B) Interest rates C) Personnel changes D) The inflation rate E) Exchange rates

45) A mutual fund had NAV per share of $23.00 on January 1, 2018. On December 31 of the same year, the fund's NAV was $23.15. Income distributions were $0.63, and the fund had capital gain distributions of $1.26. Without considering taxes and transactions costs, what rate of A) 11.26% B) 10.54% C) 8.87% D) 8.26% E) 9.63%

46) You sold short 100 shares of common stock at $45 per share. The initial margin is 50%. Your initial investment was A) $4,800. B) $12,000. C) $2,250. D) $7,200.

48) Which of the following are characteristics of preferred stock?I) It pays its holder a fixed amount of income each year at the discretion of its managers.II) It gives its holder voting power in the firm.III) Its dividends are usually cumulative.IV) Failure to pay dividends may result in bankruptcy proceedings. A) I, III, and IV B) I, II, and III C) I and III D) I, II, and IV E) I, II, III, and IV

49) A mutual fund had NAV per share of $37.12 on January 1, 2018. On December 31 of the same year, the fund's rate of return for the year was 11.0%. Inco me distributions were $2.26, and the fund had capital gain distributions of $1.64. Without considering taxes and transactions costs, what ending NAV would you calculate? A) $37.93 B) $34.52 C) $37.30 D) $47.25 E) $36.28

5) In the mean -standard deviation graph, which one of the following statements is true regarding the indifference curve of a risk -averse investor? A) It is the locus of portfolios that have the same expected rates of return and different standard d eviations. B) It is the locus of portfolios that have the same standard deviations and different rates of return. C) It is the locus of portfolios that offer the same utility according to returns and standard deviations. D) It connects portfol ios that offer increasing utilities according to returns and standard deviations. E) None of the options are correct.

1) Over the past year, you earned a nominal rate of interest of 12% on your money. The inflation rate was 3% over the same period. The exact actual growth rate of your purchasing power was A) 15.5%. B) 10.0%. C) 5.0%. D) 8.7%. E) 15.0% .

13) Which of the following statements about real estate investment trusts is true? A) REITs invest in real estate or loans secured by real estate. B) REITs ra ise capital by borrowing from banks and issuing mortgages. C) REITs are similar to open -end funds, with shares redeemable at NAV. D) REITs invest in real estate or loans secured by real estate and raise capital by borrowing from banks and issuing m ortgages. E) All of the options are true.

15) Use the below information to answer the following question. Investment Expected Return E(r) Standard Deviation 1 0.12 0.13 2 0.15 0.15 3 0.21 0.16 4 0.24 0.21 U = E(r)âˆ' (A/2)s2. A) 1 B) 2 C) 3 D) 4 E) Cannot be determined from the information given.

15) Which of the following statement(s) is (are) true regarding municipal bonds?I) A municipal bond is a debt obligation issued by state or loca l governments.II) A municipal bond is a debt obligation issued by the federal government.III) The interest income from a municipal bond is exempt from federal income taxation.IV) The interest income from a municipal bond is A) I and II only B) I and III only C) I, II, and III only D) I, III, and IV only E) I and IV only

15) Which of the following statements about money market mutual funds is true? A) They invest in commercial paper, CDs, and repurchase agreements. B) They usually offer check -writing privileges. C) They are highly leveraged and risky. D) They invest in commercial paper, CDs, and repurchase agreements, and they usually offer check -writing privileges. E) All of the options are true.

15) You sold short 200 shares of common stock at $60 per share. The initial margin is 60%. Your initial investment was A) $4,800. B) $12,000. C) $5,600. D) $7,200.

16) If the interest rate paid by borrowers and the interest rate received by savers accurately reflect the realized rate of inflation, A) borrowers gain and savers lose. B) savers gain and borrowers lose. C) both borrowers and savers lose. D) neither borrowers nor savers gain nor lose. E) both borrowers and savers gain.

16) The domestic net worth of the U.S. in 2018 was A) $9.350 trillion. B) $22.642 trillion. C) $32.539 trillion. D) $72.683 trillion. E) $80.983 trillion.

16) Which of the following statements is true regarding a corporate bond? A) A corporate callable bond gives the holder the right to exchange it for a specified number of the company's common shares. B) A corporate debenture is a secured bond. C) A corporate indenture is a secured bond. D) A corporate convertible bond g ives the holder the right to exchange the bond for a specified number of the company's common shares. E) Holders of corporate bonds have voting rights in the company.

17) The exact indifference curves of different investors A) cannot be known with perfect certainty. B) can be calculated precisely with the use of advanced calculus. C) are known with perfect certainty and allow the advisor to create more suitable portfolios for the client. D) although n ot known with perfect certainty, do allow the advisor to create more suitable portfolios for the client.

18) A debt secu rity pays A) a fixed level of income for the life of the owner. B) a variable level of income for owners on a fixed income. C) a fixed or variable income stream at the option of the owner. D) a fixed stream of income or a stream of income that is determined according to a specified formula for the life of the security.

18) The riskiness of individual assets A) should be considered for the asset in isolation. B) should be considered in the context of the effect on overall portfolio volatility. C) should be combined with the riskiness of other individual assets in the proportions these assets constitute the entire portfolio. D) should be considered in the context of the effect on ove rall portfolio volatility and should be combined with the riskiness of other individual assets in the proportions these assets constitute the entire portfolio.

18) Which of the following statement(s) is(are) false regarding the variance of a portfolio of two risky securities?I) The higher the coefficient of correlation between securities, the greater the reduction in t he portfolio variance.II) There is a linear relationship between the securities' coefficient of correlation and the portfolio variance.III) The degree to which the portfolio variance is reduced depends on the degree of correlation between securities. A) I only B) II only C) III only D) I and II E) I and III

18) You purchased 300 shares of common stock on margin for $60 per share. The initial margin is 60%, and the stock pays no dividend. What would your rate of return be if you sell the stock at $45 per share? Ignore interest on margin. A) 25.00% B) â€"33.33% C) 44.31% D) â€"41.67% E) â€"54.22%

19) A fair game A) will not be undertaken by a risk -averse investor. B) is a risky investment with a zero risk premium. C) is a riskless investment. D) will not be undertaken by a risk -averse investor and is a risky investment with a zero risk premium. E) will not be undertaken by a risk -averse investor and i s a riskless investment.

19) In 2018, the proportion of US hybrid (bond and stock) mutual funds (based on total assets) was A) 21.7%. B) 28.0%. C) 54.1%. D) 8.1%. E) 22.6%.

2) Which one of the following statements regarding closed -end mutual funds is false? A) The funds always trade at a discount from NAV . B) The funds redeem shares at their net asset value. C) The funds offer investors professional management. D) The funds always trade at a discount from NAV and redeem shares at their net asset value. E) None of the options are correct.

20) An example of a derivative security is A) a common share of Microsoft. B) a call option on Intel stock. C) a commodity futures contract. D) a call option on Intel stock and a commodity futures contract. E) a common share of Microsoft and a call option on Intel stock.

21) The Profitability Fund had NAV per share of $17.50 on January 1, 2018. On December 31 of the same year, the fund's NAV was $19.47. Income distributions were $0.75, and the fund had capital gain distributions of $1.00. Without considering taxes and transactions costs, what rate of return did an investor receive on the Profitability Fund last year? A) 11.26% B) 1 5.54% C) 16.97% D) 21.26% E) 9.83%

77) ________ is a risk measure that indicates vulnerability to extreme negative returns. A) Value at risk B) Lower partial standard deviation C) Expected shortfall D) None of the options E) All of the options are correct.

21) The risk premium for common stocks A) cannot be zero, for investors would be unwilling to invest in common stocks. B) must always be positive, in theory. C) is negative, as common stocks are risky. D) cannot be zero, for investors would be unwilling to invest in common stocks and must always be positive, in theory. E) cannot be zero, for investors would be u nwilling to invest in common stocks and is negative, as common stocks are risky.

22) Although derivatives can be used as speculative instruments, businesses most often use A) attract customers. B) appease stockholders. C) offset debt. D) hedge risks. E) enhance their balance sheets.

23) Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10 % 8 % 2 0.20 13 % 7 % 3 0.20 12 % 6 % 4 0.30 14 % 9 % 5 0.20 15 % 8 % A) 1.5%; 1.9% B) 2.5%; 1.1% C) 3.2%; 2.0% D) 1.5%; 1.1%

23) Financial assets permit all of the foll owing except A) consumption timing. B) allocation of risk. C) separation of ownership and control. D) elimination of risk.

23) You purchase a share of Duke Energy Stock for $90. One year later, after receiving a dividend of $3, you sell the stock for $92. What was your holding -period re turn? A) 4.44% B) 2.22% C) 3.33% D) 5.56% E) None of the options are correct.

24) Coca Cola stock has the following probability distribution of expected prices one year from now: State Probability Price 1 25 % $ 50 2 40 % $ 60 3 35 % $ 70 If you buy Coca Cola today for $55 and it will pay a dividend during the year of $4 per share, A) 17.72% B) 18.89% C) 17.91% D) 18.18%

24) Consider the following three stocks: Stock Price Number of shares outstanding Stock A $ 40 200 Stock B $ 70 500 Stock C $ 10 600 Assume at these prices that the value -weighted index constructed with the three stocks is 490. What would the index be if stock B is split 2 for 1 and stock C 4 for 1? A) 265 B) 430 C) 355 D) 490 E) 1000

24) Which of the following orders is most useful to short sellers who want to limit their potential losses? A) Limit order B) Discretionary order C) Limit -loss order D) Stop -buy order

25) Which of the following would increase the net asset value of a mutual fund share, assuming all other things remain unchanged? A) An increase in the number of fund shares outstanding B) An increase in the fund's accounts payable C) A change in the fund's management D) An increase in the value of one of the fund's stocks

26) Which of the following statements regarding the capital allocation line (CAL A) The CAL shows risk -return combinations. B) The slope of the CAL equals the increase in the expected return of the complete portfolio per unit of additional standard deviation. C) The slope of the CAL is also called the reward -to-volatility ratio. D) The CAL is also called the efficient frontier of risky assets in the absence of a risk -free asset.

27) Corporate shareholders are best protected from incompetent management decisions by A) the ability to engage in proxy fights. B) management's control of pecuniary rewards. C) the ability to call shareholder meetings. D) the threat of takeover by other firms. E) one -share/one -vote election rules.

27) Given the capital allocation line, an investor's optimal portfolio is the portfolio that A) maximizes her expected profit. B) maximizes her risk. C) minimizes both her risk and return. D) maximizes her expected utility. E) None of the options are correct.

28) Consider the follo wing probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10 % 8 % 2 0.20 13 % 7 % 3 0.20 12 % 6 % 4 0.30 14 % 9 % 5 0.20 15 % 8 % The expected rate of return and standard deviation of the global minimum variance portfolio, G, are __________ and __________, respectively. A) 10.07%; 1.05% B) 8.97%; 2.03% C) 10.07%; 3.01% D) 8.97%; 1.05%

28) Theoretically, takeovers should result in A) improved management. B) increas ed stock price. C) increased benefits to existing management of the taken -over firm. D) improved management and increased stock price. E) All of the options.

29) "Bracket Creep" happens when A) tax liabilities are based on real income and there is a negative inflation rate. B) tax liabilities are based on real income and there is a pos itive inflation rate. C) tax liabilities are based on nominal income and there is a negative inflation rate. D) tax liabilities are based on nominal income and there is a positive inflation rate. E) too many peculiar people make their way into the highest tax bracket.

29) An investor invests 40% of his wealth in a risky asset with an expected rate of return of 0.13 and a variance of 0.03 and 70% in a T -bill that pays 6%. His portfolio's expected return and A) 0.114; 0.128 B) 0.087; 0.063 C) 0.295; 0.125 D) 0.088; 0.069

29) Which of the following orders instructs the broker to buy at or above a specified price? A) Limit -buy order B) Discretionary order C) Limit -sell order D) Stop -buy order E) Market order

3) The means by which individuals hold their claims on real assets in a well -developed economy are A) investment assets. B) depository assets. C) der ivative assets. D) financial assets. E) exchange -driven assets.

30) Consider two perfectly negatively correlated risky securities A and B. A has an expected rate of return of 10% and a standard deviation of 16%. B has an expected rate of return of 8% and a standard deviation of 12%. The weights of A and B in the global minimum variance portfolio are _____ and _____, respectively. A) 0.24; 0.76 B) 0.50; 0.50 C) 0.57; 0.43 D) 0.43; 0.57 E) 0.76; 0.24

30) Shelf registration A) is a way of placing issues in the primary market. B) allows firms to register securities for sale over a two -year period. C) incr eases transaction costs to the issuing firm. D) is a way of placing issues in the primary market and allows firms to register securities for sale over a two -year period. E) is a way of placing issues in the primary market and increases transaction costs to the issuing firm.

30) The fee that mutual funds use to help pay for advertising and promotional literature is called a A) front -end load fee. B) back -end load fee. C) operating expense fee. D) 12b -1 fee. E) structured fee.

33) An investor who wishes to form a portfolio that lies to the right of the optimal risky portfolio on the capital allocation line must A) lend some of her money at the risk -free rate. B) borrow some money at the risk -free rate. C) invest only in risky securities. D) borrow some mon ey at the risk -free rate, invest in the optimal risky portfolio, and invest only in risky securities E) Such a portfolio cannot be formed.

35) Assume that you purchased shares of a mutual fund at a net asset value of $10.00 per share. During the year, you received dividend income distributions of $0.05 per share and capital gains distributions of $0.06 per share. At the end of the year, the shares had a net asset value of A) âˆ'18.24% B) âˆ'16.1% C) 16.10% D) âˆ'17.3% E) 17.3%

35) Which one of the following portfolios cannot lie on the efficient frontier as described by Markowitz? Portfolio Expected Return Standard Deviation C 15 % 20 % D 12 % 25 % A) Only portfolio A cannot lie on the efficient frontier. B) Only portfolio B cannot lie on the efficient frontier. C) Only portfolio C cannot lie on the efficient frontier. D) Only portfolio D cannot lie on the efficient frontier. E) Cannot be determined from the information given.

37) A mutual fund had year -end assets of $250,000,000 and liabilities of $4,0 00,000. There were 3,750,000 shares in the fund at year end. What was the mutual fund's net asset value? A) $92.53 B) $67.39 C) $63.24 D) $65.60 E) $17.46

37) Federally -sponsored agency debt A) is legally insured by the U.S. Treasury. B) would probably be backed by the U.S. Treasury in the event of a near -default. C) has a small positive yield spread relative to U.S. Treasuries. D) would probably be backed by the U.S. Treasury in the event of a near -default and has a small positive yield spread relative to U.S. Treasu ries. E) is legally insured by the U.S. Treasury and has a small positive yield spread relative to U.S. Treasuries.

38) Brokers' calls A) are funds used by individuals who wish to buy stocks on margin. B) are funds borrowe d by the broker from the bank, with the agreement to repay the bank immediately if requested to do so. C) carry a rate that is usually about one percentage point lower than the rate on U.S. T -bills. D) are funds used by individuals who wish to buy stocks on margin and are funds borrowed by the broker from the bank, with the agreement to repay the bank immediately if requested to do so. E) are funds used by individuals who wish to buy stocks on margin and carry a rate that is usually about one pe rcentage point lower than the rate on U.S. T -bills.

39) You are considering investing $1,000 in a T -bill that pays 0.05 and a risky portfolio, P, constructed with two risky securities, X and Y. The weights of X and Y in P are 0.60 and 0.40, respectively. X has an expected rate of return of 0.14 and variance of 0.01, and Y has an expected rate of return of 0 .10 and a variance of 0.0081. What would be the dollar values of your positions in X and Y, respectively, if you decide to hold 40% of your money in the risky portfolio and 60% in T -bills? A) $240; $360 B) $360; $240 C) $100; $240 D) $240; $160 E) Cannot be determined.

4) Diversifiable risk is also referre d to as A) systematic riskor unique risk. B) systematic riskor market risk. C) unique riskor market risk. D) unique riskor firm -specific risk.

4) Which one of the following is not a money market instrument? A) Treasury bill B) Negotiable certificate of deposit C) Commercial paper D) Treasury bond E) Eurodollar account

4) _______ are financial assets. A) Bonds B) Machines C) Stocks D) Bonds and stocks E) Bonds, machines, and stocks

40) A mutual fund had y ear-end assets of $465,000,000 and liabilities of $37,000,000. If the fund NAV was $56.12, how many shares must have been held in the fund? A) 4,300,000 B) 6,488,372 C) 8,601,709 D) 7,626,515 E) None of these options are correct .

40) All of the following are considered new trading strategies, except A) high frequency trading. B) algorit hmic trading. C) dark pools. D) short selling.

40) In 2018, ____________ was(were) the most significant liabilit y(ies) of U.S. commercial banks in terms of total value. A) loans and leases B) cash C) real estate D) deposits E) investment securities

40) Which of the following securities is a money market instrument? A) Treasury note B) Treasury bond C) Municipal bond D) Commercial paper E) Mortgage security

40) Which statement about portfolio diversification is correct? A) Proper diversification can eliminate systematic risk. B) The risk -reducing benefits of diversification do not occur meaningfully until at least 50-60 individual securities have been purchased. C) Because diversification reduces a portfolio's total risk, it necessarily reduces the portfolio's expected return. D) Typically, as more securities are added to a portfolio, total risk would be expected to decrease at a decreasing rate. E) None of the statements are correct.

42) For a two -stock portfolio, what would be the preferred correlation coefficient betwe en the two stocks? A) +1.00 B) +0.50 C) 0.00 D) âˆ'1.00 E) None of the options are correct.

43) In order for you to be indifferent between the after -tax returns on a corporate bond paying 8.5% and a tax -exempt municipal bond paying 6.12%, what would your tax bracket need to be? A) 33% B) 72% C) 15% D) 28% E) Cannot be determined from the information given.

44) Based on their relative degrees of risk tolerance, A) investors will hold varying amounts of the risky asset in their portfolios. B) all investors will have the same portfolio asset allocations. C) investors will hold varying amounts of the risk -free asset in their portfolios. D) investors will hold varying amounts of the risky asset and varying amounts of the risk-free asset in their portfolios.

44) In terms of total value, the most significant liability(ies) of U.S. nonfinancial businesses A) bank loans. B) bonds and mortgages. C) trade debt. D) other. E) marketable securities.

65) You purchased shares of a mutual fund at a price of $12 per share at the beginning of the year and paid a front -end load of 4.75%. If the securities in which the fund invested increased in value by 9% during the year, and the fund's expense ratio was 1.5%, your return if you sold the fund at the end of the year would be A) 4.75%. B) 3.54%. C) 2.65%. D) 2.39%.

45) Asset allocation may involve A) the decision as to the allocation between a risk -free asset and a risky asset. B) the decision as to the allocation among different risky assets. C) considerable security analysis. D) the decision as to the allocation between a risk -free ass et and a risky asset and the decision as to the allocation among different risky assets. E) the decision as to the allocation between a risk -free asset and a risky asset and considerable security analysis.

45) The global minimum variance portfolio formed from two risky securities will be riskless A) 0.0. B) 1.0. C) 0.5. D) âˆ'1.0. E) any negative number.

45) Which of the following is true regarding private placements of primary security offeri ngs? A) Extensive and costly registration statements are required by the SEC. B) For very large issues, they are better suited than public offerings. C) They trade in secondary markets. D) The shares are sold directly to a small gro up of institutional or wealthy investors. E) They have greater liquidity than public offerings.

45) You purchased a share of stock for $12. One year later, you received $0.50 as a dividend and sold the share for $13.25. What was your holdin g-period return? A) 9.75% B) 10.65% C) 11.75% D) 14.58% E) None of the options are correct.

46) Security X has expected return of 12% and standard deviation of 18%. Security Y has expected return of 15% and standard deviation of 26%. If the two securities have a correlation coefficient of 0.7, what is their covariance? A) 0.038 B) 0.070 C) 0.018 D) 0.033 E) 0.054

47) Suppose an investor is considering a corporate bond with a 7.17% before -tax yield and a municipal bond with a 5.93% before -tax yield. At what marginal tax rate would the investor be A) 15.4% B) 23.7% C) 39.5% D) 17.3% E) 12.4%

47) Treasury bills are commonly viewed as risk -free assets because A) their short -term nature makes their values insensitive to interest rate fluctuations. B) the inflation uncertainty over their time to maturity is negligible. C) their term to maturity is identical to most investors' desired holding periods. D) their short -term nature makes their values insensitive to interest rate fluctuations, and the inflation uncertainty over their time to maturity is negligible. E) the infl ation uncertainty over their time to maturity is negligible, and their term to maturity is identical to most investors' desired holding periods.

47) You sold short 150 shares of common stock at $27 per share. The initial margin is 45%. A) $4,800.60. B) $12,000.25. C) $2,250.75. D) $1,822.50.

48) Investment bankers perform which of the following role(s)? A) Market new stock and bond issues for firms B) Provide advice to the firms as to market conditions, price, etc. C) Design secur ities with desirable properties D) All of the options E) None of the options

48) The line representing all combinations of portfolio expected returns and standard A) risk/reward tradeoff line. B) capital allocation line. C) efficient frontier. D) portfolio opportunity set. E) Security Market Line.

49) You purchased 1,000 shares of PINS common stock on margin at $19 per share. Assume the initial margin is 50%, and the maintenance margin is 30%. Below what stock price level would you get a margin call? Assume the stock pays no dividend; ignore interest on margin. A) $12.86 B) $15.75 C) $19.67 D) $13.57

5) Growth Fund had year -end assets of $862,000,000 and liabilities of $12,000,000. There were 32,675,254 shares in the fund at year end. What was Growth Fund's net asset value? A) $28.17 B) $25.24 C) $19.62 D) $26.01 E) $21.56

5) Investment bankers A) act as intermediaries between issuers of stocks and investors. B) act as advisors to companies in helping them analyze their financial needs and find buyers for newly -issued securities. C) accept deposits from savers and lend them out to companies. D) act as intermediaries between issuers of stocks and investors and act as advisors to companies in helping them analyze their financial needs and find buy ers for newly -issued securities.

5) Unique risk is also referred to as A) systematic risk or dive rsifiable risk. B) systematic risk or market risk. C) diversifiable risk or market risk. D) diversifiable risk or firm -specific risk. E) None of the options are correct.

50) The spread between the LIBOR and the Treasury -bill rate is called the A) term spread. B) T -bill spread. C) LIBOR spread. D) TED spread.

50) With regard to a futures contract, the long position is held by A) the trader who bought the contract at the largest discount. B) the trader who has to travel the farthest distance to deliver the commodity. C) the trader who plans to hold the contract open for the lengthiest time period. D) the trader who commits to purchasing the commodity on the delivery date. E) the trader who commits to delivering the commodity on the delivery d ate.

51) Mortgage -backed securities were created when ________ began buying mortgage loans from originators and bundling them into large pools that could be traded like any other financial asset. A) GNMA B) FNMA C) FHLMC D) FNMA and FHLMC E) GNMA and FNMA

51) The risk that can be diversified away in a portfolio is referred to as ___________. I) diversifiable riskII) unique riskIII) systematic riskIV) firm -specific risk A) I, III, and IV B) II, III, and IV C) III and IV D) I, II, and IV E) I, II, III, and IV

51) Which of the following measures of risk best highlights the potential loss from extreme negative returns? A) Standard deviation B) Variance C) Upper partial standard devi ation D) Value at risk (VaR) E) None of the options are correct.

52) As the number of securities in a portfolio is increased, what happens to the average portfolio standard deviation? A) It increases at an increasing rate. B) It increases at a decreasing rate. C) It decreases at an increasing rate. D) It decreases at a decreasing rate. E) It first decreases, then starts to increase as more securities are added.

66) If an investment provides a 2.1% return quarterly, its effective annual rate is A) 2.1%. B) 8.4%. C) 8.56%. D) 8.67%.

67) The ____ is an example of a U.S. index of small firms. A) S&P 500 B) DJIA C) DAX D) Russell 2000 E) All of the options are correct.

52) To build an indifference curve, we can first find the utility of a portfolio with 100% in the risk-free asset, then A) find the utility of a portfolio with 0% in the risk -free asset. B) change the expected return of the portfolio and equate the utility to the standard deviation. C) find another utility level with 0% risk. D) change the standard deviation of th e portfolio and find the expected return the investor would require to maintain the same utility level. E) change the risk -free rate and find the utility level that results in the same standard deviation.

53) An investor purchases one municipal and one corporate bond that pay rates of return of 6% and 8%, respectively. If the investor is in the 24% marginal tax bracket, his or her after -tax rates of return on the municipal and corporate bonds would be ________ and ______, respectively. A) 6%; 8% B) 4.5%; 6% C) 4.5%; 8% D) 6%; 6.08%

53) You purchased 100 shares of common stock on margin for $60 per share. The initial margin is 50%, and the stock pays no dividend. What would your rate of return be if you sell the stock at $72 per share? Ignore interest on margin. A) 28% B) 33% C) 14% D) 40% E) 24%

54) If the annual real rate of interest is 3.5%, and the expected inflation rate is 3.5%, the nominal rate of interes t would be approximately A) 0%. B) 3.5%. C) 12.25%. D) 7%.

54) The standard deviation of a two -asset portfolio is a linear function of the assets' weights when A) th e assets have a correlation coefficient less than zero. B) the assets have a correlation coefficient equal to zero. C) the assets have a correlation coefficient greater than zero. D) the assets have a correlation coefficient equal to one. E) the assets have a correlation coefficient less than one.

54) ________ were designed to concentrate the credit risk of a bundle of loans on one class of investor, leaving the other investors in the pool relatively protected from that risk. A) Stocks B) Bo nds C) Derivatives D) Collateralized debt obligations E) All of the options

56) For a taxpayer in the 12% marginal tax bracket, a 15 -year municipal bond currently yielding 6.2% would offer an equivalent taxable yield of A) 6.2% . B) 5.27%. C) 8.32%. D) 7.05%.

56) Of the following types of ETFs, an investor who wishes to invest in a diversified portfolio that tracks the Russell 2000 should choose A) SPY. B) DIA. C) QQQQ. D) IWM. E) VTI.

58) You invest $100 in a risky asset with an expected rate of return of 0.11 and a standard deviation of 0.20 and a T -bill with a rate of return of 0.03. The slope of the capital allocation line formed with the risky asset and the risk -free asset is equal to A) 0.47. B) 0.80. C) 2.14. D) 0.40. E) Cannot be determined.

59) Assume you sold short 100 shares of common stock at $70 per share. The initial margin is 50%. What would be the maintenance margin if a margin call is made at a stock price of $85? A) 40.5% B) 20.5% C) 35.5% D) 23.5%

59) The Economic Growth, Regulatory Relief and Consumer Protection Act of 2019 exempted smaller banks from which rule? A) Liquidity B) Reserves C) Demand deposit D) Volker E) All of the options

6) Firm -specific risk is also referred to as A) systematic riskor diversifiable risk. B) systematic riskor market risk. C) diversifiable risk or market risk. D) diversifiable risk or unique risk.

6) In a return -standard deviation space, which of the following statements is(are) true for risk-averse investors? (The vertical and horizontal lines are referred to as the expected return -axis and the standard deviation -axis, respectively.)I) An investor's own indifference curves might intersect.II) Indifference curves have negative slopes.III) In a set of indifference cur ves, the highest offers the greatest utility.IV) Indifference curves of two investors might intersect. A) I and II only B) II and III only C) I and IV only D) III and IV only E) None of the options are correct.

60) According to the Economic Growth, Regulatory Relief and Consumer Protection Act of 2019 many larger banks are no longer considered ________________. A) insurable B) high risk C) insolvent D) systematically important E) All of the options. Test name: Cha pter 01 Test Bank - Static

61) A mutual fund had average daily assets of $2.0 billion in 2018. The fund sold $500 million worth of stock and purchased $600 million worth of stock during the year. The fund's A) 27.5%. B) 12%. C) 15%. D) 25%. E) 20%.

62) If an investment provides a 2% return semi -annually, its effective annual rate is A) 2%. B) 4%. C) 4.02%. D) 4.04%. E) None of the options are correct.

63) A mutual fund had average daily assets of $4.7 billion in 2018. The fund sold $2.2 billion worth of stock and purchased $3.6 billion worth of stock during the year. The fund's turnover ratio is A) 37.5%. B) 22.6%. C) 15.3%. D) 46.8%. E) 20.7%.

63) Consider two perfectly negatively correlated risky securities A and B. A has an expected rate of return of 12% and a standard deviation of 17%. B has an expected rate of return of 9% and a standard deviation of 14%. The weights of A and B in the global minimum variance portfolio are _____ and _____, A) 0.24; 0.76 B) 0.50; 0.50 C) 0.57; 0.43 D) 0.45; 0.55 E) 0.76; 0.24

63) The ____ index represents the performance of the Hong Kong stock market. A) DAX B) FTSE C) Nikke i D) Hang Seng

63) You invest $100 in a risky asset with an expected rate of return of 0.11 and a standard deviation of 0.21 and a T -bill with a rate of return of 0.045. What pe rcentages of your money must be invested in the risk -free asset and the risky asset, respectively, to form a portfolio with a standard deviation of 0.08? A) 30.1% and 69.9% B) 50.5% and 49.50% C) 60.0% and 40.0% D) 61.9% and 38.1% E) Cannot be determined.

64) If an investment provides a 0.78% return monthly, its effective annual rate is A) 9.36%. B) 9.63%. C) 10.02%. D) 9.77%.

65) If an investment provides a 3% return semi -annually, its effective annual rate is A) 3%. B) 6%. C) 6.06%. D) 6.09%.

69) Certificates of deposit are insured by the A) SPIC. B) CFTC. C) Lloyds of London. D) FDIC. E) All of the options are correct.

7) Elias is a risk -averse investor. David is a less risk -averse investor than Elias. Therefore, A) for the same risk, David requires a higher rate of return than Elias. B) for the same return, Elias tolerates higher risk than David. C) for the same risk, Elias requires a lower rate of return than David. D) for the same return, David tolerates higher risk than Elias. E) Cannot be determined.

7) Nonsystematic risk is also referred to as A) market riskor diversifiable risk. B) firm -specific risk or market risk. C) diversifiable risk or market risk. D) diversifiable risk or unique risk.

7) The secondary market consists of A) transactions on the AMEX. B) transactions in the OTC market. C) transactions through the investment banker. D) transactions on the AMEX and in the OTC market. E) transactions on the AMEX, through the investment banker, an d in the OTC market.

71) Compared to mutual funds, hedge funds may use the followin g strategy. A) Growth B) Value C) Sector specialization D) Significant leverage

71) If a distribution has "fat tails," it exhibits A) positive skewness. B) negative skewness. C) a kurtosis of zero. D) kurtosis. E) positive skewness and kurtosis.

74) If a portfolio had a return of 15%, the risk -free asset return was 5%, and the standard deviation of the portfolio's excess returns was 30%, the Sharpe measure would be A) 0.20. B) 0.35. C) 0.45. D) 0.33. E) 0.25.

76) A bond that can be retired prior to maturity by the issuer is a(n) ____________ bond. A) convertible B) secured C) unsecured D) callable E) Yankee

76) _______ is a risk measure that indicates vulnerability to extreme negative returns. A) Value at risk B) Lower partial standard deviation C) Standard deviation D) Value at risk and lower partial standard deviation E) None of the options are correct.

79) You purchased a futures contract on corn at a futures price of 331, and at the time of expiration, the price was 343. What was your profit or loss? A) âˆ'$12.00 B) $12.00 C) âˆ'$600 D) $600

8) In 2018, ____________ was the least significant financial asset of U.S. households in terms of total value. A) real estate B) mutual fund shares C) debt securities D) life insurance reserves E) pension reserves

8) Most actively -managed mutual funds, when compared to a market index such as the Wilshire 5000, A) beat the market return in all years. B) beat the market return in most years. C) exceed the return on index funds. D) do not outperform the market.

8) When an investment advisor attempts to determine an investor's risk toleranc e, which factor would they be least likely to assess? A) The investor's prior investing experience B) The investor's degree of financial security C) The investor's tendency to make risky or conservative choices D) The level of retur n the investor prefers E) The investor's feelings about loss

80) When assessing tail risk by looking at the 5% worst -case scenario, the VaR is the A) most realistic, as it is the most complete measure of risk. B) most pessimistic, as it is the most complete measure of risk. C) most optimistic, as it is the most complete measure of ris k. D) most optimistic, as it takes the highest return (smallest loss) of all the cases.

80) You sold a futures contract on corn at a futures price of 350, and at the time of expiration, the price was 352. What was your profit or loss? A) $2.00 B) âˆ'$2.00 C) $100 D) âˆ'$100

83) The best measure of a portfolio â€™s risk adjusted performance is the _______ __. A) return B) standard deviation C) Jensen alpha D) Sharpe measure E) All of them

9) The risk that cannot be diversified away is A) firm -specific risk. B) unique. C) nonsystematic risk. D) market risk.

9) Which of the follo wing determine(s) the level of real interest rates?I) The supply of savings by households and business firmsII) The demand for investment fundsIII) The government's net supply and/or demand for funds A) I only B) II only C) I and II onl y D) I, II, and III

9) You purchased JNJ stock at $130 per share. The stock is currently selling at $145. Your gains may be protected by placing a A) stop -buy order. B) limit -buy order. C) market order. D) limit -sell order. E) None of these options are correct.

14) Assume you purchased 200 shares of KO common stock on margin at $70 per share from A) $6,000 B) $4,000 C) $7,700 D) $7,000 E) $6,300

14) Which of the following statements about real estate investment trusts is true? A) REITs may be equity trusts or mortgage trusts. B) REITs are usually highly leveraged. C) R EITs are similar to closed -end funds. D) REITs may be equity trusts or mortgage trusts and are usually highly leveraged. E) All of the options are true.

1) Which of the following are not characteristics of money market instruments? A) Liquidity B) Marketability C) Long maturity D) Liquidity premium E) Long maturity and liquidity premium

13) In 2018, _______ of the assets of U.S. households were financial assets as opposed to tangible assets. A) 23.5% B) 87.2% C) 28.4% D) 58.4% E) 71.6%

13) The cost of buying and selling a stock consists of A) broker's commissions. B) dealer's bid -asked spread. C) a price concession an investor may be forced to m ake. D) broker's commissions and dealer's bid -asked spread. E) broker's commissions, dealer's bid -asked spread, and a price concession an investor may be forced to make.

17) In the event of the firm's bankruptcy, A) the most share holders can lose is their original investment in the firm's stock. B) common shareholders are the first in line to receive their claims on the firm's assets. C) bondholders have claim to what is left from the liquidation of the firm's assets after paying the shareholders. D) the claims of preferred shareholders are honored before those of the common shareholders. E) the most shareholders can lose is their original investment in the firm's stock and the claims of preferred shareholders are h onored before those of the common shareholders.

17) You purchased 100 shares of common stock on margin at $45 per share. Assume the initial margin is 50%, and the stock pays no dividend. What would the maintenance margin be if a margin call is made at a stock price of $30? Ignore interest on margin. A) 0.33 B) 0.55 C) 0.43 D) 0.23 E) 0.25

18) In 2018, the proportion o f mutual funds (based on total assets) specializing in money market securities was A) 21.7%. B) 28.0%. C) 54.1%. D) 73.4%. E) 15.2%.

19) Money market securities A) are short term. B) are highly marketable. C) are generally very low risk. D) are highly marketable and are generally very low risk. E) All of the options.

19) Which of the following is true of the Dow Jones Indust rial Average? A) It is a value -weighted average of 30 large industrial stocks. B) It is a price -weighted average of 30 large industrial stocks. C) The divisor must be adjusted for stock splits. D) It is a value -weighted average of 3 0 large industrial stocks, and the divisor must be adjusted for stock splits. E) It is a price -weighted average of 30 large industrial stocks, and the divisor must be adjusted for stock splits.

2) A purcha se of a new issue of stock takes place A) in the secondary market. B) in the primary market. C) usually with the assistance of an investment banker. D) in the secondary and primary markets. E) in the primary market and usually w ith the assistance of an investment banker.

2) The money market is a subsec tor of the A) commodity market. B) capital market. C) derivatives market. D) equity market. E) None of the options are correct.

2) _______ are real assets. A) Land B) Machines C) Stocks and bonds D) Knowledge E) Land, machines, and knowledge

20) If the nominal return is constant, the after -tax real rate of return A) declines as the inflation rate increases. B) increases as the inflation rate increases. C) declines as the inflation rate declines. D) increases as the inflation rate decreases. E) declines as the inflation rate increases and increases as the inflation rate decreases.

20) Management fees and other expenses of mutual funds may include A) only front -end loads. B) onlyback -end loads. C) only 12b -1 charges. D) only front -end and back -end loads. E) front -end loads, back -end loads, and 12b -1 charges.

20) Which of the following statement(s) is(are) true regarding the selection of a portfolio from those that lie on the capital alloc ation line?I) Less risk -averse investors will invest more in the risk -free security and less in the optimal risky portfolio than more risk -averse investors.II) More risk -averse investors will invest less in the optimal risky portfolio and more in the risk -free security than less risk -averse investors.III) Investors choose the portfolio that maximizes their expected utility. A) I only B) II only C) III only D) I and III E) II and III

21) The utility score an investor assigns to a particular portfolio, other things equal, A) will decrease as the rate of return increas es. B) will decrease as the standard deviation decreases. C) will decrease as the variance decreases. D) will increase as the variance increases. E) will increase as the rate of return increases.

22) Specialists on stock exchanges perform which of the following functions? A) Act as dealers in their own accounts B) Analyze the securities in which they specialize C) Provide liquidity to the market D) Act as dealers in their own accounts and analyze the securities in which they specialize E) Act as dealers in their own accounts and provide liquidity to the market

22) The Yachtsman Fund had NAV per share of $36.12 on January 1, 2018. On December 31 of the same year, the fund's NAV was $39.71. Income distributions were $0.64, and the fund had capital gain d istributions of $1.13. Without considering taxes and transactions costs, what rate of A) 22.92% B) 17.68% C) 14.39% D) 18.52% E) 14.84%

25) Which of the following orders instr ucts the broker to buy at the current market price? A) Limit order B) Discretionary order C) Limit -loss order D) Stop -buy order E) Market order

26) If a portfolio had a return of 11%, the risk -free asset return was 6%, and the standard deviation of the portfolio's excess returns was 25%, the risk premium would be A) 14%. B) 6%. C) 35%. D) 21%. E) 5%.

27) Consider the following probability distribution for stocks A and B: State Probability Return on Stock A Return on Stock B 1 0.10 10 % 8 % 2 0.20 13 % 7 % 3 0.20 12 % 6 % 4 0.30 14 % 9 % 5 0.20 15 % 8 % Let G be the global minimum variance portfolio. The weights of A and B in G are __________ and __________, respectively. A) 0.40; 0.60 B) 0.66; 0.34 C) 0.34; 0.66 D) 0.77; 0.23 E) 0.23; 0.77

28) Commingled funds are A) amounts invested in equity and fixed -income mutual funds. B) funds that may be purchased at intervals of 3, 6, or 12 months at th e discretion of management. C) amounts invested in domestic and global equities. D) closed -end funds that may be repurchased only once every two years at the discretion of mutual fund management. E) partnerships of investors that pool their fun ds, which are then managed for a fee.

29) During the period between 2000 and 2002, a large number of scandals were uncovered. Most of these scandals were related to I) manipulation of financial data to misrepresent the actual condition of the firm. II) misleading and overly optimistic research reports produced by analysts. III) allocating IPOs to exec utives as a quid pro quo for personal favors. A) II, III, and IV B) I, II, and IV C) II and IV D) I, III, and IV E) I, II, and III

29) Which of the following is true regarding equity mutual funds? I) They invest primarily in stock.II) They may hold fixed -income securities, as well as stock.III) Most hold money market A) I and IV B) I, III, and IV C) I, II, and IV D) I, II, and III E) I, II, III, and IV

3) Treasury Inflation -Protected Securities (TIPS) A) pay a fixed interest r ate for life. B) pay a variable interest rate that is indexed to inflation but maintain a constant principal. C) provide a variable stream of income in real (inflation -adjusted) dollars. D) have their principal adjusted in proportion to the Co nsumer Price Index. E) provide a constant stream of income in real (inflation -adjusted) dollars and have their principal adjusted in proportion to the Consumer Price Index.

3) Which of the following functions do investment companies perform for their investors? A) Record keeping and administration B) Diversification and divisibility C) Professional management D) Lower transaction costs E) All of the options.

3) Which of the following statements is(are) false ? I) Risk -averse investors reject investments that are fair games.II) Risk -neutra l investors judge risky investments only by the expected returns.III) Risk -averse investors judge investments only by their riskiness.IV) Risk -loving investors will not engage in fair games. A) I only B) II only C) I and II only D) II and III only E) III and IV only

30) The Sarbanes -Oxley Act A) requires corporations to have more independent directors. B) requires the firm's CFO to personally vouch for the firm's accounting statements. C) prohibits auditing firms from providing other services to clients. D) requires corporations to have more independent dire ctors and requires the firm's CFO to personally vouch for the firm's accounting statements. E) All of the above.

30) The holding -period return (HPR) for a stock is equal to A) the real yield minus the inflation rate. B) the nominal yield minus the real yield. C) the capital gains yield minus the tax rate. D) the capital gains yield minus the dividend yield. E) the dividend yield plus the capital gains yield.

33) When stocks are held in street name, A) the investor receives a stock certificate with the owner's street address. B) the investor receives a stock certificate without the owner's street address. C) the investor does not receive a stock certificate. D) the broker holds the stock in the brokerage firm's name on b ehalf of the client. E) the investor does not receive a stock certificate, and the broker holds the stock in the brokerage firm's name on behalf of the client.

34) NASDAQ subscriber levels A) permit those with the highest level , 3, to "make a market" in the security. B) permit those with a level 2 subscription to receive all bid and ask quotes but not to enter their own quotes. C) permit level 1 subscribers to receive general information about prices. D) include all OTC stocks. E) permit those with the highest level, 3, to "make a market" in the security; permit those with a level 2 subscription to receive all bid and ask quotes but not to enter their own quotes; and permit level 1 subscribers to receive general information about prices.

35) _______ are examples of financial intermediaries. A) Commercial banks B) Insurance companies C) Investment companies D) Credit unions E) All of the options

36) Financial intermediaries exist because small investors cannot efficiently A) diversify their portfolios. B) assess credit risk of borrowers. C) advertise for needed investments. D) diversify their portfolios and assess credit risk of borrowers. E) All of the options.

38) A mutual fund had year -end assets of $700,000,000 and l iabilities of $7,000,000. There were 40,150,000 shares in the fund at year end. What was the mutual fund's net asset value? A) $9.63 B) $57.71 C) $16.42 D) $17.87 E) $17.26

38) A statistic that measures how the returns of two risky assets move togeth er is: A) variance. B) standard deviation. C) covariance. D) correlation. E) covariance and correlation.

4) Which of the following statements regarding the specialist are true? A) Specialists maintain a book listing outstanding, unexecuted limit orders. B) Specialists earn income from commissions and spreads in stock prices. C) Specialists st and ready to trade at quoted bid and ask prices. D) Specialists cannot trade in their own accounts. E) Specialists maintain a book listing outstanding, unexecuted limit orders, earn income from commissions and spreads in stock prices, and stand rea dy to trade at quoted bid and ask prices.

41) The yield to maturity reported in the financial pages for Treasury securities A) is calculated by compounding the semiannual yield. B) is calculated by doubling the semiannual yield. C) is also called the bond equivalent yield. D) i s calculated as the yield -to-call for premium bonds. E) is calculated by doubling the semiannual yield and is also called the bond equivalent yield.

42) A mutual fund had year -end assets of $327,000,000 and liabilities of $46,000,000. If the A) 11,354,751 B) 8,412,642 C) 10,165,476 D) 9,165,414 E) 9,219,160

44) A mutual fund had NAV per share of $19.00 on January 1, 2018. On December 31 of the same year, the fund's NAV was $19.14. Income distributions were $0.57, and the fund had capital gain distributions of $1.12. Without considering taxes and transactions costs, what rate of return did an investor receive on the fund last year? A) 11.26% B) 10.54% C) 7.97% D) 8.26% E) 9.63%

46) The type of municipal bond that is used to finance commercial enterprises, such as the construction of a new building for a corporation, is called A) a corporate courtesy bond. B) a revenue bond. C) a general -obligation bond. D) a tax -anticipation note. E) an industrial -development bond.

46) You purchased a share of stock for $120. One year later, you received $1.82 as a dividend and sold the share for $136. What was your holding -period return? A) 15.67% B) 22.12% C) 18.85% D) 13.24% E) None of the options are correct.

47) A mutual fund had NAV per share of $16.75 on January 1, 2018. On December 31 of the same year, the fund's rate of return for the year was 26.6%. Income distributions were $1.79, and the fund had capital gain dis tributions of $2.80. Without considering taxes and transactions costs, what ending NAV would you calculate? A) $17.44 B) $13.28 C) $14.96 D) $17.25 E) $16.62

48) You have been given this probability distribution for the holding -period return for a stock:Stock of the Economy Probability HPR Recession 0.25 â€" 9 % What is the expected holding -period return for the stock? A) 11.67% B) 8.33% C) 9.56% D) 12.4% E) None of the options are correct.

49) Your client, Bo Regard, holds a complete portfolio that consists of a portfolio of risky assets ( P) and T -Bills. The information below refers to these assets. E(Rp) 12.00 % Standard Deviation of P 7.20 % T-Bill rate 3.60 % Proportion of Complete Portfolio in P 80 % Proportion of Complete Portfolio in T -Bills 20 % Composition of P: Stock A 40.00 % Stock B 25.00 % Stock C 35.00 % Total 100.00 % A) 7.20% B) 5.40% C) 6.92% D) 4.98% E) 5.76%

5) _________ financial asset(s). A) Buildings are B) Land is a C) Derivatives are D) U.S. agency bonds are E) Derivatives and U.S. agency bonds are

50) Differences between hedge funds and mutual funds are that A) hedge funds are only subject to minimal SEC regulation. B) hedge funds are typically open only to wealthy or institutional investors. C) hedge fund managers can purs ue strategies not available to mutual funds, such as short selling, heavy use of derivatives, and leverage. D) hedge funds are commonly structured as private partnerships. E) All of the options.

50) Given an optimal risky p ortfolio with expected return of 20%, standard deviation of 24%, and a risk free rate of 7%, what is the slope of the best feasible CAL? A) 0.64 B) 0.14 C) 0.62 D) 0.33 E) 0.54

50) You have been given this probability distribution for the holding -period return for a stock: Stock of the Economy Probability HPR Boom 0.40 22 % Normal growth 0.35 11 % Recession 0.25 â€" 9 % What is the expected variance for the stock? A) 142.07% B) 189.96% C) 177.04% D) 128.17% E) None of the options are correct.

52) You purchased 100 shares of common stock on margin for $50 per share. The initial margin is 50%, and the stock pays no dividend. What would your rate of return be if you sell the stock at $56 per share? Ignore interest on margin. A) 28% B) 33% C) 14% D) 42% E) 24%

53) A year ago, you invested $1,000 in a savings account that pays an annual interest rate of 4.3%. What is your approximate annual real rate of return if th e rate of inflation was 3% over the year? A) 4.3% B) âˆ'1.3% C) 7.3% D) 3% E) None of the options.

53) The capital market line I) is a special case of the capital allocation line. II) represents the opportunity set of a passive investment strategy. III) has the one -month T -Bill rate as its intercept. IV) uses a broad index of common stocks as its risky portfolio. A) I, III, and IV B) II, III, and IV C) III and IV D) I, II, and III E) I, II, III, and IV

55) A two -asset portfolio with a standard deviation of zero can be formed when A) the assets have a correlation coefficient less than zero. B) the assets have a corre lation coefficient equal to zero. C) the assets have a correlation coefficient greater than zero. D) the assets have a correlation coefficient equal to one. E) the assets have a correlation coefficient equal to negative one.

55) You purchased a share of CSCO stock for $20. One year later, you received $2 as a dividend and sold the share for $31. What was your holding -period return? A) 45% B) 50% C) 60% D) 40% E) None of the options are correct.

56) When borrowing and lending at a risk -free rate are allowed, which capital allocation line (CAL) should the investor choose to combine with the efficient frontier?I) The one with the highest reward -to-variability ratio.II) The one that will maximize his uti lity.III) The one with the steepest slope.IV) The one with the lowest slope. A) I and III B) I and IV C) II and IV D) I only E) I, II, and III

56) You have been given this probability distribution for the holding -period return for GM stock: Stock of the Economy Probability HPR Boom 0.40 30 % Normal growth 0.40 11 % Recession 0.20 â€" 10 % What is the expected holding -period return for GM stock? A) 10.4% B) 11.4% C) 12.4% D) 13.4% E) 14.4%

57) Given an optimal risky portfolio with expected return of 13%, stand ard deviation of 26%, and a risk free rate of 5%, what is the slope of the best feasible CAL? A) 0.60 B) 0.14 C) 0.08 D) 0.36 E) 0.31

57) Of the following types of ETFs, an investor who wishes to invest in a diversified portfolio that tracks the Wilshire 5 000 should choose A) SPY. B) DIA. C) QQQ. D) IWM. E) VTI.

57) With regard to a futures contract, the short position is held by A) the trader who bought the contract at the largest discount. B) the trader who has to travel the farthest dist ance to deliver the commodity. C) the trader who plans to hold the contract open for the lengthiest time period. D) the trader who commits to purchasing the commodity on the delivery date. E) the trader who commits to delivering the commodity o n the delivery date.

57) You have been given this probability distribution for the holding -period return for GM stock: Stock of the Economy Probability HPR Boom 0.40 30 % Normal growth 0.40 11 % Recession 0.20 â€" 10 % A) 16.91% B) 16.13% C) 13.79% D) 15.25% E) 14.87%

60) A mutual fund had average daily assets of $3.0 billion in 2018. The fund sold $600 million worth of stock and purchased $700 million worth of stock during the year. The fund's turnover ratio is A) 27.5%. B) 12%. C) 15%. D) 25%. E) 20%.

64) The Securities Act of 1934 I) requires full disclosure of relevant information relating to the issue of new securities. II) requires registration of new securities. III) requires issuance of a prospectus detailing finan cial prospects of the firm. IV) established the SEC. V) requires periodic disclosure of relevant financial information. VI) empowers SEC to regulate exchanges, OTC trading, brokers, and dealers. A) I, II, and III B) I, II, III, IV, V, an d VI C) I, II, and V D) I, II, and IV E) IV, V, and VI

68) The largest component of the money market is/are A) repurchase agreements. B) money market mutual funds. C) T -bills. D) Eurodollars. E) savings deposits.

7) The smallest component of the money market is A) repurchase agreements. B) small -denomination time deposits. C) savings deposits. D) money market mutual funds. E) commercial paper.

72) If a portfolio had a return of 8%, the risk-free asset return was 3%, and the standard A) 0.08. B) 0.03. C) 0.20. D) 0.11. E) 0.25.

75) Unsecured bonds are called A) junk bonds. B) debentures. C) indentures. D) subordinated debentures. E) either debentures or subordinated debentures.

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