Question 1

The nominal risk free rate of interest is a function of

Question 2

Which of the following is not a component of the risk premium?

Question 3

All of the following are major sources of uncertainty EXCEPT

Question 4

Exhibit 1.5

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

Assume that during the past year the consumer price index increased by 1.5 percent and the securities listed below returned the following nominal rates of return.

Question 5

John is 55 years old has $55,000 outstanding on a mortgage and no other debt. John typically saves $5,000 in an IRA account and another $10,000 in a company pension. John is most likely in the:

Question 6

For an investor with a time horizon of 15 years and moderate risk tolerance, an appropriate asset allocation strategy would be

Question 7

____ phase is the stage when investors in their early-to-middle earning years attempt to accumulate assets to satisfy near-term needs, e.g., children's education or down payment on a home.

Question 8

The first step in the investment process is the development of a(n)

Question 9

The purchase and sale of commodities for current delivery and consumption is known as dealing in the ____ market.

Question 10

Rank the following four investments in increasing order of historical risk.

Question 11

Exhibit 3.1

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

Security Annual Percentage Return

U.S. government T-bills   3.04

Long-term government bonds   5.75

Long-term corporate bonds   6.80

Large capitalization common stocks 13.50

Small capitalization common stocks 15.60

Question 12

Adding international investments to an all U.S. portfolio will most likely:

Question 13

Which of the following is not a characteristic of shelf registrations? Shelf registrations:

Question 14

With a best effort offering, the investment banker performs all of the following roles except:

Question 15

Exhibit 4.1

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

Jackie has a margin account with a balance of $150,000. The initial margin deposit is 60 percent and Turtle Industries is currently selling at $50 per share.

Refer to Exhibit 4.1. How many shares of Turtle can Jackie purchase?

Question 16

Floor brokers on the New York Stock Exchange

Question 17

Which of the following behaviors is consistent with escalation bias?

Question 18

A "runs test" on successive stock price changes which supports the efficient market hypothesis would show the actual number of runs

Question 19

Tests of the efficient market hypothesis (EMH) are sometimes based on examining its abnormal rate of return. The abnormal rate of return is calculated by:

Question 20

Exhibit 6.1

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

Stock Rit Rmt ai Beta

C 12 10    0 0.8

E 10   8.0 0 1.1

Rit = return for stock i during period t

Rmt = return for the aggregate market during period t

Refer to Exhibit 6.1. What is the abnormal rate of return for Stock E when you consider its systematic risk measure (beta)?

Question 21

Between 1975 and 1985, the standard deviation of the returns for the NYSE and the S&P 500 indexes were 0.06 and 0.07, respectively, and the covariance of these index returns was 0.0008. What was the correlation coefficient between the two market indicators?

Question 22

Between 1986 and 1996, the standard deviation of the returns for the NYSE and the DJIA indexes were 0.10 and 0.09, respectively, and the covariance of these index returns was 0.0009. What was the correlation coefficient between the two market indicators?

Question 23

Semivariance, when applied to portfolio theory, is concerned with

Question 24

The probability of an adverse outcome is a definition of

Question 25

Calculate the expected return for D Industries which has a beta of 1.0 when the risk free rate is 0.03 and you expect the market return to be 0.13.

Question 26

Calculate the expected return for B Services which has a beta of 0.83 when the risk free rate is 0.05 and you expect the market return to be 0.12.

Question 27

The rate of return on a risk free asset should equal the

Question 28

As the number of securities in a portfolio increases, the amount of systematic risk

Question 29

In a multifactor model, time horizon risk represents

Question 30

Exhibit 9.2

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

Consider the three stocks, stock X, stock Y and stock Z, that have the following factor loadings (or factor betas).

Stock Factor 1 Loading Factor 2 Loading

X 0.55 1.2  

Y 0.10 0.85

Z   0.35 0.5  

The zero-beta return (0) = 3%, and the risk premia are 1 = 10%, 2 = 8%. Assume that all three stocks are currently priced at $50.

Refer to Exhibit 9.2. The new prices now for stocks X, Y, and Z that will not allow for arbitrage profits are

Question 31

Consider the following list of risk factors:

(1) monthly growth in industrial production

(2) return on high book to market value portfolio minus return on low book to market value portfolio

(3) change in inflation

(4) excess return on stock market portfolio

(5) return on small cap portfolio minus return on big cap portfolio

(6) unanticipated change in bond credit spread

Which of the following factors would you use to develop a macroeconomic-based risk factor model?

Question 32

In a macro-economic based risk factor model the following factor would be one of many appropriate factors:

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Status NEW Posted 18 Jan 2019 05:01 PM My Price 12.00

FIN----------- 55-----------0 W-----------eek----------- 5 -----------Mid-----------ter-----------m E-----------xam-----------

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