fin 334 - final

According to material presented in class, dark pools I. account for roughly 70 to 90% of all trading volume. II. only allow investors to trade in large chunks. III. are private electronic trading platforms. IV. sometimes have more competitive bid and ask prices than those posted on formal exchanges. A) III and IV only B) I and III only C) I, III and IV only D) I, II, III and IV E) II, III and IV only

A

According to the semi-strong form of the efficient market hypothesis, which of the following might lead to extraordinary profits? A) possessing private information not available to other investors B) carefully timing trades to buy when the price is low and sell when the price is high C) studying charts of a stock's past price behavior D) thoroughly analyzing the state of the economy, the industry and the company's fundamentals E) none of the above

A

According to the videos assigned as homework: I. Citadel operates a conglomeration of dark pools. II. Most dark pools are subsidiaries of a formal exchange. III. Roughly 5% of all trading is done by high speed trading firms. IV. Somewhere between 10% and 50% of all trading takes place away from the formal exchanges. A) IV only B) I and III only C) II and IV only D) II and III only E) III and IV only

A

Between 1900 and 2014, a typical annual return in the U.S. stock market ranged from A) -10.2% to 29.4% B) 4.5% to 14.7% C) -16.2% to 35.4% D) -14.7% to 24.9% E) 0% to 20%

A

Bonds are least likely to be called if A) they are selling at a substantial discount. B) if they do not mature for at least 5 years. C) the price is close to par value. D) they are selling at a substantial premium.

A

Jeremy purchased 100 shares of FB for $19 per share in September 2012 and sold them 3 years later at $91 per share. At what annual rate did the value of his investment grow? A) about 69% B) about 379% C) about 95% D) about 126% E) about 48%

A

Lauren purchased a stock for $28 a share and sold it six months later for $31. While she owned the stock, Lauren received two quarterly dividends of $0.35 per share. Lauren's holding period return on this stock is A) 13.2%. B) 11.9%. C) 12.9% D) 10.7%. E) 26.4%.

A

Markhem Enterprises is expected to earn $1.34 per share this year. The company has a dividend payout ratio of 40% and a P/E ratio of 18. What should one share of common stock in Markhem Enterprises be selling for in the market? A) $24.12 B) $24.66 C) $9.65 D) $33.77 E) $14.47

A

McDonald's stock is now selling for $92 per share. Kim wants to buy 100 shares but only if she can do so at $90 or less. She should place a(n) A) limit order. B) market order. C) stop order. D) odd-lot order. E) fill or kill order.

A

People tend to A) ignore information that contradicts their current beliefs. B) earn positive abnormal profits when stock prices are rising. C) overestimate the effects of random chance. D) look at the entire situation when analyzing an individual security. E) be under-confident in their judgment of investments.

A

Stock investors are most interested in which one of the following ratios? A) return on equity B) net profit margin C) return on assets D) equity multiplier E) current ratio

A

The expected rate of return and standard deviations, respectively for four stocks are given below: LMN 4%, 0% OPQ 11%, 8% RST 11%, 9% UVW 12%, 10% XYZ 12%, 8% Which stock is clearly most desirable? A) LMN B) XYZ C) UVW D) OPQ E) RST

A

The maximum rate of return that can be earned for a given rate of interest occurs when interest is compounded A) continuously. B) annually. C) monthly. D) daily.

A

The shares of large technology companies such as IBM and Microsoft trade I. on the NYSE. II. on the NASDAQ. III. in the third market. IV. in the fourth market. A) I, II, III and IV B) II only C) I and II only D) I, II and III only E) I only

A

The tendency of naive investors to buy high (after prices have risen for several periods) and sell low (after prices have dropped for several periods) can be explained by the behavioral tendency known as A) anchoring. B) loss aversion. C) familiarity bias. D) self-attribution bias. E) overconfidence.

A

The value of a Standard & Poor's Index is computed by A) dividing the sum of the current market value of all the stocks in the index by a divisor that adjusts for stock splits and scales the Index figure to a manageable size. B) dividing the sum of the closing share prices by a divisor adjusted for changes in the companies composing the Index. C) dividing the sum of the closing share prices by a fixed divisor and then multiplying the quotient by 100. D) dividing the sum of the closing share prices by a divisor that adjusts for stock splits and scales the Index figure to a manageable size. E) dividing the sum of the current market value of all the stocks in the index by a divisor adjusted for changes in the companies composing the Index.

A

Which of the following are key inputs to determining the intrinsic value of an asset? I. the required rate of return II. future cash flows III. current stock price IV. timing of future cash flows A) I, II and IV only B) I and II only C) II, III and IV only D) I and III only E) II and IV only

A

Which of the following is most likely to increase in value as the result of a weakening dollar? A) an ADR for a foreign telecommunications company B) stock in a firm that depends heavily on imported raw materials C) stock in a foreign company that depends heavily on exports to the U.S. D) stock in a firm with many accounts payable in foreign currencies

A

Which of the following would be found on a company's balance sheet? I. Accounts receivable II. Interest expense III. Property plant and equipment IV. Total stockholders' equity A) I, III and IV only B) I, II and IV only C) I an IV only D) III and IV only E) I, II and III only

A

Which one of the following combination of features causes bond prices to be the most volatile? A) low coupon, long maturity B) low coupon, short maturity C) high coupon, short maturity D) high coupon, long maturity

A

Which one of the following is a leverage measure? A) times interest earned B) return on equity C) net profit margin D) net working capital E) current ratio

A

Which one of the following statements concerning the random walk hypothesis is correct? A) Random price movements support the weak form efficient market hypothesis. B) Random price movements indicate that investors can earn abnormal profits on a routine basis. C) Stock prices in general follow repetitive patterns but the actions of individual investors are random in nature. D) Stock price movements are predictable but only over short periods of time. E) none of the above

A

Which stage of an industry's growth cycle is interesting only for potentially high dividend payouts? A) stability or decline B) rapid expansion C) initial development D) mature growth

A

A high TRIN value is considered A) good for the market when the number of advancing stocks is declining. B) bad for the market when the trading volume in the declining stocks is rising. C) bad for the market when the number of declining stocks is stable. D) good for the market when the volume of advancing stocks is declining.

B

According the Morningstar interview presented in class, I. Eugene Fama believes that markets are generally efficient. II. Robert Shiller believes that markets are generally efficient. III. According to Cliff Asness, if you are a strong believer in efficient markets, accounting standards are very important. IV. According to Cliff Asness, the efficient market hypothesis is the null hypothesis for modern financial economics. A) I, II, III and IV B) I and IV only C) I and III only D) I, III, and IV only E) II and III only

B

According to chartists, a breakout below a support level A) is a buy signal but only for value investors. B) is a sell signal. C) is a signal that the market is stagnant. D) is a buy signal.

B

Aria has heard a rumor that a major food company will be forced to recall millions of jars of peanut butter due to contamination. If the rumors are true, the company's stock price will decline sharply. Which one of the following strategies would allow Jennifer to earn a profit if the rumor proves to be true? A) Buy a call option on the stock that expires next month. B) Sell the stock short today. C) Take a long position in the stock one month from today. D) Take a long position in the stock today. E) Buy the stock on margin today.

B

Emily bought 200 shares of ABC Co. stock for $29.00 per share on 60% margin. Assume she holds the stock for one year and that her interest costs will be $80 over the holding period. Ignoring commissions, what is her percentage return (loss) on invested capital if the stock price went down 10%? A) 10% B) -19% C) -32% D) -10% E) -16%

B

Excessively trading a customer's account to increase a stockbroker's commission income is A) an acceptable method of timing the market to increase rates of return. B) called churning which is an illegal practice. C) permitted provided that the customer does not object. D) probably unethical but yet is acceptable by the securities industry.

B

Gerry bought 100 shares of stock for $30.00 per share on 70% margin. Assume Gerry holds the stock for one year and that his interest costs will be $45 over the holding period. Gerry also received dividends amounting to $0.30 per share. Ignoring commissions, what is his percentage return on invested capital if he sells the stock for $34 a share? A) 9.16% B) 18.33% C) 20.48% D) 12.83% E) 106.17%

B

Investors seeking a diversified, professionally managed portfolio of securities can purchase shares of A) insurance policies. B) mutual funds. C) common equity. D) convertible securities. E) preferred stock.

B

JJ Industries has a P/E ratio of 18 and an EPS of $0.93. This means that JJ's stock is currently selling for A) $19.35 per share. B) $16.74 per share. C) $18.00 per share. D) $18.00 per share. E) $17.07 per share.

B

Jocelyn sells short 1000 shares of JKLO stock at $31.25 per share and six months later purchases the shares at $29.00 each. Ignoring brokerage fees, Nancy will A) lose a total of $2,900. B) earn a total profit of $2,250. C) earn a total profit of $3,125. D) lose a total of $3,125. E) lose a total of $2,250.

B

Mike bought 200 shares of EG stock two years ago at $16 per share. The stock has traded in a range of $21 to $44 a share over the past year. EG is now selling for $43.60 a share. EG announces its earnings today and Mike feels the stock could go to $60 on good news or fall to $30 on bad. order for him to place is A) market order to sell immediately. B) a stop loss order at $42. C) a stop loss order at $16. D) a stop-limit order to sell at $45. E) a limit sell order at $60.00.

B

Municipal bonds can be either general obligation bonds or revenue bonds. Of these two types of municipal bonds, only general obligation bonds A) have the principal and interest guaranteed by a third party. B) are backed by the full faith and credit of the issuer. C) offer tax-exempt interest income. D) are specifically serviced by the income generated from particular projects. E) repay the principal only if a sufficient level of revenue is generated.

B

On a table are 100 sacks, each of which contain 1,000 poker chips. Forty-five of these sacks contain 70% black chips and 30% red chips. The other 55 bags hold 70% red chips and 30% black chips. Suppose you choose one bag at random and then take out 12 chips. Of the 12 chips that you pull out, 8 are black and 4 are red. What is the probability that the bag you picked contains mostly black chips? A) 30% B) 95% C) 70% D) 75% E) 85%

B

Over the long term, which one of the following has historically had the lowest risk and lowest average annual rate of return? A) corporate bonds B) long-term government bonds C) real-estate D) mortgage-backed securities E) common stock

B

Small company stocks are yielding 10.7% while the U.S. Treasury bill has a 1.3% yield and a bank savings account is yielding 0.8%. What is the risk premium on small company stocks? A) 11.5% B) 9.4% C) 10.7% D) 12.0% E) 9.9%

B

The Sorka Corp. has paid annual dividends of $0.60, $0.63, $0.65, $0.68 and $0.72, respectively, over the past five years. What is the dividend growth rate? A) 5.2% B) 4.7% C) 5.4% D) 5.0% E) 5.9%

B

Under which bond provision is the issuer required to retire portions of the bond issue prior to maturity? A) subordination clause B) sinking fund feature C) trust certificates D) refunding provision E) call feature

B

Which of the following designations does NOT have formal education and testing requirements? A) Chartered Financial Analyst B) Registered Investment Adviser C) Certified Public Accountant D) Certified Financial Planner

B

Which one of the following indexes reflects a large sample of small, medium sized and large companies? A) NYSE composite B) Russell 3000 C) Value Line composite D) DJIA E) S&P MidCap 400

B

Which one of the following is a characteristic of blue chip stocks? A) relatively high risk exposure B) long and stable dividend and earnings records C) headquarters location near the ocean D) annual dividends of more than $5 per share E) guaranteed minimum annual dividend of $2 a share

B

Which one of the following is likely to have a negative effect on stock prices? A) rising home prices B) a decrease in the money supply (M2) C) falling interest rates D) low inflation E) a decrease in the unemployment rate

B

Which one of the following statements concerning the primary market is correct? A) A rights offering is a direct sale of stock to an institution that participates in the primary market. B) The first public sale of a company's stock is called an IPO. C) The first public sale of a company's stock in the primary market is called a seasoned new issue. D) A transaction in the primary market is between two private stockholders. E) The primary market operates from 9:30am to 4:00pm every day.

B

Which one of the following will tend to cause domestic interest rates to rise? A) a decline in the real rate of return B) an increase in interest rates overseas C) a decrease in the rate of inflation D) an increase in the money supply E) a decrease in the federal budget deficit

B

A bond quoted at a price of 101.2 A) would cost $1,010.93. B) yields 12%. C) has a coupon rate that exceeds the market rate. D) is a deep discount bond. E) yields 10.12%.

C

A margin account A) can be opened by any investor who wants to purchase securities by charging them to his/her credit card. B) allows an investor to borrow one hundred percent of the cost of the securities purchased. C) allows an investor to borrow a portion of the purchase price at a reasonable rate of interest. D) allows an investor to buy and sell option contracts. E) is permitted only in wrap accounts.

C

A stock's beta value is a measure of A) interest rate risk. B) total risk. C) systematic risk. D) manageable risk. E) diversifiable risk.

C

An informal, voluntary agreement to solve disputes between an investor and his/her broker by utilizing a person to facilitate negotiations between the two parties is called A) litigation. B) tribunal. C) mediation. D) binding arbitration. E) voluntary arbitration.

C

For the period 2000 through 2009, the average annual price change for stocks in the S&P 500 index was A) 16%. B) 8%. C) -1%. D) -50%. E) 9.6%.

C

GLOO stock's P/E ratio is 45 at a time when the market's P/E ratio is 15. GLOO's relative P/E ratio is A) .33. B) 30. C) 3. D) 1.5. E) -30.

C

If a corporation declares a 10% stock dividend, then A) the share price of the stock will most likely increase by about 10%. B) investors must pay income taxes on the distribution. C) the share price of the stock will most likely decline by about 9%. D) the share price of the stock will most likely remain unchanged. E) each shareholder will get a 10% cash rebate off his or her next round lot purchase of the stock.

C

In the U. S., the most prestigious designation for financial planners is A) CFA. B) ING. C) CFP. D) CPA. E) SIPC.

C

In the absence of any new relevant information about the firm: I. If the stock traded for $25 at the close of trading on the 5th, it would most likely begin trading at $23.50 on the 6th. II. If the stock traded for $25 at the close of trading on the 6th, it would most likely begin trading at $23.50 on the 7th. III. All investors that purchased the stock before the close of trading on the 7th would receive the dividend. IV. All investors that purchased the stock before the close of trading on the 6th would receive the dividend. A) I and IV B) II and III only C) I only D) II only E) IV only

C

Investment bankers who join together to share the financial risk associated with buying an entire issue of new securities and reselling them to the public is called a(n) A) tombstone group. B) IPO team. C) underwriting syndicate. D) primary market group. E) selling group.

C

On a net basis, funds in the financial markets are generally supplied by A) both individuals and business firms. B) business firms. C) individuals. D) the government. E) the central bank.

C

The confidence index indicates A) investors' trust in financial advisors. B) stock investors ' perceptions of risk in the economy. C) bond investors ' perceptions of risk in the economy. D) consumers' perceptions of risk in the economy. E) a security's strength of advances and declines over time.

C

The document that describes the issuer of a security's management and financial position is known as a A) balance sheet. B) red herring. C) prospectus. D) 8-K filing. E) 10-K report.

C

The normal sequence in performing top down analysis is A) market conditions, risk, company fundamentals. B) profitability, efficiency, liquidity. C) economy, industry, company. D) competition, consumer demand, threat of substitute products.

C

The required rate of return on the Cosmos Corporation's common stock is 10%, the current real rate of return in the market is 1%, and the inflation rate is 3%. In this case, the risk premium associated with Cosmos stock is A) 5%. B) 10% C) 6%. D) 8%. E) 7%.

C

This picture describes an anomaly because A) investors react strongly to accounting profits, but they should be more concerned about free cash flow. B) stock prices begin rising before a firm announces earnings. C) stock prices take an entire year to adjust to new information. D) investors react more strongly to negative news than positive news. E) the market is consistently surprised by the information contained in earnings announcements.

C

When the Capital Asset Pricing Model is depicted graphically, the result is the A) coefficient of variation line. B) alpha-beta line. C) security market line. D) efficient frontier. E) standard deviation line.

C

Which of the following factors are considered when analyzing an industry? I. the nature and conditions of governmental regulations II. the involvement and relations, if any, with labor unions III. the development of new technologies relevant to the industry IV. the extent of competition within the industry A) II, III and IV only B) I, II and III only C) I, II, III and IV D) III and IV only E) I, II and IV only

C

Which of the following factors are included in the rating analysis of a corporate bond? I. the issue's indenture provisions II. the liquidity position of the issuing company III. the issuing company's relative debt burden IV. the stability of the company's earnings A) I and II only B) I, III and IV only C) I, II, III and IV D) II, III and IV only E) I, II and III only

C

Which one of the following statements about margin trading is correct? A) Margin traders are willing to accept lower return to reduce their risk. B) Margin traders are pessimistic about the future price of the stock. C) If Fred buys $1,000 worth of stock using 60% margin, he will need to pay $600 in cash to make the purchase. D) The Securities Exchange Commission sets the minimum margin requirement for margin trading. E) If Fred buys $1,000 worth of stock using 60% margin, he will need to pay $400 in cash to make the purchase.

C

Which ratio is commonly used to distinguish between value and growth firms? A) Price-to-sales ratio B) Current ratio C) Market-to-book ratio D) Price-to-users ratio E) Price-to-cash-flow ratio

C

According the Morningstar interview assigned as homework, I. Robert Shiller created the efficient markets hypothesis. II. According to Cliff Asness, Robert Shiller will not take a bubble bath. III. Examples of market anomalies are: cheap beats expensive; good momentum beats bad momentum; low risk seems to outperform high risk. A) I, II and III B) I and II only C) II only D) III only E) I only

D

Amanda has the following portfolio of assets. What is the beta of Amanda's portfolio if the risk-free rate is 1.5% and the market risk premium in 6%? A) 0.85 B) 1.13 C) 0.733 D) 0.62 E) 2.20

D

American investors can enjoy some benefits of international diversification by I. purchasing shares in a mutual fund that invests in foreign companies. II. purchasing ADSs (American Depositary shares). III. purchasing shares of a U.S. based company such as Coca Cola with extensive international operations. IV. purchasing shares of a foregin based company such as Alibaba that is listed on a U.S. exchange. A) I and III only B) I, III and IV only C) II, III and IV only D) I, II, III and IV E) I, II and III only

D

As a general rule, which one of the following statements concerning the various values of common stock is correct? A) Intrinsic values are usually below par values. B) Market values are usually below book values. C) Par values are usually above book values. D) Book values are usually below market values. E) Market values are usually below par values.

D

Beginning investors with small amounts to invest should A) avoid stock investments completely. B) invest all of their money in one high quality stock. C) buy a portfolio of very low priced stocks (penny stocks). D) buy mutual funds or exchange traded funds (ETFs). E) avoid fixed income investments completely.

D

If you were a hedge fund manager interested in earning a positive return without taking on systematic risk, you should A) purchase portfolio C and short an equal proportion of portfolio D. B) short portfolio D. C) purchase portfolio A and short an equal proportion of portfolio C. D) purchase portfolio B and short an equal proportion of portfolio D. E) purchase portfolio A.

D

Reinvested dividends A) do not increase the value of an investor's holdings. B) are generally sold at a premium over the market price. C) are taxed when the shares purchased with the reinvested dividend are sold. D) are taxed at the time the dividend is paid. E) have the same tax implications as a stock split.

D

Spencer Inc.'s stock recently sold for $33.83 per share. Current earnings per share are $2.05 and the expected EPS 5 years from today are $ 3.64. Spencer's PEG ratio is A) 2.19. B) 1.07. C) 2.78. D) 1.36. E) 16.50.

D

The Securities Exchange Act of 1934 A) requires full disclosure of information on all new security issues. B) established trade associations such as the NASD. C) established FINRA as the primary rule making body of the securities industry. D) created the SEC as the regulator of the securities exchanges. E) authorized the SEC to regulate mutual funds.

D

The balance sheet value of a firm's assets minus the balance sheet amount of its liabilities is known as A) intrinsic value. B) par value. C) market value. D) book value. E) liquidation value.

D

The current annual sales of Flower Bud, Inc. are $178,000. Sales are expected to increase by 4% next year. The company has a net profit margin of 5% which is expected to remain constant for the next couple of years. There are 10,000 shares of common stock outstanding. The market multiple is 16.4 and the relative P/E of the firm is 1.21. What is the expected market price per share of common stock for next year? A) $15.18 B) $17.66 C) $20.16 D) $18.37 E) $19.29

D

The efficient market hypothesis rests on which of the following assumptions? I. Information is widely available to all investors almost simultaneously. II. Investors react quickly to new information. III. Investors correctly interpret all available information. IV. Events which affect the market occur randomly. A) I and II only B) I, II and III only C) II, III and IV only D) I, II, III and IV E) I, II and IV only

D

Which of the following are characteristics of short selling? I. borrowing shares of stock from a brokerage firm or other investors II. selling shares of stock you do not own III. betting the stock price will increase IV. limiting losses per share to the price at which the stock was sold A) III and IV only B) I, II, III and IV C) I, II and IV only D) I and II only E) I, II, III only

D

Which of the following are common but dysfunctional investor behaviors? I. overinvesting in companies with familiar names II. dividing their funds equally among available choices, even if several of the choices serve the same purpose III. holding on to a stock that has dropped in value because you would be willing to buy it at its current price IV. overestimating one's ability to pick successful investments A) II and III only B) I and IV only C) I, II, III and IV D) I, II and IV only E) II and IV only

D

Which of the following factors will increase the risk level of an investment? I. a firm's decision to use a high percentage of debt financing II. an economic situation in which consumer prices are rising at a rapid rate III. the ability to trade the investment in a broad market rather than in a thin market IV. unstable currency values A) I and II only B) I, III and IV only C) I and IV only D) I, II and IV only E) II and IV only

D

Which of the following practices is prohibited by the Insider Trading and Fraud Act of 1988? A) selling of stock by officers of the company B) private sales of stock between executives of the company C) promoting a low-price stock, sometimes with false information, in the hopes of selling after a price spike D) the use of nonpublic information to make profitable stock transactions E) the granting of stock options to corporate executives in lieu of salaries

D

Which one of the following has the lowest level of risk? A) commercial paper B) banker's acceptance C) money market mutual fund account D) U.S. Treasury bill E) common equity.

D

A rights offering is the A) sale of securities directly to a select group of investors. B) sale of newly issued shares of stock to the general public with voting rights included. C) sale of newly issued shares of stock to the general public with voting rights withheld. D) secondary offering of securities to the general public. E) offering of new securities to current shareholders on a pro-rata basis.

E

An individual investor who wishes to borrow money to buy stocks must open a A) custodial account. B) signature account. C) joint account. D) PayPal account. E) margin account.

E

Crossing markets are those that A) conduct business at locations in varying time zones. B) trade foreign securities. C) conduct transactions between institutional and individual traders. D) rely on a visible limit order book. E) fill only the orders which have opposing orders at identical prices.

E

DMC3 Inc. will pay no dividend for 2016 or 2017. At the end of 2018, it will pay a dividend of $1.50. Thereafter dividends will grow at 4% per year. The required rate of return is 10%. The intrinsic value of DMC3 shares is (assume you are at the beginning of 2016) A) $22.72. B) $24.91. C) $34.61. D) $26.00 E) $20.66.

E

Investors who buy mutual funds that have had large gains over the last few years are exhibiting a tendency known as A) winning. B) overconfidence. C) loss aversion. D) narrow framing. E) representativeness.

E

Lindor Inc.'s $100 par value preferred stock pays a dividend fixed at 8% of par. To earn 12% on an investment in this stock, you need to purchase the shares at a per share price of A) $150.00. B) $96.00. C) $9.60. D) $8.00. E) $66.67.

E

Melissa owns the following portfolio of stocks. What is the return on her portfolio? A) 9.0% B) 11.5% C) 8.0% D) 10.9% E) 9.8%

E

One of the calendar effect market anomalies indicates that ________ in value during January. A) large cap stocks tend to decline B) strong performers from the previous year tend to decline C) equities in general tend to increase D) equities in general tend to decline E) small cap stocks tend to increase

E

Taylor has saved $400 at the end of every month for the last 4 years with the intention of paying cash for a new car. She has earned a fixed annual rate of 4% over the 4 year period; interest is compounded monthly. How much can she pay for her new car at the end of the fourth year? A) $1,699 B) $22,272 C) $17,716 D) $55,705 E) $20,784

E

The present value of $1,000, discounted at the rate of 5% per year, to be received at the end of 3 years is equal to A) $1,000 × (1.05) × (1.05) × (1.05) B) $1,000 - ($1,000) × .03 × 5. C) $1,000 × (1.05)3. D) $1,000/(1.03)5. E) $1,000/(1.05)3.

E

The published analysis and recommendations of an individual brokerage firm is called a A) investment newsletter. B) comparative data source. C) broker's subscription report. D) prospectus. E) back-office research report.

E

To determine whether a pharmaceutical company's profitability ratios indicate strength or weakness, we should I. compare them to others in the same industry. II. compare them to companies in unrelated industries such as energy or banking. III. compare them to previous years. IV. compare them to absolute standards established by the CFA Institute. A) IV only B) I and II only C) III and IV only D) III only E) I and III only

E

Typical hedge funds are characterized by A) their appeal to a large number of small investors. B) investment portfolios consisting only of traditional stocks and bonds. C) a fee structure that only pays managers when the fund makes money. D) low minimum investment requirements. E) active investment strategies.

E

Which of the following are true about stock market returns as measured by the S&P 500 index? I. In 2008 alone stocks in the index lost between 30% and 40% of their value. II. $10,000 invested in the index in March 2009 would have been worth more than $20,000 by the end of 2016. III. From the beginning of 2000 to the end of 2010, the index more than doubled in value. IV. Both stock and real estate prices recovered strongly in the period between early 2009 and late 2014. A) I, and IV only B) II, III and IV only C) II and IV only D) I II and III only E) I ,II and IV only

E

Which of the following guidelines are appropriate for inclusion in a portfolio management policy? I. Diversify among different types of securities and across industry and geographic lines. II. Determine the risk level and financial situation of the individual investor. III. Utilize beta to help align the portfolio to the risk level of the investor. IV. Minimize the standard deviation of each security in the portfolio. A) I, II, III and IV B) I and III only C) II, III and IV only D) I, II and IV only E) I, II and III only

E

Which one of the following statements about the NYSE is correct? A) Each member of the exchange owns a trading post. B) Any listed stock may be traded at any of 20 trading posts. C) Brokerage firms are only permitted to have one individual trading on the floor of the exchange. D) Most trades for NYSE listed stocks occur on the trading floor. E) Buy orders are filled at the lowest price and sell orders are filled at the highest price.

E