1.Preferred stock:
a. Is actually a form of equity
b. Pays dividends not fully taxable to U.S. corporations
c. Is normally considered a fixed-income security
d. All of the above
2. Find the tax equivalent yield of a municipal bond paying
4% for someone in the 30% tax bracket (assume this investor resides in the same
state as the municipal bond). Show your work.
4. What does NASDAQ stand for? I need a word for each
letter.
5. Which of the following statements about the security
market line (SML) are true (only 1 is true)?
a. The SML provides a benchmark for evaluating expected
investment performance
b. The SML leads all investors to invest in the same
portfolio of risky assets
c. The SML is a graphic representation of the relationship
between expected return and beta
d. Properly valued assets plot exactly on the SML
6. In relation to this course, what does CAPM stand for? I
need one word for each letter.
7. The security market line (SML) depicts:
a. A security’s expected return as a function of its
systematic risk.
b. The market portfolio as the optimal portfolio of risky
securities.
c. The relationship between a security’s return and the
return on an index.
d. The complete portfolio as a combination of the market
portfolio and the risk-free asset.
8. Which of the following statements are true if the
efficient market hypothesis holds (only 1 is true)?
a. It implies perfect forecasting ability
b. It implies that prices reflect all available information
c. It implies that the market is irrational
d. It implies that prices do not fluctuate
9. A market anomaly refers to:
a. An exogenous shock to the market that is sharp but not
persistent
b. A price or volume event that is inconsistent with
historical price or volume trends
c. A trading or pricing structure that interferes with
efficient buying and selling of securities
d. Price behavior that differs from the behavior predicted
by the efficient market hypothesis
10. As of the close of the stock market on Wednesday June
13, 2007; which stock had a higher price: Walmart or Target? Use the price as
of 4pm EST as the price may change during after hours trading.
11. The ticker symbol for Intel is:
a. IN
b. NTL
c. INTC
d. INTEL
12. Which of the following is not considered a leading
economic indicator?
a. Stock prices, 500 common stocks
b. Money supply (M2)
c. Index of consumer expectations
d. 30 year mortgage rate
13. The current Federal Reserve chairman is:
a. Alan Greenspan
b. Ben Bernanke
c. George Bush
d. Pete Rose
14. The Dow Jones Industrial Average is comprised of how
many stocks?
a. 15
b. 20
c. 30
d. 100
15. The EAFE index stands for:
a. The East and Far East Index
b. European and France East Index
c. European, Australian, Far East Index
d. None of the above
16. A call option gives its holder the right to purchase an
asset for a specified price, called the __________ price, on or before some
specified expiration date.
a. cheap
b. set
c. exercise
d. fair
17. All stocks trade only on the New York Stock Exchange.
This statement is:
a. True
b. False
18. The formula for holding period return (HPR) is:
(Ending price – Beginning Price + BLANK)
Beginning Price
Fill in the BLANK:
a. stock price
b. cash dividend
c. stock dividend
d. none of the above
19. The geometric average of the quarterly returns is equal
to the single per-period return that would give the same cumulative performance
as the sequence of actual returns. This statement is:
a. True
b. False
20. A mutual fund can hold all of the following:
a. bonds
b. stocks
c. cash/money market
d. all of the above
