投资学第7版练习作业题
投资学第7版练习作业题
投资学练习作业题（1）画出基金A和基金B的可行集(5个点)。
（2）找出最优风险投资组合P及其期望收益与标准差。
（3）找出由短期国库券与投资组合P支持的资本配置线的斜率。
（4）当一个投资者的风险厌恶程度A=5时，应在股票基金A、B和短期国库券中各投资多少？2假定一个风险证券投资组合中包含大量的股票，它们有相同的分布，ρ60E，相关系数5.0%=σr(=15)%,=（1）含有25种股票的等权重投资组合期望收益和标准差是多少？（2）构造一个标准差小于或等于43%的有效投资组合所需要最少的股票数量为多少？（3）这一投资组合的系统风险为多少？（4）如果国库券的收益率为10%，资本配置的斜率为多少？3短期国库券的收益现在是4.90%，你已经建立了一个最优风险资产投资组合，投资组合P，即你把23%的资金投资到共同基金A，把77%的资金投资到共同基金B。
前者的收益率是8%，后者的收益率是19%。
（1）投资组合P的预期收益率是多少？（2）假定你设计了一个投资组合C，其中34%的资金投资到无风险资产，其余的投资到组合P中，那么这个新的投资组合的预期收益是多少？（3）如果投资组合P的标准差是21%，这个新组合的标准差是多少？确定在新的投资组合中无风险资产、共同基金A和共同基金B的权重。
（1）市场指数投资组合的平均超额收益率为多少？（2）股票A与股票B之间的协方差为多大？（3）股票B与指数之间的协方差为多大？（4）将股票B的方差分解为市场和公司特有两部分。
5对股票A和股票B分析估计的指数模型结果如下：A M A e R R ++=6.012.0B M B e R R ++=4.104.026.0=M σ 20.0)(=A e σ 10.0)(=B e σ（1） 股票A 和股票B 收益之间的协方差是多少？ （2） 每只股票的方差是多少？（3） 将每只股票的方差分类到系统风险和公司特有风险中 （4） 每只股票和市场指数的协方差是多少？ （5） 两只股票的相关系数是多少？6预计无风险利率是6.1%，市场投资组合的预期收益是14.6%。
投资学第7版TestBank答案22
投资学第7版TestBank答案22Multiple Choice Questions1. A futures contractA) is an agreement to buy or sell a specified amount of an asset at the spot price on theexpiration date of the contract.B) is an agreement to buy or sell a specified amount of an asset at a predeterminedprice on the expiration date of the contract.C) gives the buyer the right, but not the obligation, to buy an asset some time in thefuture.D) is a contract to be signed in the future by the buyer and the seller of the commodity.E) none of the above.Answer: B Difficulty: EasyRationale: A futures contract locks in the price of a commodity to be delivered at some future date. Both the buyer and seller of the contract are committed.2. The terms of futures contracts __________ standardized, and the terms of forwardcontracts __________ standardized.A) are; areB) are not; areC) are; are notD) are not; are notE) are; may or may not beAnswer: C Difficulty: EasyRationale: Futures contracts are standardized and are tradedon organized exchanges;forward contracts are not traded on organized exchanges, the participant negotiates for the delivery of any quantity of goods, and banks and brokers negotiate contracts as needed.3. Futures contracts __________ traded on an organized exchange, and forward contracts__________ traded on an organized exchange.A) are not; areB) are; areC) are not; are notD) are; are notE) are; may or may not beAnswer: D Difficulty: EasyRationale: See rationale for test bank question 22.2.4. In a futures contract the futures price isA) determined by the buyer and the seller when the delivery of the commodity takesplace.B) determined by the futures exchange.C) determined by the buyer and the seller when they initiate the contract.D) determined independently by the provider of the underlying asset.E) none of the above.Answer: C Difficulty: ModerateRationale: The futures exchanges specify all the terms of the contracts except price; as a result, the traders bargain over the futures price.5. The buyer of a futures contract is said to have a __________position and the seller of afutures contract is said to have a __________ position in futures.A) long; shortB) long; longC) short; shortD) short; longE) margined; longAnswer: A Difficulty: ModerateRationale: The trader taking the long position commits to purchase the commodity on the delivery date. The trader taking the short position commits to delivering thecommodity at contract maturity. The trader in the long position is said to "buy" the contract; the trader in the short position is said to "sell" the contract. However, no money changes hands at this time.6. Investors who take long positions in futures agree to __________ of the commodity onthe delivery date, and those who take the short positions agree to __________ of the commodity.A) make delivery; take deliveryB) take delivery; make deliveryC) take delivery; take deliveryD) make delivery; take deliveryE) negotiate the price; pay the priceAnswer: B Difficulty: ModerateRationale: See explanation for test bank question 22.5.7. The terms of futures contracts such as the quality and quantity of the commodity and thedelivery date areA) specified by the buyers and sellers.B) specified only by the buyers.C) specified by the futures exchanges.D) specified by brokers and dealers.E) none of the above.Answer: C Difficulty: ModerateRationale: See rationale for test bank question 22.4.8. A trader who has a __________ position in wheat futures believes the price of wheatwill __________ in the future.A) long; increaseB) long; decreaseC) short; increaseD) long; stay the sameE) short; stay the sameAnswer: A Difficulty: ModerateRationale: The trader holding the long position (the person who will purchase the goods) will profit from a price increase. Profit to long position = Spot price atmaturity--Original futures price.9. A trader who has a __________ position in gold futures wants the price of gold to__________ in the future.A) long; decreaseB) short; decreaseC) short; stay the sameD) short; increaseE) long; stay the sameAnswer: B Difficulty: ModerateRationale: Profit to short position = Original futures price--Spot price at maturity. Thus, the person in the short positionprofits if the price of the commodity declines in the future.10. The open interest on silver futures at a particular time is theA) number of silver futures contracts traded during the day.B) number of outstanding silver futures contracts for delivery within the next month.C) number of silver futures contracts traded the previous day.D) number of all silver futures outstanding contracts.E) none of the above.Answer: D Difficulty: ModerateRationale: Open interest is the number of contracts outstanding. When contracts begin trading, open interest is zero; as time passes more contracts are entered. Most contracts are liquidated before the maturity date.11. Which one of the following statements regarding delivery is true?A) Most futures contracts result in actual delivery.B) Only one to three percent of futures contracts result in actual delivery.C) Only fifteen percent of futures contracts result in actual delivery.D) Approximately fifty percent of futures contracts result in actual delivery.E) Futures contracts never result in actual delivery.Answer: B Difficulty: ModerateRationale: Virtually all traders enter reversing trades to cancel their original positions, thereby realizing profits or losses on the contract.12. You hold one long corn futures contract that expires in April. To close your position incorn futures before the delivery date you mustA) buy one May corn futures contract.B) buy two April corn futures contract.C) sell one April corn futures contract.D) sell one May corn futures contract.E) none of the above.Answer: C Difficulty: ModerateRationale: The long position is considered the buyer; to close out the position one must take a reversing position, or sell the contract.13. Which one of the following statements is true?A) The maintenance margin is the amount of money you post with your broker whenyou buy or sell a futures contract.B) The maintenance margin determines the value of the margin account below whichthe holder of a futures contract receives a margin call.C) A margin deposit can only be met with cash.D) All futures contracts require the same margin deposit.E) The maintenance margin is set by the producer of the underlying asset.Answer: B Difficulty: ModerateRationale: The maintenance margin applies to the value of the account after the account is opened; if the value of this account falls below the maintenance margin requirement and the holder of the contract will receive a margin call. A margin deposit can be made with cash or interest-earning securities; the margin deposit amounts depend on thevolatility of the underlying asset.14. Financial futures contracts are actively traded on thefollowing indices exceptA) the S&P 500 Index.B) the New York Stock Exchange Index.C) the Nikkei Index.D) the Dow Jones Industrial Index.E) all of the above indices have actively traded futures contracts.Answer: E Difficulty: ModerateRationale: The indices are listed in Table 22.1.15. To exploit an expected increase in interest rates, an investor would most likelyA) sell Treasury bond futures.B) take a long position in wheat futures.C) buy S&P 500 index futures.D) take a long position in Treasury bond futures.E) none of the above.Answer: A Difficulty: DifficultRationale: If interest rates rise, bond prices decrease. As bond prices decrease, the short position gains. Thus, if you are bearish about bond prices, you might speculate byselling T-bond futures contracts.16. An investor with a long position in Treasury notes futures will profit ifA) interest rates decline.B) interest rate increase.C) the prices of Treasury notes increase.D) the price of the long bond increases.E) none of the above.Answer: A Difficulty: ModerateRationale: Profit to long position = Spot price at maturity--original futures price.17. To hedge a long position in Treasury bonds, an investor most likely wouldA) buy interest rate futures.B) sell S&P futures.C) sell interest rate futures.D) buy Treasury bonds in the spot market.E) none of the above.Answer: C Difficulty: DifficultRationale: By taking the short position, the hedger is obligated to deliver T-bonds at the contract maturity date for the current futures price, which locks in the sales price for the bonds and guarantees that the total value of the bond-plus-futures position at thematurity date is the futures price.18. An increase in the basis will __________ a long hedger and __________ a short hedger.A) hurt; benefitB) hurt; hurtC) benefit; hurtD) benefit; benefitE) benefit; have no effect uponAnswer: C Difficulty: DifficultRationale: If a contract and an asset are to be liquidated early, basis risk exists andfutures price and spot price need not move in lockstep before delivery date. An increase in the basis will hurt the short hedger and benefit the long hedger.19. Which one of the following statements regarding "basis" is not true?A) the basis is the difference between the futures price and the spot price.B) the basis risk is borne by the hedger.C) a short hedger suffers losses when the basis decreases.D) the basis increases when the futures price increases by more than the spot price.E) none of the above.Answer: C Difficulty: DifficultRationale: See explanation for test bank question 22.20.20. If you determine that the S&P 500 Index futures is overpriced relative to the spot S&P500 Index you could make an arbitrage profit byA) buying all the stocks in the S&P 500 and selling put options on the S&P 500 index.B) selling short all the stocks in the S&P 500 and buying S&P Index futures.C) selling all the stocks in the S&P 500 and buying call options on the S&P 500 index.D) selling S&P 500 Index futures and buying all the stocks in the S&P 500.E) none of the above.Answer: D Difficulty: ModerateRationale: If you think one asset is overpriced relative to another, you sell theoverpriced asset and buy the other one.21. On January 1, the listed spot and futures prices of a Treasury bond were 93.8 and 93.13.You purchased $100,000 par value Treasury bonds and sold one Treasury bond futures contract. One month later, the listed spot price and futures prices were 94 and 94.09, respectively. Ifyou were to liquidate your position, your profits would beA) $125 loss.B) $125 profit.C) $12.50 loss.D) $1,250 loss.E) none of the above.Answer: A Difficulty: DifficultRationale: On bonds: $94,000 - $93,250 = $750; On futures: $93,406.25 - $94,281.25 = -$875; Net profits: $750 - $875 = -$125.22. You purchased one silver future contract at $3 per ounce. What would be your profit(loss) at maturity if the silver spot price at that time is $4.10 per ounce? Assume the contract size is 5,000 ounces and there are no transactions costs.A) $5.50 profitB) $5,500 profitC) $5.50 lossD) $5,500 lossE) none of the above.Answer: B Difficulty: ModerateRationale: $4.10 - $3.00 = $1.10 X 5,000 = $5,500.23. You sold one silver future contract at $3 per ounce. What would be your profit (loss) atmaturity if the silver spot price at that time is $4.10 per ounce? Assume the contract size is 5,000 ounces and there are no transactions costs.A) $5.50 profitB) $5,500 profitC) $5.50 lossD) $5,500 lossE) none of the above.Answer: D Difficulty: ModerateRationale: $3.00 - $4.10 = -$1.10 X 5,000 = -$5,500.24. You purchased one corn future contract at $2.29 per bushel. What would be your profit(loss) at maturity if the corn spot price at that time were $2.10 per bushel? Assume the contract size is 5,000 ounces and there are no transactions costs.A) $950 profitB) $95 profitC) $950 lossD) $95 lossE) none of the above.Answer: C Difficulty: ModerateRationale: $2.10 - $2.29 = -$0.19 X 5,000 = -$950.25. You sold one corn future contract at $2.29 per bushel. What would be your profit (loss)at maturity if the corn spot price at that time were $2.10 per bushel? Assume thecontract size is 5,000 ounces and there are no transactions costs.A) $950 profitB) $95 profitC) $950 lossD) $95 lossE) none of the above.Answer: A Difficulty: ModerateRationale: $2.29 - $2.10 = $0.19 X 5,000 = $950.26. You sold one wheat future contract at $3.04 per bushel. What would be your profit (loss)at maturity if the wheat spot price at that time were $2.98 per bushel? Assume thecontract size is 5,000 ounces and there are no transactions costs.A) $30 profitB) $300 profitC) $300 lossD) $30 lossE) none of the above.Answer: B Difficulty: ModerateRationale: $3.04 - $2.98 = $0.06 X 5,000 = $300.27. You purchased one wheat future contract at $3.04 per bushel. What would be yourprofit (loss) at maturity if the wheat spot price at that time were $2.98 per bushel?Assume the contract size is 5,000 ounces and there are no transactions costs.A) $30 profitB) $300 profitC) $300 lossD) $30 lossE) none of the above.Answer: C Difficulty: ModerateRationale: $2.98 - $3.04 = -$0.06 X 5,000 = -$300.28. On January 1, you sold one April S&P 500 index futures contract at a futures price of420. If on February 1 the April futures price were 430, what would be your profit (loss) if you closed your position (without considering transactions costs)?A) $2,500 lossB) $10 lossC) $2,500 profitD) $10 profitE) none of the aboveAnswer: A Difficulty: DifficultRationale: $420 - $430 = -$10 X 250 = -$2,50029. On January 1, you bought one April S&P 500 index futures contract at a futures price of420. If on February 1 the April futures price were 430, what would be your profit (loss) if you closed your position (without considering transactions costs)?A) $2,500 lossB) $10 lossC) $2,500 profitD) $10 profitE) none of the aboveAnswer: C Difficulty: DifficultRationale: $430 - $420 = $10 X 250 = $2,50030. You sold one soybean future contract at $5.13 per bushel. What would be your profit(loss) at maturity if the wheat spot price at that time were $5.26 per bushel? Assume the contract size is 5,000 ounces and there are no transactions costs.A) $65 profitB) $650 profitC) $650 lossD) $65 lossE) none of the above.Answer: C Difficulty: ModerateRationale: $5.13 - $5.26 = -$0.13 X 5,000 = -$650.31. You bought one soybean future contract at $5.13 per bushel. What would be your profit(loss) at maturity if the wheat spot price at that time were $5.26 per bushel? Assume the contract size is 5,000 ounces and there are no transactions costs.A) $65 profitB) $650 profitC) $650 lossD) $65 lossE) none of the above.Answer: B Difficulty: ModerateRationale: $5.26 - $5.13 = $0.13 X 5,000 = $650.32. On April 1, you bought one S&P 500 index futures contract at a futures price of 950. Ifon June 15th the futures price were 1012, what would be your profit (loss) if you closed your position (without considering transactions costs)?A) $1,550 lossB) $15,550 lossC) $15,550 profitD) $1,550 profitE) none of the aboveAnswer: C Difficulty: DifficultRationale: $1012 - $950 = $62 X 250 = $15,50033. On April 1, you sold one S&P 500 index futures contract at a futures price of 950. If onJune 15th the futures price were 1012, what would be your profit (loss) if you closed your position (without considering transactions costs)?A) $1,550 lossB) $15,550 lossC) $15,550 profitD) $1,550 profitE) none of the aboveAnswer: B Difficulty: DifficultRationale: $950 - $1012 = -$62 X 250 = -$15,50034. The expectations hypothesis of futures pricingA) is the simplest theory of futures pricing.B) states that the futures price equals the expected value of the future spot price of theasset.C) is not a zero sum game.D) A and B.E) A and C.Answer: D Difficulty: EasyRationale: The expectations hypothesis relies on the concept of risk neutrality; i.e., if all market participants are risk neutral, they should agree on a futures price that provides an expected profit of zero to all parties.35. Normal backwardationA) maintains that for most commodities, there are natural hedgers who desire to shedrisk.B) maintains that speculators will enter the long side of the contract only if the futuresprice is below the expected spot price.C) assumes that risk premiums in the futures markets are based on systematic risk.D) A and B.E) B and C.Answer: D Difficulty: EasyRationale: Risk premiums in this theory are based on total variability.36. ContangoA) holds that the natural hedgers are the purchasers of a commodity, not the suppliers.B) is a hypothesis polar to backwardation.C) holds that F O must be less than (P T).D) A and C.E) A and B.Answer: E Difficulty: Easy37. Delivery of stock index futuresA) is never made.B) is made by a cash settlement based on the index value.C) requires delivery of 1 share of each stock in the index.D) is made by delivering 100 shares of each stock in the index.E) is made by delivering a value-weighted basket of stocks.Answer: B Difficulty: ModerateRationale: Stock index futures are cash-settled, similar to the procedure used for index options.38. The establishment of a futures market in a commodity should not have a major impacton spot prices becauseA) the futures market is small relative to the spot market.B) the futures market is illiquid.C) futures are a zero-sum gameD) the futures market is large relative to the spot market.E) most futures contracts do not take delivery.Answer: C Difficulty: ModerateRationale: Losses and gains to futures contracts net to zero,and thus should not impact spot prices.39. The most recently established category of futures contracts isA) agricultural commodities.B) metals and minerals.C) foreign currencies.D) financial futures.E) both B and C.Answer: D Difficulty: ModerateRationale: Financial futures were first introduced in 1975, and this segment of themarket has seen rapid innovation.40. If a trader holding a long position in corn futures fails to meet the obligations of afutures contract, the party that is hurt by the failure isA) the offsetting short trader.B) the corn farmer.C) the clearinghouse.D) the broker.E) the commodities dealer.Answer: C Difficulty: ModerateRationale: The clearinghouse acts as a middle party to every transaction, and bears any losses arising from failure to meet contractual obligations.41. Open interest includesA) only contracts with a specified delivery date.B) the sum of short and long positions.C) the sum of short, long and clearinghouse positions.D) the sum of long or short positions and clearinghouse positions.E) only long or short positions but not both.Answer: E Difficulty: ModerateRationale: Open interest is the number of contracts outstanding across all delivery dates for a given contract. Long and short positions are not counted separately, and the clearinghouse position is not counted because it nets to zero.42. The process of marking-to-marketA) posts gains or losses to each account daily.B) may result in margin calls.C) impacts only long positions.D) all of the above are true.E) both A and B are true.Answer: E Difficulty: EasyRationale: Marking-to-market effectively puts futures contracts on a "pay as you go"basis.43. Futures contracts are regulated byA) the Commodity Futures Trading Corporation.B) the Chicago Board of Trade.C) the Chicago Mercantile Exchange.D) the Federal Reserve.E) the Securities and Exchange Commission.Answer: A Difficulty: EasyRationale: The CFTC, a federal agency, sets rules and requirements for futures trading.44. Taxation of futures trading gains and lossesA) is based on cumulative year-end profits or losses.B) occurs based on the date contracts are sold or closed.C) can be timed to offset stock portfolio gains and losses.D) is based on the contract holding period.E) none of the above.Answer: A Difficulty: ModerateRationale: Futures profits and losses are taxed based on cumulative year-end value due to marking-to-market procedures.45. Speculators may use futures markets rather than spot markets becauseA) transactions costs are lower in futures markets.B) futures markets provide leverage.C) spot markets are less efficient.D) futures markets are less efficient.E) both A and B are true.Answer: E Difficulty: ModerateRationale: Futures markets allow speculators to benefit from leverage and minimize transactions costs. Both markets should be equally price-efficient.46. Given a stock index with a value of $1,000, an anticipated dividend of $30 and arisk-free rate of 6%, what should be the value of one futures contract on the index?A) $943.40B) $970.00C) $913.40D) $915.09E) $1000.00Answer: C Difficulty: DifficultRationale: F = 1000/(1.06) - 30; F = 913.40.47. Given a stock index with a value of $1,125, an anticipated dividend of $33 and arisk-free rate of 4%, what should be the value of one futures contract on the index?A) $1048.73B) $1070.00C) $993.40D) $995.09E) $1000.00Answer: A Difficulty: DifficultRationale: F = 1125/(1.04) - 33; F = 1048.73.48. Given a stock index with a value of $1100, an anticipated dividend of $27 and arisk-free rate of 3%, what should be the value of one futures contract on the index?A) $943.40B) $970.00C) $913.40D) $1040.96E) $1000.00Answer: D Difficulty: DifficultRationale: F = 1100/(1.03) - 27; F = 1040.96.49. Given a stock index with a value of $1,200, an anticipated dividend of $45 and arisk-free rate of 6%, what should be the value of one futures contract on the index?A) $1087.08B) $1070.00C) $993.40D) $995.09E) $1000.00Answer: A Difficulty: DifficultRationale: F = 1200/(1.06) - 45; F = 1087.08.50. Which of the following items is specified in a futurescontract?I)the contract sizeII)the maximum acceptable price range during the life of the contractIII)the acceptable grade of the commodity on which the contract is heldIV)the market price at expirationV)the settlement priceA) I, II, and IVB) I, III, and VC) I and VD) I, IV, and VE) I, II, III, IV, and VAnswer: B Difficulty: ModerateRationale: The maximum price range and the market price at expiration will bedetermined by the market rather than specified in the contract.51. With regard to futures contracts, what does the word “margin” mean?A) It is the amount of the money borrowed from the broker when you buy the contract.B) It is the maximum percentage that the price of the contract can change before it ismarked to market.C) It is the maximum percentage that the price of the underlying asset can changebefore it is marked to market.D) It is a good-faith deposit made at the time of the contract's purchase or sale.E) It is the amount by which the contract is marked to market.Answer: D Difficulty: EasyRationale: The exchange guarantees the performance of each party, so it requires agood-faith deposit. This helps avoid the cost of credit checks.52. Which of the following is true about profits from futures contracts?A) The person with the long position gets to decide whether to exercise the futurescontract and will only do so if there is a profit to be made.B) It is possible for both the holder of the long position and the holder of the shortposition to earn a profit.C) The clearinghouse makes most of the profit.D) The amount that the holder of the long position gains must equal the amount that theholder of the short position loses.E) Holders of short positions can recognize profits by making delivery early.Answer: D Difficulty: ModerateRationale: The net profit on the contract is zero it is a zero-sum game.53. Some of the newer futures contracts includeI)fashion futures.II)weather futures.III)electricity futures.IV)entertainment futures.A) I and IIB) II and IIIC) III and IVD) I, II, and IIIE) I, III, and IVAnswer: B Difficulty: EasyRationale: Weather and electricity futures are mentioned in the textbook as recentinnovations.54. Who guarantees that a futures contract will be fulfilled?A) the buyerB) the sellerC) the brokerD) the clearinghouseE) nobodyAnswer: D Difficulty: EasyRationale: Once two parties have agreed to enter the transaction, the clearinghouse becomes the buyer and seller of the contract and guarantees its completion.55. If you took a long position in a pork bellies futures contract and then forgot about it,what would happen at the expiration of the contract?A) Nothing--the seller understands that these things happen.B) You would wake up to find the pork bellies on your front lawn.C) Your broker would send you a nasty letter.D) You would be notified that you owe the holder of the short position a certain amountof cash.E) You would be notified that you have to pay a penalty in addition to the regular costof the pork bellies.Answer: D Difficulty: EasyRationale: The item is usually not delivered, but cash settlement can be made through the use of warehouse receipts. You are still obligated to fulfill the contract and give the holder of the short position the value of the pork bellies.56. Hedging a position using futures on another commodity is calledA) surrogate hedging.B) cross hedging.C) alternative hedging.D) correlative hedging.E) proxy hedging.Answer: B Difficulty: EasyRationale: Cross-hedging is used in some cases because no futures contract exists for the item you want to hedge. The two commodities should be highly correlated.57. A trader who has a __________ position in oil futures believes the price of oil will__________ in the future.A) short; increaseB) long; increaseC) short; decreaseD) long; stay the sameE) B and CAnswer: E Difficulty: ModerateRationale: The trader holding the long position (the person who will purchase the goods) will profit from a price increase. Profit to long position = Spot price atmaturity--Original futures price.。
投资学第7版TestBank答案10
投资学第7版TestBank答案10ReturnMultiple Choice Questions1. ___________ a relationship between expected return and risk.A) APT stipulatesB) CAPM stipulatesC) Both CAPM and APT stipulateD) Neither CAPM nor APT stipulateE) No pricing model has foundAnswer: C Difficulty: EasyRationale: Both models attempt to explain asset pricing based on risk/returnrelationships.2. Which pricing model provides no guidance concerning the determination of the riskpremium on factor portfolios?A) The CAPMB) The multifactor APTC) Both the CAPM and the multifactor APTD) Neither the CAPM nor the multifactor APTE) None of the above is a true statement.Answer: B Difficulty: ModerateRationale: The multifactor APT provides no guidance as to the determination of the risk premium on the various factors. The CAPM assumes that the excess market return over the risk-free rate is the market premium in the single factor CAPM.3. An arbitrage opportunity exists if an investor can construct a __________ investmentportfolio that will yield a sure profit.A) positiveB) negativeC) zeroD) all of the aboveE) none of the aboveAnswer: C Difficulty: EasyRationale: If the investor can construct a portfolio without the use of the investor's own funds and the portfolio yields a positive profit, arbitrage opportunities exist.Return4. The APT was developed in 1976 by ____________.A) LintnerB) Modigliani and MillerC) RossD) SharpeE) none of the aboveAnswer: C Difficulty: EasyRationale: Ross developed this model in 1976.5. A _________ portfolio is a well-diversified portfolio constructed to have a beta of 1 onone of the factors and a beta of 0 on any other factor.A) factorB) marketC) indexD) A and BE) A, B, and CAnswer: A Difficulty: EasyRationale: A factor model portfolio has a beta of 1 one factor, with zero betas on other factors.6. The exploitation of security mispricing in such a way that risk-free economic profitsmay be earned is called ___________.A) arbitrageB) capital asset pricingC) factoringD) fundamental analysisE) none of the aboveAnswer: A Difficulty: EasyRationale: Arbitrage is earning of positive profits with a zero (risk-free) investment.Return7. In developing the APT, Ross assumed that uncertainty in asset returns was a result ofA) a common macroeconomic factorB) firm-specific factorsC) pricing errorD) neither A nor BE) both A and BAnswer: E Difficulty: ModerateRationale: Total risk (uncertainty) is assumed to be composed of both macroeconomic and firm-specific factors.8. The ____________ provides an unequivocal statement on the expected return-betarelationship for all assets, whereas the _____________ implies that this relationshipholds for all but perhaps a small number of securities.A) APT, CAPMB) APT, OPMC) CAPM, APTD) CAPM, OPME) none of the aboveAnswer: C Difficulty: ModerateRationale: The CAPM is an asset-pricing model based on the risk/return relationship of all assets. The APT implies that this relationship holds for all well-diversified portfolios, and for all but perhaps a few individual securities.9. Consider a single factor APT. Portfolio A has a beta of 1.0 and an expected return of16%. Portfolio B has a beta of 0.8 and an expected return of 12%. The risk-free rate of return is 6%. If you wanted to take advantage of an arbitrage opportunity, you should take a short position in portfolio __________ and a long position in portfolio _______.A) A, AB) A, BC) B, AD) B, BE) A, the riskless assetAnswer: C Difficulty: ModerateRationale: A: 16% = 1.0F + 6%; F = 10%; B: 12% = 0.8F + 6%: F = 7.5%; thus, short B and take a long position in A.Return10. Consider the single factor APT. Portfolio A has a beta of 0.2 and an expected return of13%. Portfolio B has a beta of 0.4 and an expected return of 15%. The risk-free rate of return is 10%. If you wanted to take advantage of an arbitrage opportunity, you should take a short position in portfolio _________ and a long position in portfolio _________.A) A, AB) A, BC) B, AD) B, BE) none of the aboveAnswer: C Difficulty: ModerateRationale: A: 13% = 10% + 0.2F; F = 15%; B: 15% = 10% + 0.4F; F = 12.5%; therefore, short B and take a long position in A.11. Consider the one-factor APT. The variance of returns on the factor portfolio is 6%. Thebeta of a well-diversified portfolio on the factor is 1.1. The variance of returns on the well-diversified portfolio is approximately __________.A) 3.6%B) 6.0%C) 7.3%D) 10.1%E) none of the aboveAnswer: C Difficulty: ModerateRationale: s2P = (1.1)2(6%) = 7.26%.12. Consider the one-factor APT. The standard deviation of returns on a well-diversifiedportfolio is 18%. The standard deviation on the factor portfolio is 16%. The beta of the well-diversified portfolio is approximately __________.A) 0.80B) 1.13C) 1.25D) 1.56E) none of the aboveAnswer: B Difficulty: ModerateRationale: (18%)2 = (16%)2 b2; b = 1.125.Return13. Consider the single-factor APT. Stocks A and B have expected returns of 15% and 18%,respectively. The risk-free rate of return is 6%. Stock B has a beta of 1.0. If arbitrage opportunities are ruled out, stock A has a beta of __________.A) 0.67B) 1.00C) 1.30D) 1.69E) none of the aboveAnswer: E Difficulty: ModerateRationale: A: 15% = 6% + bF; B: 8% = 6% + 1.0F; F = 12%; thus, beta of A = 9/12 =0.75.14. Consider the multifactor APT with two factors. Stock A has an expected return of16.4%, a beta of 1.4 on factor 1 and a beta of .8 on factor 2. The risk premium on thefactor 1 portfolio is 3%. The risk-free rate of return is 6%. What is the risk-premium on factor 2 if no arbitrage opportunities exit?A) 2%B) 3%C) 4%D) 7.75%E) none of the aboveAnswer: D Difficulty: DifficultRationale: 16.4% = 1.4(3%) + .8x + 6%; x = 7.75.15. Consider the multifactor model APT with two factors. Portfolio A has a beta of 0.75 onfactor 1 and a beta of 1.25 on factor 2. The risk premiums on the factor 1 and factor 2 portfolios are 1% and 7%, respectively. The risk-free rate of return is 7%. The expected return on portfolio A is __________if no arbitrage opportunities exist.A) 13.5%B) 15.0%C) 16.5%D) 23.0%E) none of the aboveAnswer: C Difficulty: ModerateRationale: 7% + 0.75(1%) + 1.25(7%) = 16.5%.Return16. Consider the multifactor APT with two factors. The risk premiums on the factor 1 andfactor 2 portfolios are 5% and 6%, respectively. Stock A has a beta of 1.2 on factor 1, and a beta of 0.7 on factor 2. The expected return on stock A is 17%. If no arbitrageopportunities exist, the risk-free rate of return is ___________.A) 6.0%B) 6.5%C) 6.8%D) 7.4%E) none of the aboveAnswer: C Difficulty: ModerateRationale: 17% = x% + 1.2(5%) + 0.7(6%); x = 6.8%.17. Consider a one-factor economy. Portfolio A has a beta of 1.0 on the factor and portfolioB has a beta of 2.0 on the factor. The expected returns on portfolios A and B are 11%and 17%, respectively. Assume that the risk-free rate is 6% and that arbitrageopportunities exist. Suppose you invested $100,000 in the risk-free asset, $100,000 in portfolio B, and sold short $200,000 of portfolio A. Your expected profit from thisstrategy would be ______________.A) -$1,000B) $0C) $1,000D) $2,000E) none of the aboveAnswer: C Difficulty: ModerateRationale: $100,000(0.06) = $6,000 (risk-free position); $100,000(0.17) = $17,000(portfolio B); -$200,000(0.11) = -$22,000 (short position, portfolio A); 1,000 profit. 18. Consider the one-factor APT. Assume that two portfolios, A and B, are well diversified.The betas of portfolios A and B are 1.0 and 1.5, respectively. The expected returns on portfolios A and B are 19% and 24%, respectively. Assuming no arbitrageopportunities exist, the risk-free rate of return must be ____________.A) 4.0%B) 9.0%C) 14.0%D) 16.5%E) none of the aboveAnswer: B Difficulty: ModerateRationale: A: 19% = r f + 1(F); B:24% = r f + 1.5(F); 5% = .5(F); F = 10%; 24% = r f +1.5(10); ff = 9%.Return19. Consider the multifactor APT. The risk premiums on the factor 1 and factor 2 portfoliosare 5% and 3%, respectively. The risk-free rate of return is 10%. Stock A has anexpected return of 19% and a beta on factor 1 of 0.8. Stock A has a beta on factor 2 of ________.A) 1.33B) 1.50C) 1.67D) 2.00E) none of the aboveAnswer: C Difficulty: ModerateRationale: 19% = 10% + 5%(0.8) + 3%(x); x = 1.67.20. Consider the single factor APT. Portfolios A and B have expected returns of 14% and18%, respectively. The risk-free rate of return is 7%. Portfolio A has a beta of 0.7. If arbitrage opportunities are ruled out, portfolio B must have a beta of __________.A) 0.45B) 1.00C) 1.10D) 1.22E) none of the aboveAnswer: C Difficulty: ModerateRationale: A: 14% = 7% + 0.7F; F = 10; B: 18% = 7% + 10b; b = 1.10.Use the following to answer questions 21-24:There are three stocks, A, B, and C. You can either invest in these stocks or short sell them. There are three possible states of nature for economic growth in the upcoming year; economic growth may be strong, moderate, or weak. The returns for the upcoming year on stocks A, B, and C for each of these states of nature are given below:Return21. If you invested in an equally weighted portfolio of stocks A and B, your portfolio return would be ___________ if economic growth were moderate.A) 3.0%B) 14.5%C) 15.5%D) 16.0%E) none of the aboveAnswer: D Difficulty: EasyRationale: E(Rp) = 0.5(17%) + 0.5(15%) = 16%.22. If you invested in an equally weighted portfolio of stocks A and C, your portfolio return would be ____________ if economic growth was strong.A) 17.0%B) 22.5%C) 30.0%D) 30.5%E) none of the aboveAnswer: B Difficulty: EasyRationale: 0.5(39%) + 0.5(6%) = 22.5%.23. If you invested in an equally weighted portfolio of stocks B and C, your portfolio return would be _____________ if economic growth was weak.A) -2.5%B) 0.5%C) 3.0%D) 11.0%E) none of the aboveAnswer: D Difficulty: EasyRationale: 0.5(0%) + 0.5(22%) = 11%.Return24. If you wanted to take advantage of a risk-free arbitrage opportunity, you should take a short position in _________ and a long position in an equally weighted portfolio of_______.A) A, B and CB) B, A and CC) C, A and BD) A and B, CE) none of the above, none of the aboveAnswer: C Difficulty: DifficultRationale: E(R A) = (39% + 17% - 5%)/3 = 17%; E(R B) = (30% + 15% + 0%)/3 = 15%;E(R C) = (22% + 14% + 6%)/3 = 14%; E(R P) = -0.5(14%) + 0.5[(17% + 15%)/2]; -7.0% + 8.0% = 1.0%.Use the following to answer questions 25-26:Consider the multifactor APT. There are two independent economic factors, F1 and F2. The risk-free rate of return is 6%. The following information is available about two well-diversified portfolios:25. Assuming no arbitrage opportunities exist, the risk premium on the factor F1 portfolioshould be __________.A) 3%B) 4%C) 5%D) 6%E) none of the aboveAnswer: A Difficulty: DifficultRationale: 2A: 38% = 12% + 2.0(RP1) + 4.0(RP2); B: 12% = 6% + 2.0(RP1) +0.0(RP2); 26% = 6% + 4.0(RP2); RP2 = 5; A: 19% = 6% + RP1 + 2.0(5); RP1 = 3%.Return26. Assuming no arbitrage opportunities exist, the risk premium on the factor F2 portfolioshould be ___________.A) 3%B) 4%C) 5%D) 6%E) none of the aboveAnswer: C Difficulty: DifficultRationale: See solution to previous problem.27. A zero-investment portfolio with a positive expected return arises when _________.A) an investor has downside risk onlyB) the law of prices is not violatedC) the opportunity set is not tangent to the capital allocation lineD) a risk-free arbitrage opportunity existsE) none of the aboveAnswer: D Difficulty: EasyRationale: When an investor can create a zero-investment portfolio (by using none of the investor's own funds) with a possibility of a positive profit, a risk-free arbitrageopportunity exists.28. An investor will take as large a position as possible when an equilibrium pricerelationship is violated. This is an example of _________.A) a dominance argumentB) the mean-variance efficiency frontierC) a risk-free arbitrageD) the capital asset pricing modelE) none of the aboveAnswer: C Difficulty: ModerateRationale: When the equilibrium price is violated, the investor will buy the lower priced asset and simultaneously place an order to sell the higher priced asset. Suchtransactions result in risk-free arbitrage. The larger the positions, the greater therisk-free arbitrage profits.Return29. The APT differs from the CAPM because the APT _________.A) places more emphasis on market riskB) minimizes the importance of diversificationC) recognizes multiple unsystematic risk factorsD) recognizes multiple systematic risk factorsE) none of the aboveAnswer: D Difficulty: ModerateRationale: The CAPM assumes that market returns represent systematic risk. The APT recognizes that other macroeconomic factors may be systematic risk factors.30. The feature of the APT that offers the greatest potential advantage over the CAPM is the______________.A) use of several factors instead of a single market index to explain the risk-returnrelationshipB) identification of anticipated changes in production, inflation and term structure askey factors in explaining the risk-return relationshipC) superior measurement of the risk-free rate of return over historical time periodsD) variability of coefficients of sensitivity to the APT factors for a given asset overtimeE) none of the aboveAnswer: A Difficulty: EasyRationale: The advantage of the APT is the use of multiple factors, rather than a single market index, to explain the risk-return relationship. However, APT does not identify the specific factors.31. In terms of the risk/return relationshipA) only factor risk commands a risk premium in market equilibrium.B) only systematic risk is related to expected returns.C) only nonsystematic risk is related to expected returns.D) A and B.E) A and C.Answer: D Difficulty: EasyRationale: Nonfactor risk may be diversified away; thus, only factor risk commands a risk premium in market equilibrium. Nonsystematic risk across firms cancels out inwell-diversified portfolios; thus, only systematic risk is related to expected returns.Return32. The following factors might affect stock returns:A) the business cycle.B) interest rate fluctuations.C) inflation rates.D) all of the above.E) none of the above.Answer: D Difficulty: EasyRationale: A, B, and C all are likely to affect stock returns.33. Advantage(s) of the APT is(are)A) that the model provides specific guidance concerning the determination of the riskpremiums on the factor portfolios.B) that the model does not require a specific benchmark market portfolio.C) that risk need not be considered.D) A and B.E) B and C.Answer: B Difficulty: EasyRationale: The APT provides no guidance concerning the determination of the riskpremiums on the factor portfolios. Risk must considered in both the CAPM and APT.A major advantage of APT over the CAPM is that a specific benchmark marketportfolio is not required.34. Portfolio A has expected return of 10% and standard deviation of 19%. Portfolio B hasexpected return of 12% and standard deviation of 17%. Rational investors willA) Borrow at the risk free rate and buy A.B) Sell A short and buy B.C) Sell B short and buy A.D) Borrow at the risk free rate and buy B.E) Lend at the risk free rate and buy B.Answer: B Difficulty: EasyRationale: Rational investors will arbitrage by selling A and buying B.Return35. An important difference between CAPM and APT isA) CAPM depends on risk-return dominance; APT depends on a no arbitragecondition.B) CAPM assumes many small changes are required to bring the market back toequilibrium; APT assumes a few large changes are required to bring the marketback to equilibrium.C) implications for prices derived from CAPM arguments are stronger than pricesderived from APT arguments.D) all of the above are true.E) both A and B are true.Answer: E Difficulty: DifficultRationale: Under the risk-return dominance argument of CAPM, when an equilibrium price is violated many investors will make small portfolio changes, depending on their risk tolerance, until equilibrium is restored. Under the no-arbitrage argument of APT, each investor will take as large a position as possible so only a few investors must act to restore equilibrium. Implications derived from APT are much stronger than thosederived from CAPM, making C an incorrect statement.36. A professional who searches for mispriced securities in specific areas such asmerger-target stocks, rather than one who seeks strict (risk-free) arbitrage opportunities is engaged inA) pure arbitrage.B) risk arbitrage.C) option arbitrage.D) equilibrium arbitrage.E) none of the above.Answer: B Difficulty: ModerateReturn37. In the context of the Arbitrage Pricing Theory, as a well-diversified portfolio becomeslarger its nonsystematic risk approachesA) one.B) infinity.C) zero.D) negative one.E) none of the above.Answer: C Difficulty: EasyRationale: As the number of securities, n, increases, the nonsystematic risk of awell-diversified portfolio approaches zero.38. A well-diversified portfolio is defined asA) one that is diversified over a large enough number of securities that thenonsystematic variance is essentially zero.B) one that contains securities from at least three different industry sectors.C) a portfolio whose factor beta equals 1.0.D) a portfolio that is equally weighted.E) all of the above.Answer: A Difficulty: ModerateRationale: A well-diversified portfolio is one that contains a large number of securities, each having a small (but not necessarily equal) weight, so that nonsystematic variance is negligible.39. The APT requires a benchmark portfolioA) that is equal to the true market portfolio.B) that contains all securities in proportion to their market values.C) that need not be well-diversified.D) that is well-diversified and lies on the SML.E) that is unobservable.Answer: D Difficulty: ModerateRationale: Any well-diversified portfolio lying on the SML can serve as the benchmark portfolio for the APT. The true (and unobservable) market portfolio is only arequirement for the CAPM.Return40. Imposing the no-arbitrage condition on a single-factor security market implies which ofthe following statements?I)the expected return-beta relationship is maintained for all but a small number ofII)the expected return-beta relationship is maintained for all well-diversified portfolios.III)the expected return-beta relationship is maintained for all but a small number of individual securities.IV)the expected return-beta relationship is maintained for all individual securities.A) I and III are correct.B) I and IV are correct.C) II and III are correct.D) II and IV are correct.E) Only I is correct.Answer: C Difficulty: ModerateRationale: The expected return-beta relationship must hold for all well-diversifiedportfolios and for all but a few individual securities; otherwise arbitrage opportunities will be available.41. Consider a well-diversified portfolio, A, in a two-factor economy. The risk-free rate is6%, the risk premium on the first factor portfolio is 4% and the risk premium on thesecond factor portfolio is 3%. If portfolio A has a beta of 1.2 on the first factor and .8 on the second factor, what is its expected return?A) 7.0%B) 8.0%C) 9.2%D) 13.0%E) 13.2%Answer: E Difficulty: ModerateRationale: .06 + 1.2 (.04) + .8 (.03) = .132Return42. The term “arbitrage” refers toA) buying low and selling high.B) short selling high and buying low.C) earning risk-free economic profits.D) negotiating for favorable brokerage fees.E) hedging your portfolio through the use of options.Answer: C Difficulty: EasyRationale: Arbitrage is exploiting security mispricings by the simultaneous purchase and sale to gain economic profits without taking any risk. A capital market inequilibrium rules out arbitrage opportunities.43. To take advantage of an arbitrage opportunity, an investor wouldI)construct a zero investment portfolio that will yield a sure profit.III)make simultaneous trades in two markets without any net investment.IV)short sell the asset in the low-priced market and buy it in the high-priced market.A) I and IVB) I and IIIC) II and IIID) I, III, and IVE) II, III, and IVAnswer: B Difficulty: DifficultRationale: Only I and III are correct. II is incorrect because the beta of the portfoliodoes not need to be zero. IV is incorrect because the opposite is true.44. The factor F in the APT model representsA) firm-specific risk.B) the sensitivity of the firm to that factor.C) a factor that affects all security returns.D) the deviation from its expected value of a factor that affects all security returns.E) a random amount of return attributable to firm events.Answer: D Difficulty: ModerateRationale: F measures the unanticipated portion of a factor that is common to all security returns.Return45. In the APT model, what is the nonsystematic standard deviation of an equally-weighted portfolio that has an average value of ó(e i ) equal to 25% and 50 securities?A) 12.5%B) 625%C) 0.5%D) 3.54%E) 14.59%Answer: D Difficulty: ModerateRationale: ()%54.35.12)(,5.1225501)(1)(222=====p i p e e n e σσ46. Which of the following is true about the security market line (SML) derived from the APT?A) The SML has a downward slope.B) The SML for the APT shows expected return in relation to portfolio standardC) The SML for the APT has an intercept equal to the expected return on the marketportfolio.D) The benchmark portfolio for the SML may be any well-diversified portfolio. E) The SML is not relevant for the APT. Answer: D Difficulty: ModerateRationale: The benchmark portfolio does not need to be the (unobservable) marketportfolio under the APT, but can be any well-diversified portfolio. The intercept still equals the risk-free rate.47. If arbitrage opportunities are to be ruled out, each well-diversified portfolio's expectedexcess return must beA) inversely proportional to the risk-free rate.B) inversely proportional to its standard deviation.C) proportional to its weight in the market portfolio.D) proportional to its standard deviation.E) proportional to its beta coefficient.Answer: E Difficulty: ModerateRationale: For each well-diversified portfolio (P and Q, for example), it must be true that [E(r p )-r f ]/βp = [E(r Q )-r f ]/ βQ. Return48. Suppose you are working with two factor portfolios, Portfolio 1 and Portfolio 2. Theportfolios have expected returns of 15% and 6%, respectively. Based on thisinformation, what would be the expected return on well-diversified portfolio A, if A hasa beta of 0.80 on the first factor and 0.50 on the second factor? The risk-free rate is 3%.A) 15.2%B) 14.1%C) 13.3%D) 10.7%E) 8.4%Answer: B Difficulty: ModerateRationale: E(R A) = 3 +0.8*(15-3) + 0.5*(6-3) = 14.1.49. Which of the following is (are) true regarding the APT?I)The Security Market Line does not apply to the APT.II)More than one factor can be important in determining returns.III)Almost all individual securities satisfy the APT relationship.IV)It doesn't rely on the market portfolio that contains all assets.A) II, III, and IVB) II and IVD) I, II, and IVE) I, II, III, and IVAnswer: A Difficulty: ModerateRationale: All except the first item are true. There is a Security Market Line associated with the APT.50. In a factor model, the return on a stock in a particular period will be related toA) factor risk.B) non-factor risk.C) standard deviation of returns.D) both A and B are true.E) none of the above is true.Answer: D Difficulty: ModerateRationale: Factor models explain firm returns based on both factor risk and non-factor risk.Return51. Which of the following factors did Chen, Roll and Ross not include in their multifactor model?A) Change in industrial productionB) Change in expected inflationC) Change in unanticipated inflationD) Excess return of long-term government bonds over T-billsE) All of the above factors were included in their model.Answer: E Difficulty: ModerateRationale: Chen, Roll and Ross included the four listed factors as well as the excessreturn of long-term corporate bonds over long-term government bonds in their model.52. Which of the following factors were used by Fama and French in their multi-factormodel?A) Return on the market indexB) Excess return of small stocks over large stocks.C) Excess return of high book-to-market stocks over low book-to-market stocks.D) All of the above factors were included in their model.E) None of the above factors was included in their model.Answer: D Difficulty: ModerateRationale: Fama and French included all three of the factors listed.53. Which of the following factors did Merton not suggest as a likely source of uncertaintythat might affect security returns?B) prices of important consumption goods.C) book-to-market ratios.D) changes in future investment opportunities.E) All of the above are sources of uncertainty affecting security returns. Answer: C Difficulty: ModerateRationale: Merton did not suggest book-to-market ratios as an ICAPM pricing factor; the other three were suggested.。
(完整版)投资学第7版TestBank答案11
Multiple Choice Questions1.If you believe in the ________ form of the EMH, you believe that stock prices reflectall relevant information including historical stock prices and current public informationabout the firm, but not information that is available only to insiders.A)semistrongB)strongC)weakD)A, B, and CE)none of the aboveAnswer: A Difficulty: EasyRationale: The semistrong form of EMH maintains that stock prices immediatelyreflect all historical and current public information, but not inside information.2.Proponents of the EMH typically advocateA)an active trading strategy.B)investing in an index fund.C) a passive investment strategy.D) A and BE) B and CAnswer: E Difficulty: EasyRationale: Believers of market efficiency advocate passive investment strategies, andan investment in an index fund is one of the most practical passive investment strategies, especially for small investors.3.If you believe in the _______ form of the EMH, you believe that stock prices reflect allinformation that can be derived by examining market trading data such as the historyof past stock prices, trading volume or short interest.A)semistrongB)strongC)weakD)all of the aboveE)none of the aboveAnswer: C Difficulty: EasyRationale: The information described above is market data, which is the data set forthe weak form of market efficiency. The semistrong form includes the above plus allother public information. The strong form includes all public and private information.4.If you believe in the _________ form of the EMH, you believe that stock prices reflectall available information, including information that is available only to insiders.A)semistrongB)strongC)weakD)all of the aboveE)none of the aboveAnswer: B Difficulty: EasyRationale: The strong form includes all public and private information.5.If you believe in the reversal effect, you shouldA)buy bonds in this period if you held stocks in the last period.B)buy stocks in this period if you held bonds in the last period.C)buy stocks this period that performed poorly last period.D)go short.E) C and DAnswer: C Difficulty: EasyRationale: The reversal effect states that stocks that do well in one period tend to perform poorly in the subsequent period, and vice versa.6.__________ focus more on past price movements of a firm's stock than on theunderlying determinants of future profitability.A)Credit analystsB)Fundamental analystsC)Systems analystsD)Technical analystsE)All of the aboveAnswer: D Difficulty: EasyRationale: Technicians attempt to predict future stock prices based on historical stock prices.7._________ above which it is difficult for the market to rise.A)Book value is a valueB)Resistance level is a valueC)Support level is a valueD) A and BE) A and CAnswer: B Difficulty: EasyRationale: When stock prices have remained stable for a long period, these prices are termed resistance levels; technicians believe it is difficult for the stock prices to penetrate these resistance levels.8.___________ the return on a stock beyond what would be predicted frommarket movements alone.A)An excess economic return isB)An economic return isC)An abnormal return isD) A and BE) A and CAnswer: E Difficulty: EasyRationale: An economic return is the expected return, based on the perceived level of risk and market factors. When returns exceed these levels, the returns are called abnormal or excess economic returns.9.The debate over whether markets are efficient will probably never be resolvedbecause of ________.A)the lucky event issue.B)the magnitude issue.C)the selection bias issue.D)all of the above.E)none of the above.Answer: D Difficulty: EasyRationale: Factors A, B, and C all exist make rigid testing of market efficiencydifficult or impossible.10. A common strategy for passive management is ____________.A)creating an index fundB)creating a small firm fundC)creating an investment clubD) A and CE) B and CAnswer: A Difficulty: EasyRationale: The index fund is, by definition, passively managed. The other investment alternatives may or may not be managed passively.11.Arbel (1985) found thatA)the January effect was highest for neglected firms.B)the book-to-market value ratio effect was highest in JanuaryC)the liquidity effect was highest for small firms.D)the neglected firm effect was independent of the small firm effect.E)small firms had higher book-to-market value ratios.Answer: A Difficulty: ModerateRationale: Arbel divided firms into highly researched, moderately researched,and neglected groups based on the number of institutions holding the stock.12.Researchers have found that most of the small firm effect occursA)during the spring months.B)during the summer months.C)in December.D)in January.E)randomly.Answer: D Difficulty: ModerateRationale: Much of the so-called small firm effect simply may be the tax-effect as investors sell stocks on which they have losses in December and reinvest the funds in January. As small firms are especially volatile, these actions affect small firms in a more dramatic fashion.13.Malkiel (1995) calculated that the average alphas, or abnormal returns, on alarge sample of mutual funds between 1972 and 1991 wereA)significantly positive.B)significantly negative.C)statistically indistinguishable from zero.D)positive before 1981 and negative thereafter.E)negative before 1981 and positive thereafter.Answer: C Difficulty: ModerateRationale: Malkiel's study suggests that fund managers do not beat the market on a risk-adjusted basis.14.Basu (1977, 1983) found that firms with low P/E ratiosA)earned higher average returns than firms with high P/E ratios.B)earned the same average returns as firms with high P/E ratios.C)earned lower average returns than firms with high P/E ratios.D)had higher dividend yields than firms with high P/E ratios.E)none of the above.Answer: A Difficulty: ModerateRationale: Firms with high P/E ratios already have an inflated price relative toearnings and thus tend to have lower returns than low P/E ratio stocks. However, the P/E ratio may capture risk not fully impounded in market betas so this may represent an appropriate risk adjustment rather than a market anomaly.15.Jaffe (1974) found that stock prices _________ after insiders intensively bought shares.A)decreasedB)did not changeC)increasedD)became extremely volatileE)became much less volatileAnswer: C Difficulty: ModerateRationale: Insider trading may signal private information.16.Banz (1981) found that, on average, the risk-adjusted returns of small firmsA)were higher than the risk-adjusted returns of large firms.B)were the same as the risk-adjusted returns of large firms.C)were lower than the risk-adjusted returns of large firms.D)were unrelated to the risk-adjusted returns of large firms.E)were negative.Answer: A Difficulty: ModerateRationale: Banz found A to be true, although subsequent studies have attemptedto explain the small firm effect as the January effect, the neglected firm effect, etc.17.Proponents of the EMH think technical analystsA)should focus on relative strength.B)should focus on resistance levels.C)should focus on support levels.D)should focus on financial statements.E)are wasting their time.Answer: E Difficulty: ModerateRationale: Technical analysts attempt to predict future stock prices from historic stock prices; proponents of EMH believe that stock price changes are random variables.18.Studies of positive earnings surprises have shown that there isA) a positive abnormal return on the day positive earnings surprises are announced.B) a positive drift in the stock price on the days following the earningssurprise announcement.C) a negative drift in the stock price on the days following the earningssurprise announcement.D)both A and B are true.E)both A and C are true.Answer: D Difficulty: ModerateRationale: The market appears to adjust to earnings information gradually, resulting ina sustained period of abnormal returns.19.On November 22, 2005 the stock price of Walmart was $39.50 and the retailer stockindex was 600.30. On November 25, 2005 the stock price of Walmart was $40.25 and the retailer stock index was 605.20. Consider the ratio of Walmart to the retailer index on November 22 and November 25. Walmart is _______ the retail industry andtechnical analysts who follow relative strength would advise _______ the stock.A)outperforming, buyingB)outperforming, sellingC)underperforming, buyingD)underperforming, sellingE)equally performing, neither buying nor sellingAnswer: A Difficulty: ModerateRationale: 11/22: $39.50/600.30 = 0.0658; 11/25: $40.25/605.20 = 0.0665; Thus,K-Mart's relative strength is improving and technicians using this technique wouldrecommend buying.20.Work by Amihud and Mendelson (1986,1991)A)argues that investors will demand a rate of return premium to invest in lessliquid stocks.B)may help explain the small firm effect.C)may be related to the neglected firm effect.D) B and C.E)A, B, and C.Answer: E Difficulty: ModerateRationale: Lack of liquidity may affect the returns of small and neglected firms;however the theory does not explain why the abnormal returns are concentratedin January.21.Fama and French (1992) found that the stocks of firms within the highest decile ofmarket/book ratios had average monthly returns of _______ while the stocks offirms within the lowest decile of market/book ratios had average monthly returnsof________.A)greater than 1%, greater than 1%B)greater than 1%, less than 1%C)less than 1%, greater than 1%D)less than 1%, less than 1%E)less than 0.5%, greater than 0.5%Answer: C Difficulty: ModerateRationale: This finding suggests either that low market-to-book ratio firms arerelatively underpriced, or that the market-to-book ratio is serving as a proxy for arisk factor that affects expected equilibrium returns.22. A market decline of 23% on a day when there is no significant macroeconomic event______ consistent with the EMH because ________.A)would be, it was a clear response to macroeconomic news.B)would be, it was not a clear response to macroeconomic news.C)would not be, it was a clear response to macroeconomic news.D)would not be, it was not a clear response to macroeconomic news.E)none of the above.Answer: D Difficulty: ModerateRationale: This happened on October 19, 1987. Although this specific event is not mentioned in this edition of the book, it is an example of something that would be considered a violation of the EMH.23.In an efficient market, __________.A)security prices react quickly to new informationB)security prices are seldom far above or below their justified levelsC)security analysts will not enable investors to realize superior returns consistentlyD)one cannot make moneyE)A, B, and CAnswer: E Difficulty: EasyRationale: A, B, and C are true; however, even in an efficient market one should be able to earn the appropriate risk-adjusted rate of return.24.The weak form of the efficient market hypothesis asserts thatA)stock prices do not rapidly adjust to new information contained in past prices orpast data.B)future changes in stock prices cannot be predicted from past prices.C)technicians cannot expect to outperform the market.D) A and BE) B and CAnswer: E Difficulty: EasyRationale: Stock prices do adjust rapidly to new information.25. A support level is the price range at which a technical analyst would expect theA)supply of a stock to increase dramatically.B)supply of a stock to decrease substantially.C)demand for a stock to increase substantially.D)demand for a stock to decrease substantially.E)price of a stock to fall.Answer: C Difficulty: EasyRationale: A support level is considered to be a level below that the price of the stock is unlikely to fall and is believed to be determined by market psychology.26. A finding that _________ would provide evidence against the semistrong form ofthe efficient market theory.A)low P/E stocks tend to have positive abnormal returnsB)trend analysis is worthless in determining stock pricesC)one can consistently outperform the market by adopting the contrarianapproach exemplified by the reversals phenomenonD) A and BE) A and CAnswer: E Difficulty: ModerateRationale: Both A and C are inconsistent with the semistrong form of the EMH.27.The weak form of the efficient market hypothesis contradictsA)technical analysis, but supports fundamental analysis as valid.B)fundamental analysis, but supports technical analysis as valid.C)both fundamental analysis and technical analysis.D)technical analysis, but is silent on the possibility of successfulfundamental analysis.E)none of the above.Answer: D Difficulty: ModerateRationale: The process of fundamental analysis makes the market more efficient, and thus the work of the fundamentalist more difficult. The data set for the weak form of the EMH is market data, which is the only data used exclusively by technicians.Fundamentalists use all public information.28.Two basic assumptions of technical analysis are that security prices adjustA)rapidly to new information and market prices are determined by the interactionof supply and demand.B)rapidly to new information and liquidity is provided by security dealers.C)gradually to new information and market prices are determined by the interactionof supply and demand.D)gradually to new information and liquidity is provided by security dealers.E)rapidly to information and to the actions of insiders.Answer: C Difficulty: ModerateRationale: Technicians follow market data--price changes and volume of trading (asindicator of supply and demand) believing that they can identify price trends assecurity prices adjust gradually.29.Cumulative abnormal returns (CAR)A)are used in event studies.B)are better measures of security returns due to firm-specific events than areabnormal returns (AR).C)are cumulated over the period prior to the firm-specific event.D) A and B.E) A and C.Answer: D Difficulty: ModerateRationale: As leakage of information occurs, the accumulated abnormal returns that are abnormal returns summed over the period of interest (around the event date) are better measures of the effect of firm-specific events.30.Studies of mutual fund performanceA)indicate that one should not randomly select a mutual fund.B)indicate that historical performance is not necessarily indicative offuture performance.C)indicate that the professional management of the fund insures above market returns.D) A and B.E) B and C.Answer: D Difficulty: EasyRationale: Studies show that all funds do not outperform the market and thathistorical performance is not necessarily an indicator of future performance.31.The likelihood of an investment newsletter's successfully predicting the direction of themarket for three consecutive years by chance should beA)between 50% and 70%.B)between 25% and 50%.C)between 10% and 25%.D)less than 10%.E)greater than 70%.Answer: C Difficulty: ModerateRationale: The probability of successful prediction for 3 consecutive years is 23,or 12.5%.32.In an efficient market the correlation coefficient between stock returns fortwo non-overlapping time periods should beA)positive and large.B)positive and small.C)zero.D)negative and small.E)negative and large.Answer: C Difficulty: ModerateRationale: In an efficient market there should be no serial correlation betweenreturns from non-overlapping periods.33.The weather report says that a devastating and unexpected freeze is expected to hitFlorida tonight, during the peak of the citrus harvest. In an efficient market one would expect the price of Florida Orange's stock toA)drop immediately.B)remain unchanged.C)increase immediately.D)gradually decline for the next several weeks.E)gradually increase for the next several weeks.Answer: A Difficulty: ModerateRationale: In an efficient market the price of the stock should drop immediatelywhen the bad news is announced. If later news changes the perceived impact toFlorida Orange, the price may once again adjust quickly to the new information. Agradual change is a violation of the EMH.34. Matthews Corporation has a beta of 1.2. The annualized market return yesterday was13%, and the risk-free rate is currently 5%. You observe that Matthews had anannualized return yesterday of 17%. Assuming that markets are efficient, this suggests thatA) bad news about Matthews was announced yesterday.B) good news about Matthews was announced yesterday.C) no news about Matthews was announced yesterday.D) interest rates rose yesterday.E) interest rates fell yesterday.Answer: B Difficulty: ModerateRationale: AR = 17% - (5% + 1.2 (8%)) = +2.4%. A positive abnormal return suggests that there was firm-specific good news.th 35. Nicholas Manufacturing just announced yesterday that its 4 quarter earnings will be 10% higher than last year's 4th quarter. You observe that Nicholas had anabnormal return of -1.2% yesterday. This suggests thatA) the market is not efficient.B) Nicholas' stock will probably rise in value tomorrow.C) investors expected the earnings increase to be larger than what was actuallyannounced.D) investors expected the earnings increase to be smaller than what was actuallyannounced.E) earnings are expected to decrease next quarter.Answer: C Difficulty: ModerateRationale: Anticipated earnings changes are impounded into a security's price as soon as expectations are formed. Therefore a negative market response indicates that the earnings surprise was negative, that is, the increase was less than anticipated.36.When Maurice Kendall first examined stock price patterns in 1953, he found thatA)certain patterns tended to repeat within the business cycle.B)there were no predictable patterns in stock prices.C)stocks whose prices had increased consistently for one week tended to have anet decrease the following week.D)stocks whose prices had increased consistently for one week tended to have anet increase the following week.E)the direction of change in stock prices was unpredictable, but the amount ofchange followed a distinct pattern.Answer: B Difficulty: EasyRationale: The first studies in this area were made possible by the development of computer technology. Kendall's study was the first to indicate that marketswere efficient.37.If stock prices follow a random walkA)it implies that investors are irrational.B)it means that the market cannot be efficient.C)price levels are not random.D)price changes are random.E)price movements are predictable.Answer: D Difficulty: EasyRationale: A random walk means that the changes in prices are randomand independent.38.The main difference between the three forms of market efficiency is thatA)the definition of efficiency differs.B)the definition of excess return differs.C)the definition of prices differs.D)the definition of information differs.E)they were discovered by different people.Answer: D Difficulty: ModerateRationale: The main difference is that weak form encompasses historical data,semistrong form encompasses historical data and current public information, and strong form encompasses historical data, current public information, and inside information. All of the other definitions remain the same.39.Chartists practiceA)technical analysis.B)fundamental analysis.C)regression analysis.D)insider analysis.E)psychoanalysis.Answer: A Difficulty: EasyRationale: Chartist is another name for a technical analyst.40.Which of the following are used by fundamental analysts to determine properstock prices?I)trendlinesII)earningsIII)dividend prospectsIV) expectations of future interest ratesV)resistance levelsA)I, IV, and VB)I, II, and IIIC)II, III, and IVD)II, IV, and VE)All of the items are used by fundamental analysts.Answer: C Difficulty: ModerateRationale: Analysts look at fundamental factors such as earnings, dividend prospects, expectation of future interest rates, and risk of the firm. The information is used todetermine the present value of future cash flows to stockholders. Technical analysts use trendlines and resistance levels.41.According to proponents of the efficient market hypothesis, the best strategy for asmall investor with a portfolio worth $40,000 is probably toA)perform fundamental analysis.B)exploit market anomalies.C)invest in Treasury securities.D)invest in derivative securities.E)invest in mutual funds.Answer: E Difficulty: ModerateRationale: Individual investors tend to have relatively small portfolios and are usually unable to realize economies of size. The best strategy is to pool funds with other small investors and allow professional managers to invest the funds.42.Which of the following are investment superstars who have consistently shownsuperior performance?I)Warren BuffetII)Phoebe BuffetIII)Peter LynchIV) Merrill LynchV)Jimmy BuffetA)I, III, and IVB)II, III, and IVC)I and IIID)III and IVE)I, III, IV, and VAnswer: C Difficulty: ModerateRationale: Warren Buffet manages Berkshire Hathaway and Peter Lynch managed Fidelity's Magellan Fund. Phoebe Buffet is a character on NBC's and Jimmy Buffet is Away in Margaritaville. Merrill Lynch isn't a person.43.Google has a beta of 1.0. The annualized market return yesterday was 11%, and therisk-free rate is currently 5%. You observe that Google had an annualized returnyesterday of 14%. Assuming that markets are efficient, this suggests thatA)bad news about Google was announced yesterday.B)good news about Google was announced yesterday.C)no news about Google was announced yesterday.D)interest rates rose yesterday.E)interest rates fell yesterday.Answer: B Difficulty: ModerateRationale: AR = 14% - (5% + 1.0 (6%)) = +3.0%. A positive abnormal return suggests that there was firm-specific good news.44.Music Doctors has a beta of 2.25. The annualized market return yesterday was 12%,and the risk-free rate is currently 4%. You observe that Music Doctors had anannualized return yesterday of 15%. Assuming that markets are efficient, this suggests thatA)bad news about Music Doctors was announced yesterday.B)good news about Music Doctors was announced yesterday.C)no news about Music Doctors was announced yesterday.D)interest rates rose yesterday.E)interest rates fell yesterday.Answer: A Difficulty: ModerateRationale: AR = 15% - (4% + 2.25 (8%)) = -7.0%. A negative abnormal return suggests that there was firm-specific bad news.45.QQAG has a beta of 1.7. The annualized market return yesterday was 13%, and therisk-free rate is currently 3%. You observe that QQAG had an annualized returnyesterday of 20%. Assuming that markets are efficient, this suggests thatA)bad news about QQAG was announced yesterday.B)good news about QQAG was announced yesterday.C)no significant news about QQAG was announced yesterday.D)interest rates rose yesterday.E)interest rates fell yesterday.Answer: C Difficulty: ModerateRationale: AR = 20% - (3% + 1.7 (10%)) = 0.0%. A positive abnormal return suggests that there was firm-specific good news and a negative abnormal return suggests that there was firm-specific bad news.46.QQAG just announced yesterday that its th4 quarter earnings will be 35% higherthan last year's 4thquarter. You observe that QQAG had an abnormal return of -1.7% yesterday. This suggests thatA)the market is not efficient.B)QQAG stock will probably rise in value tomorrow.C)investors expected the earnings increase to be larger than what wasactually announced.D)investors expected the earnings increase to be smaller than what wasactually announced.E)earnings are expected to decrease next quarter.Answer: C Difficulty: ModerateRationale: Anticipated earnings changes are impounded into a security's price as soon as expectations are formed. Therefore a negative market response indicates that the earnings surprise was negative, that is, the increase was less than anticipated.47.LJP Corporation just announced yesterday that it would undertake an international jointventure. You observe that LJP had an abnormal return of 3% yesterday. This suggests thatA)the market is not efficient.B)LJP stock will probably rise in value again tomorrow.C)investors view the international joint venture as bad news.D)investors view the international joint venture as good news.E)earnings are expected to decrease next quarter.Answer: D Difficulty: Moderate48.Music Doctors just announced yesterday that its st1 quarter sales were 35% higherthan last year's 1stquarter. You observe that Music Doctors had an abnormal returnof -2% yesterday. This suggests thatA)the market is not efficient.B)Music Doctors stock will probably rise in value tomorrow.C)investors expected the sales increase to be larger than what was actually announced.D)investors expected the sales increase to be smaller than what wasactually announced.E)earnings are expected to decrease next quarter.Answer: C Difficulty: Moderate49.The Food and Drug Administration (FDA) just announced yesterday that they wouldapprove a new cancer-fighting drug from King. You observe that King had an abnormal return of 0% yesterday. This suggests thatA)the market is not efficient.B)King stock will probably rise in value tomorrow.C)King stock will probably fall in value tomorrow.D)the approval was already anticipated by the marketE)none of the above.Answer: D Difficulty: Moderate50.Your professor finds a stock-trading rule that generates excess risk-adjusted returns.Instead of publishing the results, she keeps the trading rule to herself. This is mostclosely associated with ________.A)regret avoidanceB)selection biasC)framingD)insider tradingE)none of the aboveAnswer: B Difficulty: Moderate51.At freshman orientation, 1,500 students are asked to flip a coin 20 times. One student iscrowned the winner (tossed 20 heads). This is most closely associated with ________.A)regret avoidanceB)selection biasC)overconfidenceD)the lucky event issueE)none of the aboveAnswer: D Difficulty: Moderate52.Sehun (1986) finds that the practice of monitoring insider trade disclosures, andtrading on that information, would be ________.A)extremely profitable for long-term tradersB)extremely profitable for short-term tradersC)marginally profitable for long-term tradersD)marginally profitable for short-term tradersE)not sufficiently profitable to cover trading costsAnswer: E53.If you believe in the reversal effect, you shouldA)sell bonds in this period if you held stocks in the last period.B)sell stocks in this period if you held bonds in the last period.C)sell stocks this period that performed well last period.D)go long.E) C and DAnswer: C Difficulty: EasyRationale: The reversal effect states that stocks that do well in one period tendto perform poorly in the subsequent period, and vice versa.。
(完整word版)投资学第7版Test Bank答案06
Multiple Choice Questions1. 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 the risk-free rate.D) They are willing to accept lower returns and high risk.E) A and B.Answer: C Difficulty: Moderate2. Which of the following statements is (are) true?I)Risk-averse 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 onlyB) II onlyC) I and II onlyD) II and III onlyE) II, III, and IV onlyAnswer: C Difficulty: ModerateRationale: Risk-averse investors consider a risky investment only if the investmentoffers a risk premium. Risk-neutral investors look only at expected returns whenmaking an investment decision.3. In the mean-standard deviation graph an indifference curve has a ________ slope.A) negativeB) zeroC) positiveD) northeastE) cannot be determinedAnswer: C Difficulty: EasyRationale: The risk-return trade-off is one in which greater risk is taken if greater returns can be expected, resulting in a positive slope.4. In the mean-standard deviation graph, which one of the following statements is trueregarding the indifference curve of a risk-averse investor?A) It is the locus of portfolios that have the same expected rates of return and differentstandard deviations.B) It is the locus of portfolios that have the same standard deviations and different ratesof return.C) It is the locus of portfolios that offer the same utility according to returns andstandard deviations.D) It connects portfolios that offer increasing utilities according to returns and standarddeviations.E) none of the above.Answer: C Difficulty: ModerateRationale: Indifference curves plot trade-off alternatives that provide equal utility to the individual (in this case, the trade-offs are the risk-return characteristics of theportfolios).5. In a return-standard deviation space, which of the following statements is (are) true forrisk-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 curves, the highest offers the greatest utility.IV)Indifference curves of two investors might intersect.A) I and II onlyB) II and III onlyC) I and IV onlyD) III and IV onlyE) none of the aboveAnswer: D Difficulty: ModerateRationale: An investor's indifference curves are parallel, and thus cannot intersect and have positive slopes. The highest indifference curve (the one in the most northwestern position) offers the greatest utility. Indifference curves of investors with similarrisk-return trade-offs might intersect.6. 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.Answer: D Difficulty: ModerateRationale: The more risk averse the investor, the less risk that is tolerated, given a rate of return.7. When an investment advisor attempts to determine an investor's risk tolerance, whichfactor would they be least likely to assess?A) the investor's prior investing experienceB) the investor's degree of financial securityC) the investor's tendency to make risky or conservative choicesD) the level of return the investor prefersE) the investor's feeling about lossAnswer: D Difficulty: ModerateUse the following to answer questions 8-9:Assume an investor with the following utility function: U = E(r) - 3/2(s2).8. To maximize her expected utility, she would choose the asset with an expected rate ofreturn of _______ and a standard deviation of ________, respectively.A) 12%; 20%B) 10%; 15%C) 10%; 10%D) 8%; 10%E) none of the aboveAnswer: C Difficulty: ModerateRationale: U = 0.10 - 3/2(0.10)2 = 8.5%; highest utility of choices.9. To maximize her expected utility, which one of the following investment alternativeswould she choose?A) A portfolio that pays 10 percent with a 60 percent probability or 5 percent with 40percent probability.B) A portfolio that pays 10 percent with 40 percent probability or 5 percent with a 60percent probability.C) A portfolio that pays 12 percent with 60 percent probability or 5 percent with 40percent probability.D) A portfolio that pays 12 percent with 40 percent probability or 5 percent with 60percent probability.E) none of the above.Answer: C Difficulty: DifficultRationale: U(c) = 9.02%; highest utility of possibilities.10. A portfolio has an expected rate of return of 0.15 and a standard deviation of 0.15. Therisk-free rate is 6 percent. An investor has the following utility function: U = E(r) - (A/2)s2. Which value of A makes this investor indifferent between the risky portfolio and the risk-free asset?A) 5B) 6C) 7D) 8E) none of the aboveAnswer: D Difficulty: DifficultRationale: 0.06 = 0.15 - A/2(0.15)2; 0.06 - 0.15 = -A/2(0.0225); -0.09 = -0.01125A; A = 8; U = 0.15 - 8/2(0.15)2 = 6%; U(R f) = 6%.11. According to the mean-variance criterion, which one of the following investmentsdominates all others?A) E(r) = 0.15; Variance = 0.20B) E(r) = 0.10; Variance = 0.20C) E(r) = 0.10; Variance = 0.25D) E(r) = 0.15; Variance = 0.25E) none of these dominates the other alternatives.Answer: A Difficulty: DifficultRationale: A gives the highest return with the least risk; return per unit of risk is .75, which dominates the reward-risk ratio for the other choices.12. Consider a risky portfolio, A, with an expected rate of return of 0.15 and a standarddeviation of 0.15, that lies on a given indifference curve. Which one of the following portfolios might lie on the same indifference curve?A) E(r) = 0.15; Standard deviation = 0.20B) E(r) = 0.15; Standard deviation = 0.10C) E(r) = 0.10; Standard deviation = 0.10D) E(r) = 0.20; Standard deviation = 0.15E) E(r) = 0.10; Standard deviation = 0.20Answer: C Difficulty: DifficultRationale: Portfolio A has a reward to risk ratio of 1.0; portfolio C is the only choice with the same risk-return tradeoff.Use the following to answer questions 13-15:13. Based on the utility function above, which investment would you select?A) 1B) 2C) 3D) 4E) cannot tell from the information givenAnswer: C Difficulty: DifficultRationale: U(c) = 0.21 - 4/2(0.16)2 = 15.88 (highest utility of choices).14. Which investment would you select if you were risk neutral?A) 1B) 2C) 3D) 4E) cannot tell from the information givenAnswer: D Difficulty: DifficultRationale: If you are risk neutral, your only concern is with return, not risk.15. 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.E) none of the above.Answer: B Difficulty: ModerateRationale: A is an arbitrary scale factor used to measure investor risk tolerance. The higher the value of A, the more risk averse the investor.16. The exact indifference curves of different investorsA) cannot be known with perfect certainty.B) can be calculated precisely with the use of advanced calculus.C) although not known with perfect certainty, do allow the advisor to create moresuitable portfolios for the client.D) A and C.E) none of the above.Answer: D Difficulty: EasyRationale: Indifference curves cannot be calculated precisely, but the theory does allow for the creation of more suitable portfolios for investors of differing levels of risktolerance.17. The riskiness of individual assetsA) should be considered for the asset in isolation.B) should be considered in the context of the effect on overall portfolio volatility.C) combined with the riskiness of other individual assets (in the proportions theseassets constitute of the entire portfolio) should be the relevant risk measure.D) B and C.E) none of the above.Answer: D Difficulty: EasyRationale: The relevant risk is portfolio risk; thus, the riskiness of an individual security should be considered in the context of the portfolio as a whole.18. A fair gameA) 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) Both A and B are true.E) Both A and C are true.Answer: D Difficulty: ModerateRationale: A fair game is a risky investment with a payoff exactly equal to its expected value. Since it offers no risk premium, it will not be acceptable to a risk-averse investor.19. The presence of risk means thatA) 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 wealth will be greater than initial wealth.E) terminal wealth will be less than initial wealth.Answer: B Difficulty: EasyRationale: The presence of risk means that more than one outcome is possible.20. The utility score an investor assigns to a particular portfolio, other things equal,A) will decrease as the rate of return increases.B) will decrease as the standard deviation increases.C) will decrease as the variance increases.D) will increase as the variance increases.E) will increase as the rate of return increases.Answer: E Difficulty: EasyRationale: Utility is enhanced by higher expected returns and diminished by higher risk.21. The certainty equivalent rate of a portfolio isA) the rate that a risk-free investment would need to offer with certainty to beconsidered equally attractive as the risky portfolio.B) the rate that the investor must earn for certain to give up the use of his money.C) the minimum rate guaranteed by institutions such as banks.D) the rate that equates “A” in the utility fun ction with the average risk aversioncoefficient for all risk-averse investors.E) represented by the scaling factor “-.005” in the utility function.Answer: A Difficulty: Moderate22. According to the mean-variance criterion, which of the statements below is correct?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.Answer: B Difficulty: ModerateRationale: This question tests the student's understanding of how to apply themean-variance criterion.23. Steve is more risk-averse than Edie. On a graph that shows Steve and Edie'sindifference curves, which of the following is true? Assume that the graph showsexpected return on the vertical axis and standard deviation on the horizontal axis.I)Steve and Edie's indifference curves 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 VB) I and IIIC) III and IVD) I and IIE) II and IVAnswer: B Difficulty: ModerateRationale: This question tests whether the student understands the graphical properties of indifference curves and how they relate to the degree of risk tolerance.24. The Capital Allocation Line can be described as theA) 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 differentstandard deviations.E) none of the above.Answer: A Difficulty: ModerateRationale: The CAL has an intercept equal to the risk-free rate. It is a straight linethrough the point representing the risk-free asset and the risky portfolio, inexpected-return/standard deviation space.25. Which of the following statements regarding the Capital Allocation Line (CAL) isfalse?A) The CAL shows risk-return combinations.B) The slope of the CAL equals the increase in the expected return of a risky portfolioper unit of additional standard deviation.C) The slope of the CAL is also called the reward-to-variability ratio.D) The CAL is also called the efficient frontier of risky assets in the absence of arisk-free asset.E) Both A and D are true.Answer: D Difficulty: ModerateRationale: The CAL consists of combinations of a risky asset and a risk-free assetwhose slope is the reward-to-variability ratio; thus, all statements except d are true.26. Given the capital allocation line, an investor's optimal portfolio is the portfolio thatA) maximizes her expected profit.B) maximizes her risk.C) minimizes both her risk and return.D) maximizes her expected utility.E) none of the above.Answer: D Difficulty: ModerateRationale: By maximizing expected utility, the investor is obtaining the best risk-return relationships possible and acceptable for her.27. An investor invests 30 percent of his wealth in a risky asset with an expected rate ofreturn of 0.15 and a variance of 0.04 and 70 percent in a T-bill that pays 6 percent. His portfolio's expected return and standard deviation are __________ and __________,respectively.A) 0.114; 0.12B) 0.087;0.06C) 0.295; 0.12D) 0.087; 0.12E) none of the aboveAnswer: B Difficulty: ModerateRationale: E(r P) = 0.3(15%) + 0.7(6%) = 8.7%; s P = 0.3(0.04)1/2 = 6%.Use the following to answer questions 28-31: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 0.05.28. What percentages of your money must be invested in the risky asset and the risk-freeasset, respectively, to form a portfolio with an expected return of 0.09?A) 85% and 15%B) 75% and 25%C) 67% and 33%D) 57% and 43%E) cannot be determinedAnswer: D Difficulty: ModerateRationale: 9% = w1(12%) + (1 - w1)(5%); 9% = 12%w1 + 5% - 5%w1; 4% = 7%w1; w1 =0.57; 1 - w1 = 0.43; 0.57(12%) + 0.43(5%) = 8.99%.29. What percentages of your money must be invested in the risk-free asset and the riskyasset, 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 determinedAnswer: C Difficulty: ModerateRationale: 0.06 = x(0.15); x = 40% in risky asset.30. A portfolio that has an expected outcome of $115 is formed byA) 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 riskyasset.D) investing $43 in the risky asset and $57 in the riskless asset.E) Such a portfolio cannot be formed.Answer: C Difficulty: DifficultRationale: For $100, (115-100)/100=15%; .15 = w1(.12) + (1 - w1)(.05); .15 = .12w1 + .05 - .05w1; 0.10 = 0.07w1; w1 = 1.43($100) = $143; (1 - w1)$100 = -$43.31. The slope of the Capital Allocation Line formed with the risky asset and the risk-freeasset is equal toA) 0.4667.B) 0.8000.C) 2.14.D) 0.41667.E) Cannot be determined.Answer: A Difficulty: ModerateRationale: (0.12 - 0.05)/0.15 = 0.4667.32. Consider a T-bill with a rate of return of 5 percent and the following risky securities:Security A: E(r) = 0.15; Variance = 0.04Security B: E(r) = 0.10; Variance = 0.0225Security C: E(r) = 0.12; Variance = 0.01Security D: E(r) = 0.13; Variance = 0.0625From which set of portfolios, formed with the T-bill and any one of the 4 risky securities, would a risk-averse investor 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 set of portfolios formed with the T-bill and security D.E) Cannot be determined.Answer: C Difficulty: DifficultRationale: Security C has the highest reward-to-volatility ratio.Use the following to answer questions 33-36:You are considering investing $1,000 in a T-bill that pays 0.05 and a risky portfolio, P, constructed with 2 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 0.0081.33. If you want to form a portfolio with an expected rate of return of 0.11, what percentagesof your money must you invest in the T-bill and P, respectively?A) 0.25; 0.75B) 0.19; 0.81C) 0.65; 0.35D) 0.50; 0.50E) cannot be determinedAnswer: B Difficulty: ModerateRationale: E(r p) = 0.6(14%) + 0.4(10%) = 12.4%; 11% = 5x + 12.4(1 - x); x = 0.189(T-bills) (1-x) =0.811 (risky asset).34. If you want to form a portfolio with an expected rate of return of 0.10, what percentagesof 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; 0.30B) 0.19; 0.49; 0.32C) 0.32; 0.41; 0.27D) 0.50; 0.30; 0.20E) cannot be determinedAnswer: C Difficulty: DifficultRationale: E(r p) = .100.10 = 5w + 12.4(1 - w); x = 0.32 (weight of T-bills); Ascomposition of X and Y are .6 and .4 of P, respectively, then for 0.68 weight in P, the respective weights must be 0.41 and 0.27; .6(.68) = 41%; .4(.68) = 27%35. What would be the dollar values of your positions in X and Y, respectively, if youdecide to hold 40% percent of your money in the risky portfolio and 60% in T-bills?A) $240; $360B) $360; $240C) $100; $240D) $240; $160E) Cannot be determinedAnswer: D Difficulty: ModerateRationale: $400(0.6) = $240 in X; $400(0.4) = $160 in Y.36. 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 $1,200?A) Cannot be determinedB) $54; $568; $378C) $568; $54; $378D) $378; $54; $568E) $108; $514; $378Answer: B Difficulty: DifficultRationale: ($1,200 - $1,000)/$1,000 = 12%; (0.6)14% + (0.4)10% = 12.4%; 12% = w5% + 12.4%(1 - w);w=.054; 1-w=.946; w = 0.054($1,000) = $54 (T-bills); 1 - w = 1 -0.054 = 0.946($1,000) = $946; $946 x 0.6 = $568 in X; $946 x 0.4 = $378 in Y.37. A reward-to-volatility ratio is useful in:A) measuring 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 above.Answer: B Difficulty: ModerateRationale: B is the only choice relevant to the reward-to-volatility ratio (risk and return).38. 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 the portfolio proportion of the risk-free asset.E) none of the above.Answer: B Difficulty: DifficultRationale: The linear capital allocation line assumes that the investor may borrow and lend at the same rate (the risk-free rate), which obviously is not true. Relaxing this assumption and incorporating the higher borrowing rates into the model results in the kinked capital allocation line.39. The first major step in asset allocation is:A) assessing risk tolerance.B) analyzing financial statements.C) estimating security betas.D) identifying market anomalies.E) none of the above.Answer: A Difficulty: ModerateRationale: A should be the first consideration in asset allocation. B, C, and D refer to security selection.40. Based on their relative degrees of risk toleranceA) 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) A and C.E) none of the above.Answer: D Difficulty: EasyRationale: By determining levels of risk tolerance, investors can select the optimum portfolio for their own needs; these asset allocations will vary between amounts of risk-free and risky assets based on risk tolerance.41. Asset allocationA) may involve the decision as to the allocation between a risk-free asset and a riskyasset.B) may involve the decision as to the allocation among different risky assets.C) may involve considerable security analysis.D) A and B.E) A and C.Answer: D Difficulty: EasyRationale: A and B are possible steps in asset allocation. C is related to securityselection.42. In the mean-standard deviation graph, the line that connects the risk-free rate and theoptimal risky portfolio, P, is called ______________.A) the Security Market LineB) the Capital Allocation LineC) the Indifference CurveD) the investor's utility lineE) none of the aboveAnswer: B Difficulty: ModerateRationale: The Capital Allocation Line (CAL) illustrates the possible combinations of a risk-free asset and a risky asset available to the investor.43. Treasury bills are commonly viewed as risk-free assets becauseA) 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) Both A and B are true.E) Both B and C are true.Answer: D Difficulty: EasyRationale: Treasury bills do not exactly match most investor's desired holding periods, but because they mature in only a few weeks or months they are relatively free ofinterest rate sensitivity and inflation uncertainty.Use the following to answer questions 44-47: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.44. 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%Answer: A Difficulty: EasyRationale: E(r C) = .8*12.00% + .2*3.6% = 10.32%45. What is the standard deviation of Bo's complete portfolio?A) 7.20%B) 5.40%C) 6.92%D) 4.98%E) 5.76%Answer: E Difficulty: EasyRationale: Std. Dev. of C = .8*7.20% = 5.76%46. What is the equation of Bo's Capital Allocation Line?A) E(r C) = 7.2 + 3.6 * Standard Deviation of CB) E(r C) = 3.6 + 1.167 * Standard Deviation of CC) E(r C) = 3.6 + 12.0 * Standard Deviation of CD) E(r C) = 0.2 + 1.167 * Standard Deviation of CE) E(r C) = 3.6 + 0.857 * Standard Deviation of CAnswer: B Difficulty: ModerateRationale: The intercept is the risk-free rate (3.60%) and the slope is(12.00%-3.60%)/7.20% = 1.167.47. What are the proportions of Stocks A, B, and C, respectively in Bo's complete portfolio?A) 40%, 25%, 35%B) 8%, 5%, 7%C) 32%, 20%, 28%D) 16%, 10%, 14%E) 20%, 12.5%, 17.5%Answer: C Difficulty: ModerateRationale: Proportion in A = .8 * 40% = 32%; proportion in B = .8 * 25% = 20%;proportion in C = .8 * 35% = 28%.48. To build an indifference curve we can first find the utility of a portfolio with 100% inthe risk-free asset, thenA) 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 standarddeviation.C) find another utility level with 0% risk.D) change the standard deviation of the portfolio and find the expected return theinvestor would require to maintain the same utility level.E) change the risk-free rate and find the utility level that results in the same standarddeviation.Answer: D Difficulty: DifficultRationale: This references the procedure described on page 207-208 of the text. The authors describe how to trace out indifference curves using a spreadsheet.49. The Capital Market LineI)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 IVB) II, III, and IVC) III and IVD) I, II, and IIIE) I, II, III, and IVAnswer: E Difficulty: ModerateRationale: 'The Capital Market Line is the Capital Allocation Line based on theone-month T-Bill rate and a broad index of common stocks. It applies to an investor pursuing a passive management strategy.50. An investor invests 40 percent of his wealth in a risky asset with an expected rate ofreturn of 0.18 and a variance of 0.10 and 60 percent in a T-bill that pays 4 percent. His portfolio's expected return and standard deviation are __________ and __________,respectively.A) 0.114; 0.112B) 0.087; 0.063C) 0.096; 0.126D) 0.087; 0.144E) none of the aboveAnswer: C Difficulty: ModerateRationale: E(r P) = 0.4(18%) + 0.6(4%) = 9.6%; s P = 0.4(0.10)1/2 = 12.6%.51. An investor invests 70 percent of his wealth in a risky asset with an expected rate ofreturn of 0.11 and a variance of 0.12 and 30 percent in a T-bill that pays 3 percent. His portfolio's expected return and standard deviation are __________ and __________,respectively.A) 0.086; 0.242B) 0.087; 0.267C) 0.295; 0.123D) 0.087; 0.182E) none of the aboveAnswer: A Difficulty: ModerateRationale: E(r P) = 0.7(11%) + 0.3(3%) = 8.6%; s P = 0.7(0.12)1/2 = 24.2%.Use the following to answer questions 52-54: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 0.03.52. What percentages of your money must be invested in the risky asset and the risk-freeasset, 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 determinedAnswer: C Difficulty: ModerateRationale: 8% = w1(11%) + (1 - w1)(3%); 8% = 11%w1 + 3% - 3%w1; 5% = 8%w1; w1 =0.625; 1 - w1 = 0.375; 0.625(11%) + 0.375(3%) = 8.0%.。
投资学7版习题总答案
第1章投资环境一、单选题1. B2.B3.A4.C5.B6. B7.D8.B9.D 10.B二、多选题1. CD2.ABCD3.ABCD4.ACD5.BCD6. ABC7.ABD8.ABCD9.BCD 10.ABC三、判断题1.非2.是3.非4.是5.是6.非7.是8.非9.非 10.是四、简答题：1、从三方面来区分：（1）实物资产是能够为社会经济提供产品与服务能力的资产，包括土地、建筑物、知识、用于生产的机器设备等；金融资产不能直接对社会生产产生作用，只能简介推动社会生产，比如带来公司所有权和经营权的分离，金融资产包括股票、债券。
（2）实物资产是创造收入的资产，而金融资产只能定义为收入或财富在投资者之间的分配。
（3）实物资产和金融资产可以在资产负债表中区分开来。
实物资产一般只能在资产负债表一边的资产方出现，而金融资产可以在资产负债表的两栏出现。
2、证券化要求拥有大量的潜在投资者。
要吸引他们，资本市场需要：（1）一个安全的行业法规体系、较低的税赋和可能的严格管制；（2）相当发达的投资银行业；（3）高度发达的经纪行和金融交易体系；（4）高度发达的信息系统，尤其是在财务披露方面。
这些都是一个高度发达的金融市场的必备(实际也是构成)条件。
3、证券化导致非中介化；也就是说，它提供给市场参与者一种无须经过中介机构的方法。
例如，抵押支撑的证券将资金融通到房地产市场而无须银行或储蓄机构从它们的自有资产中提供贷款。
随着证券化的进程，金融中介必须增加它在其他方面的业务能力，例如提供金融服务或向消费者和小企业提供短期资金的融通。
4、资产在初级市场被初次销售，发行公司收到销售净收入。
同一资产的每一次后续销售都发生在次级市场，从二次销售中得到的收入由卖主获得而不是由原始发行者获得。
投资银行家通常使在初级市场上销售的操作便利化，各种有组织的兑换和场外交易市场是次级市场的例子。
5、经纪人市场是指中间人不持有资产，只是将买主和卖主聚集到一起，以佣金为收入的市场，有组织的交换主要指经纪人市场。
投资学第7版Test Bank答案03
Multiple Choice Questions1. A purchase of a new issue of stock takes placeA) in the secondary market.B) in the primary market.C) usually with the assistance of an investment banker.D) A and B.E) B and C.Answer: E Difficulty: EasyRationale: Funds from the sale of new issues flow to the issuing corporation, makingthis a primary market transaction. Investment bankers usually assist by pricing the issue and finding buyers.2. 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 stand ready to trade at quoted bid and ask prices.D) Specialists cannot trade in their own accounts.E) A, B, and C are all true.Answer: E Difficulty: ModerateRationale: The specialists' functions are all of the items listed in A, B, and C. In addition, specialists trade in their own accounts.3. Investment bankersA) act as intermediaries between issuers of stocks and investors.B) act as advisors to companies in helping them analyze their financial needs and findbuyers for newly issued securities.C) accept deposits from savers and lend them out to companies.D) A and B.E) A, B, and C.Answer: D Difficulty: ModerateRationale: The role of the investment banker is to assist the firm in issuing newsecurities, both in advisory and marketing capacities. The investment banker does not have a role comparable to a commercial bank, as indicated in C.4. In a "firm commitment"A) the investment banker buys the stock from the company and resells the issue to thepublic.B) the investment banker agrees to help the firm sell the stock at a favorable price.C) the investment banker finds the best marketing arrangement for the investmentbanking firm.D) B and C.E) A and B.Answer: A Difficulty: Moderate5. The secondary market consists ofA) transactions on the AMEX.B) transactions in the OTC market.C) transactions through the investment banker.D) A and B.E) A, B, and C.Answer: D Difficulty: ModerateRationale: The secondary market consists of transactions on the organized exchanges and in the OTC market. The investment banker is involved in the placement of new issues in the primary market.6. The use of the Internet to trade and underwrite securitiesA) is illegal under SEC regulations.B) is regulated by the New York Stock Exchange.C) decreases underwriting costs for a new security issue.D) increases underwriting costs for a new security issue.E) is regulated by the National Association of Securities Dealers.Answer: C Difficulty: ModerateRationale: The SEC permits trading and underwriting of securities over the Internet, but has required firms participating in this activity to take steps to safeguard investment funds. This form of underwriting is expected to grow quickly due to its lower cost.7. Initial margin requirements are determined byA) the Securities and Exchange Commission.B) the Federal Reserve System.C) the New York Stock Exchange.D) B and C.E) A and BAnswer: B Difficulty: ModerateRationale: The Board of Governors of the Federal Reserve System determines initial margin requirements. The New York Stock Exchange determines maintenance margin requirements on NYSE-listed stocks; however, brokers usually set maintenance margin requirements above those established by the NYSE.8. You purchased XYZ stock at $50 per share. The stock is currently selling at $65. Yourgains may be protected by placing a __________A) stop-buy orderB) limit-buy orderC) market orderD) limit-sell orderE) none of the above.Answer: D Difficulty: ModerateRationale: With a limit-sell order, your stock will be sold only at a specified price, or better. Thus, such an order would protect your gains. None of the other orders are applicable to this situation.9. You sold ABC stock short at $80 per share. Your losses could be minimized by placinga __________:A) limit-sell orderB) limit-buy orderC) stop-buy orderD) day-orderE) none of the above.Answer: C Difficulty: ModerateRationale: With a stop-buy order, the stock would be purchased if the price increased toa specified level, thus limiting your loss. None of the other orders are applicable to thissituation.10. 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 theprevailing market price.B) A limit sell order is where investors specify prices at which they are willing to sell asecurity.C) If stock ABC is selling at $50, a limit-buy order may instruct the broker to buy thestock if and when the share price falls below $45.D) A day order expires at the close of the trading day.E) None of the above.Answer: E Difficulty: ModerateRationale: All of the order descriptions above are correct.11. Restrictions on trading involving insider information apply to the following exceptA) corporate officers and directors.B) relatives of corporate directors and officers.C) major stockholders.D) All of the above are subject to insider trading restrictions.E) None of the above is subject to insider trading restrictions.Answer: D Difficulty: ModerateRationale: A, B, and C are corporate insiders and are subject to restrictions on trading on inside information. Further, the Supreme Court held that traders may not trade onnonpublic information even if they are not insiders.12. The cost of buying and selling a stock consists of __________.A) broker's commissionsB) dealer's bid-asked spreadC) a price concession an investor may be forced to make.D) A and B.E) A, B, and C.Answer: E Difficulty: ModerateRationale: All of the above are possible costs of buying and selling a stock.13. Assume you purchased 200 shares of XYZ common stock on margin at $70 per sharefrom your broker. If the initial margin is 55%, how much did you borrow from thebroker?A) $6,000B) $4,000C) $7,700D) $7,000E) $6,300Answer: E Difficulty: ModerateRationale: 200 shares * $70/share * (1-0.55) = $14,000 * (0.45) = $6,300.14. You sold short 200 shares of common stock at $60 per share. The initial margin is 60%.Your initial investment wasA) $4,800.B) $12,000.C) $5,600.D) $7,200.E) none of the above.Answer: D Difficulty: ModerateRationale: 200 shares * $60/share * 0.60 = $12,000 * 0.60 = $7,20015. You purchased 100 shares of ABC common stock on margin at $70 per share. Assumethe 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) $21B) $50C) $49D) $80E) none of the aboveAnswer: B Difficulty: DifficultRationale: 100 shares * $70 * .5 = $7,000 * 0.5 = $3,500 (loan amount); 0.30 = (100P - $3,500)/100P; 30P = 100P - $3,500; -70P = -$3,500; P = $50.16. You purchased 100 shares of common stock on margin at $45 per share. Assume theinitial 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) 0.33B) 0.55C) 0.43D) 0.23E) 0.25Answer: E Difficulty: DifficultRationale: 100 shares * $45/share * 0.5 = $4,500 * 0.5 = $2,250 (loan amount); X = [100($30) - $2,250]/100($30); X = 0.25.17. You purchased 300 shares of common stock on margin for $60 per share. The initialmargin 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%B) -33%C) 44%D) -42%E) –54%Answer: D Difficulty: DifficultRationale: 300($60)(0.60) = $10,800 investment; 300($60) = $18,000 X (0.40) =$7,200 loan; Proceeds after selling stock and repaying loan: $13,500 - $7,200 = $6,300;Return = ($6,300 - $10,800)/$10,800 = - 41.67%.18. Assume you sell short 100 shares of common stock at $45 per share, with initial marginat 50%. What would be your rate of return if you repurchase the stock at $40/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%B) 25%C) 22%D) 77%E) none of the aboveAnswer: C Difficulty: ModerateRationale: Profit on stock = ($45 - $40) * 100 = $500, $500/$2,250 (initial investment) = 22.22%.19. 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) $51B) $65C) $35D) $40E) none of the aboveAnswer: B Difficulty: DifficultRationale: Equity = 300($55) * 1.6 = $26,400; 0.35 = ($26,400 - 300P)/300P; 105P = 26,400 - 300P; 405P = 26,400; P = $65.1820. Assume you sold short 100 shares of common stock at $50 per share. The initial marginis 60%. What would be the maintenance margin if a margin call is made at a stock price of $60?A) 40%B) 33%C) 35%D) 25%E) none of the aboveAnswer: B Difficulty: DifficultRationale: $5,000 X 1.6 = $8,000; [$8,000 - 100($60)]/100($60) = 33%.21. Specialists on stock exchanges perform the following functionsA) Act as dealers in their own accounts.B) Analyze the securities in which they specialize.C) Provide liquidity to the market.D) A and B.E) A and C.Answer: E Difficulty: ModerateRationale: Specialists are both brokers and dealers and provide liquidity to the market;they are not analysts.22. Shares for short transactionsA) 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) B and C.E) none of the above.Answer: B Difficulty: ModerateRationale: Typically, the only source of shares for short transactions is those held by the short seller's broker in street name; often these are margined shares.23. Which of the following orders is most useful to short sellers who want to limit theirpotential losses?A) Limit orderB) Discretionary orderC) Limit-loss orderD) Stop-buy orderE) None of the aboveAnswer: D Difficulty: ModerateRationale: By issuing a stop-buy order, the short seller can limit potential losses by assuring that the stock will be purchased (and the short position closed) if the price increases to a certain level.24. Shelf registrationA) is a way of placing issues in the primary market.B) allows firms to register securities for sale over a two-year period.C) increases transaction costs to the issuing firm.D) A and B.E) A and C.Answer: D Difficulty: EasyRationale: Shelf registration lowers transactions costs to the firm as the firm mayregister issues for a longer period than in the past, and thus requires the services of the investment banker less frequently.25. NASDAQ subscriber levelsA) 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 toenter their own quotes.C) permit level 1 subscribers to receive general information about prices.D) include all OTC stocks.E) A, B, and C.Answer: E Difficulty: EasyRationale: NASDAQ links dealers in a loosely organized network with different levels of access to meet different needs.26. You want to buy 100 shares of Hotstock Inc. at the best possible price as quickly aspossible. You would most likely place aA) stop-loss orderB) stop-buy orderC) market orderD) limit-sell orderE) limit-buy orderAnswer: C Difficulty: EasyRationale: A market order is for immediate execution at the best possible price.27. You want to purchase XYZ stock at $60 from your broker using as little of your ownmoney as possible. If initial margin is 50% and you have $3000 to invest, how many shares can you buy?A) 100 sharesB) 200 sharesC) 50 sharesD) 500 sharesE) 25 sharesAnswer: A Difficulty: ModerateRationale: .5 = [(Q * $60)-$3,000] / (Q * $60); $30Q = $60Q-$3,000; $30Q = $3,000;Q=100.28. A sale by IBM of new stock to the public would be a(n)A) short sale.B) seasoned new issue offering.C) private placement.D) secondary market transaction.E) initial public offering.Answer: B Difficulty: EasyRationale: When a firm whose stock already trades in the secondary market issues new shares to the public this is referred to as a seasoned new issue.29. The finalized registration statement for new securities approved by the SEC is calledA) a red herringB) the preliminary statementC) the prospectusD) a best-efforts agreementE) a firm commitmentAnswer: C Difficulty: ModerateRationale: The prospectus is the finalized registration statement approved by the SEC.30. The minimum market value required for an initial listing on the New York StockExchange isA) $2,000,000B) $2,500,000C) $1,100,000D) $60,000,000E) 100,000,000Answer: E Difficulty: ModerateRationale: See Table 3.3.31. In 2005, the price of a seat on the NYSE reached a high ofA) $1,000,000B) $4,000,000C) $1,750,000D) $2,225,000E) $3,000,000Answer: B Difficulty: ModerateRationale: See Table 3.2.32. The floor broker is best described asA) an independent member of the exchange who owns a seat and handles overloadwork for commission brokers.B) someone who makes a market in one or more securities.C) a representative of a brokerage firm who is on the floor of the exchange to executetrade.D) a frequent trader who performs no public function but executes trades for himself.E) any counter party to a trade executed on the floor of the exchange.Answer: A Difficulty: EasyRationale: The floor broker is an independent member of the exchange who handles work for commission brokers when they have too many orders to handle.33. You sell short 100 shares of Loser Co. at a market price of $45 per share. Yourmaximum possible loss isA) $4500B) unlimitedC) zeroD) $9000E) cannot tell from the information givenAnswer: B Difficulty: ModerateRationale: A short seller loses money when the stock price rises. Since there is no upper limit on the stock price, the maximum theoretical loss is unlimited.34. 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%Answer: B Difficulty: ModerateRationale: AM = [300 ($25) - .5 (300) ($30) ] / [300 ($25)] = .4035. When a firm markets new securities, a preliminary registration statement must be filedwithA) 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.Answer: B Difficulty: EasyRationale: The SEC requires the registration statement and must approve it before the issue can take place.36. In a typical underwriting arrangement the investment banking firmI)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 public but does not actually purchase the securities.A) I, II, and IIIB) I, III, and IVC) I and IVD) II and IIIE) I and IIAnswer: A Difficulty: ModerateRationale: A typical underwriting arrangement is made on a firm commitment basis.37. Which of the following is true regarding private placements of primary securityofferings?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 group of institutional or wealthy investors.E) They have greater liquidity than public offerings.Answer: D Difficulty: ModerateRationale: Firms can save on registration costs, but the result is that the securities cannot trade in the secondary markets and therefore are less liquid. Public offerings are better suited for very large issues.38. A specialist on the AMEX Stock Exchange is offering to buy a security for $37.50. Abroker in Oklahoma City wants to sell the security for his client. The IntermarketTrading System shows a bid price of $37.375 on the NYSE. What should the broker do?A) Route the order to the AMEX Stock Exchange.B) Route the order to the NYSE.C) Call the client to see if she has a preference.D) Route half of the order to AMEX and the other half to the NYSE.E) It doesn't matter - he should flip a coin and go with it.Answer: A Difficulty: ModerateRationale: The broker should try to obtain the best price for his client. Since the client wants to sell shares and the bid price is higher on the AMEX, he should route the order there.39. You sold short 100 shares of common stock at $45 per share. The initial margin is 50%.Your initial investment wasA) $4,800.B) $12,000.C) $2,250.D) $7,200.E) none of the above.Answer: C Difficulty: ModerateRationale: 100 shares * $45/share * 0.50 = $4,500 * 0.50 = $2,25040. You sold short 150 shares of common stock at $27 per share. The initial margin is 45%.Your initial investment wasA) $4,800.60.B) $12,000.25.C) $2,250.75.D) $1,822.50.E) none of the above.Answer: D Difficulty: ModerateRationale: 150 shares * $27/share * 0.45 = $4,050 * 0.45 = $1,822.5041. You purchased 100 shares of XON common stock on margin at $60 per share. Assumethe 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) $42.86B) $50.75C) $49.67D) $80.34E) none of the aboveAnswer: A Difficulty: DifficultRationale: 100 shares * $60 * .5 = $6,000 * 0.5 = $3,000 (loan amount); 0.30 = (100P - $3,000)/100P; 30P = 100P - $3,000; -70P = -$3,000; P = $42.8642. You purchased 1000 shares of CSCO 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 marginA) $12.86B) $15.75C) $19.67D) $13.57E) none of the aboveAnswer: D Difficulty: DifficultRationale: 1000 shares * $19 * .5 = $19,000 * 0.5 = $9,500 (loan amount); 0.30 =(1000P - $9,500)/1000P; 300P = 1000P - $9,500; -700P = -$9,500; P = $13.5743. You purchased 100 shares of common stock on margin at $40 per share. Assume theinitial 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) 0.33B) 0.55C) 0.20D) 0.23E) 0.25Answer: C Difficulty: DifficultRationale: 100 shares * $40/share * 0.5 = $4,000 * 0.5 = $2,000 (loan amount); X = [100($25) - $2,000]/100($25); X = 0.20.44. You purchased 1000 shares of common stock on margin at $30 per share. Assume theinitial 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? Ignore interest on margin.A) 0.33B) 0.375C) 0.20D) 0.23E) 0.25Answer: B Difficulty: DifficultRationale: 1000 shares * $30/share * 0.5 = $30,000 * 0.5 = $15,000 (loan amount); X = [1000($24) - $15,000]/1000($24); X = 0.375.45. You purchased 100 shares of common stock on margin for $50 per share. The initialmargin 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%Answer: E Difficulty: DifficultRationale: 100($50)(0.50) = $2,500 investment; gain on stock sale = (56-50)(100) = $600; Return = ($600/$2,500) = 24%.46. You purchased 100 shares of common stock on margin for $35 per share. The initialmargin is 50% and the stock pays no dividend. What would your rate of return be if you sell the stock at $42 per share? Ignore interest on margin.A) 28%B) 33%C) 14%D) 40%E) 24%Answer: D Difficulty: DifficultRationale: 100($35)(0.50) = $1,750 investment; gain on stock sale = (42-35)(100) = $700; Return = ($700/$1,750) = 40%.47. Assume you sell short 1000 shares of common stock at $35 per share, with initialmargin at 50%. What would be your rate of return if you repurchase the stock at$25/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) 20.47%B) 25.63%C) 57.14%D) 77.23%E) none of the aboveAnswer: C Difficulty: ModerateRationale: Profit on stock = ($35 - $25)(1,000) = $10,000; initial investment =($35)(1,000)(.5) = $17,500; return =$10,000/$17,500 = 57.14%.48. Assume you sell short 100 shares of common stock at $30 per share, with initial marginat 50%. What would be your rate of return if you repurchase the stock at $35/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) -33.33%B) -25.63%C) -57.14%D) -77.23%E) none of the aboveAnswer: A Difficulty: ModerateRationale: Profit on stock = ($30 - $35)(100) = -500; initial investment = ($30)(100)(.5) = $1,500; return =$-500/$1,500 = -33.33%.49. You want to purchase GM stock at $40 from your broker using as little of your ownmoney as possible. If initial margin is 50% and you have $4000 to invest, how many shares can you buy?A) 100 sharesB) 200 sharesC) 50 sharesD) 500 sharesE) 25 sharesAnswer: B Difficulty: ModerateRationale: you can buy ($4000/$40) = 100 shares outright and you can borrow $4,000 to buy another 100 shares.50. You want to purchase IBM stock at $80 from your broker using as little of your ownmoney as possible. If initial margin is 50% and you have $2000 to invest, how many shares can you buy?A) 100 sharesB) 200 sharesC) 50 sharesD) 500 sharesE) 25 sharesAnswer: C Difficulty: ModerateRationale: You can buy ($2000/$80) = 25 shares outright and you can borrow $2,000 to buy another 25 shares.51. Assume you sold short 100 shares of common stock at $40 per share. The initial marginis 50%. What would be the maintenance margin if a margin call is made at a stock price of $50?A) 40%B) 20%C) 35%D) 25%E) none of the aboveAnswer: B Difficulty: DifficultRationale: $4,000 X 1.5 = $6,000; [$6,000 - 100($50)]/100($50) = 20%.52. Assume you sold short 100 shares of common stock at $70 per share. The initial marginis 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%E) none of the aboveAnswer: D Difficulty: DifficultRationale: $7,000 X 1.5 = $10,500; [$10,500 - 100($85)]/100($85) = 23.5%.53. 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) $50B) $65C) $35D) $40E) none of the aboveAnswer: A Difficulty: DifficultRationale: Equity = 100($45) * 1.5 = $6,750; 0.35 = ($6,750 - 100P)/100P; 35P = 6,750 - 100P; 135P = 6,750; P = $50.0054. 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) $90.23B) $88.52C) $86.54D) $87.12E) none of the aboveAnswer: C Difficulty: DifficultRationale: Equity = 100($75) * 1.5 = $11,250; 0.30 = ($11,250 - 100P)/100P; 30P = 11,250 - 100P; 130P = 11,250; P = $86.5455. IPO average first-day returns are largest in ____________.A) The United StatesB) DenmarkC) JapanD) ChinaE) FranceAnswer: D Difficulty: EasyRationale: See Figure 3.3.56. Despite large first-day IPO returns, average first-year returns in the US areapproximately ____________ percent.A) 6.7B) 18.2C) 26.4D) 4.8E) 9.1Answer: A Difficulty: EasyRationale: See Figure 3.4.57. Average second-year IPO returns in the US are approximately ____________ percent.A) 6.7B) 18.2C) 26.4D) 5.3E) 9.1Answer: D Difficulty: EasyRationale: See Figure 3.4.58. Average third-year IPO returns in the US are approximately ____________ percent.A) 6.7B) 18.2C) 26.4D) 5.3E) 10.3Answer: E Difficulty: EasyRationale: See Figure 3.4.59. The advertisement by the underwriting syndicate to announce an new security issue isreferred to as the ____________.A) red herringB) preliminary prospectusC) prospectusD) tombstoneE) headstoneAnswer: D Difficulty: Easy60. The preliminary prospectus is referred to as a ____________.A) red herringB) indentureC) green mailD) tombstoneE) headstoneAnswer: A Difficulty: Easy61. The minimum revenue required for an initial listing on the New York Stock Exchange isA) $2,000,000B) $25,000,000C) $50,000,000D) $75,000,000E) 100,000,000Answer: D Difficulty: ModerateRationale: See Table 3.3.62. The annual dollar volume of trading on the NYSE in 2004 was approximately____________ dollars.A) 12 trillionB) 4 trillionC) 12 billionD) 4 billionE) none of the aboveAnswer: A Difficulty: EasyRationale: See Figure 3.7.63. The ____________ had the largest trading volume of securities in 2004.A) NASDAQB) NYSEC) LondonD) TokyoE) Hong KongAnswer: B Difficulty: EasyRationale: See Figure 3.7.64. The securities act of 1933 ____________.I)requires full disclosure of relevant information relating to the issue of newsecuritiesII)requires registration of new securitiesIII)requires issuance of a prospectus detailing financial prospects of the firm IV)established the SECV)requires periodic disclosure of relevant financial informationVI)empowers SEC to regulate exchanges, OTC trading, brokers, and dealersA) I, II and IIIB) I, II, III, IV, V, and VIC) I, II and VD) I, II and IVE) IV onlyAnswer: A Difficulty: Easy65. The securities act of 1934 ____________.I)requires full disclosure of relevant information relating to the issue of newsecuritiesII)requires registration of new securitiesIII)requires issuance of a prospectus detailing financial prospects of the firm IV)established the SECV)requires periodic disclosure of relevant financial informationVI)empowers SEC to regulate exchanges, OTC trading, brokers, and dealersA) I, II and IIIB) I, II, III, IV, V, and VIC) I, II and VD) I, II and IVE) IV, V, and VIAnswer: E Difficulty: Easy。
投资学第7版Test-Bank答案03
Multiple Choice Questions1. A purchase of a new issue of stock takes placeA) in the secondary market.B) in the primary market.C) usually with the assistance of an investment banker.D) A and B.E) B and C.Answer: E Difficulty: EasyRationale: Funds from the sale of new issues flow to the issuing corporation, making this aprimary market transaction. Investment bankers usually assist by pricing the issue and finding buyers.2. 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 stand ready to trade at quoted bid and ask prices.D) Specialists cannot trade in their own accounts.E) A, B, and C are all true.Answer: E Difficulty: ModerateRationale: The specialists' functions are all of the items listed in A, B, and C. In addition,specialists trade in their own accounts.3. Investment bankersA) act as intermediaries between issuers of stocks and investors.B) act as advisors to companies in helping them analyze their financial needs and find buyersfor newly issued securities.C) accept deposits from savers and lend them out to companies.D) A and B.E) A, B, and C.Answer: D Difficulty: ModerateRationale: The role of the investment banker is to assist the firm in issuing new securities, both in advisory and marketing capacities. The investment banker does not have a role comparable to a commercial bank, as indicated in C.4. In a "firm commitment"A) the investment banker buys the stock from the company and resells the issue to the public.B) the investment banker agrees to help the firm sell the stock at a favorable price.C) the investment banker finds the best marketing arrangement for the investment bankingfirm.D) B and C.E) A and B.Answer: A Difficulty: Moderate5. The secondary market consists ofA) transactions on the AMEX.B) transactions in the OTC market.C) transactions through the investment banker.D) A and B.E) A, B, and C.Answer: D Difficulty: ModerateRationale: The secondary market consists of transactions on the organized exchanges and in the OTC market. The investment banker is involved in the placement of new issues in the primary market.6. The use of the Internet to trade and underwrite securitiesA) is illegal under SEC regulations.B) is regulated by the New York Stock Exchange.C) decreases underwriting costs for a new security issue.D) increases underwriting costs for a new security issue.E) is regulated by the National Association of Securities Dealers.Answer: C Difficulty: ModerateRationale: The SEC permits trading and underwriting of securities over the Internet, but has required firms participating in this activity to take steps to safeguard investment funds. This form of underwriting is expected to grow quickly due to its lower cost.7. Initial margin requirements are determined byA) the Securities and Exchange Commission.B) the Federal Reserve System.C) the New York Stock Exchange.D) B and C.E) A and BAnswer: B Difficulty: ModerateRationale: The Board of Governors of the Federal Reserve System determines initial margin requirements. The New York Stock Exchange determines maintenance margin requirements on NYSE-listed stocks; however, brokers usually set maintenance margin requirements above those established by the NYSE.8. You purchased XYZ stock at $50 per share. The stock is currently selling at $65. Your gainsmay be protected by placing a __________A) stop-buy orderB) limit-buy orderC) market orderD) limit-sell orderE) none of the above.Answer: D Difficulty: ModerateRationale: With a limit-sell order, your stock will be sold only at a specified price, or better.Thus, such an order would protect your gains. None of the other orders are applicable to this situation.9. You sold ABC stock short at $80 per share. Your losses could be minimized by placing a__________:A) limit-sell orderB) limit-buy orderC) stop-buy orderD) day-orderE) none of the above.Answer: C Difficulty: ModerateRationale: With a stop-buy order, the stock would be purchased if the price increased to a specified level, thus limiting your loss. None of the other orders are applicable to this situation.10. 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 marketprice.B) A limit sell order is where investors specify prices at which they are willing to sell asecurity.C) If stock ABC is selling at $50, a limit-buy order may instruct the broker to buy the stock ifand when the share price falls below $45.D) A day order expires at the close of the trading day.E) None of the above.Answer: E Difficulty: ModerateRationale: All of the order descriptions above are correct.11. Restrictions on trading involving insider information apply to the following exceptA) corporate officers and directors.B) relatives of corporate directors and officers.C) major stockholders.D) All of the above are subject to insider trading restrictions.E) None of the above is subject to insider trading restrictions.Answer: D Difficulty: ModerateRationale: A, B, and C are corporate insiders and are subject to restrictions on trading on inside information. Further, the Supreme Court held that traders may not trade on nonpublicinformation even if they are not insiders.12. The cost of buying and selling a stock consists of __________.A) broker's commissionsB) dealer's bid-asked spreadC) a price concession an investor may be forced to make.D) A and B.E) A, B, and C.Answer: E Difficulty: ModerateRationale: All of the above are possible costs of buying and selling a stock.13. Assume you purchased 200 shares of XYZ common stock on margin at $70 per share from yourbroker. If the initial margin is 55%, how much did you borrow from the broker?A) $6,000B) $4,000C) $7,700D) $7,000E) $6,300Answer: E Difficulty: ModerateRationale: 200 shares * $70/share * (1-0.55) = $14,000 * (0.45) = $6,300.14. You sold short 200 shares of common stock at $60 per share. The initial margin is 60%. Yourinitial investment wasA) $4,800.B) $12,000.C) $5,600.D) $7,200.E) none of the above.Answer: D Difficulty: ModerateRationale: 200 shares * $60/share * 0.60 = $12,000 * 0.60 = $7,20015. You purchased 100 shares of ABC common stock on margin at $70 per share. Assume theinitial 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) $21B) $50C) $49D) $80E) none of the aboveAnswer: B Difficulty: DifficultRationale: 100 shares * $70 * .5 = $7,000 * 0.5 = $3,500 (loan amount); 0.30 = (100P -$3,500)/100P; 30P = 100P - $3,500; -70P = -$3,500; P = $50.16. You purchased 100 shares of common stock on margin at $45 per share. Assume the initialmargin 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) 0.33B) 0.55C) 0.43D) 0.23E) 0.25Answer: E Difficulty: DifficultRationale: 100 shares * $45/share * 0.5 = $4,500 * 0.5 = $2,250 (loan amount); X = [100($30) - $2,250]/100($30); X = 0.25.17. You purchased 300 shares of common stock on margin for $60 per share. The initial margin is60% 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%B) -33%C) 44%D) -42%E) –54%Answer: D Difficulty: DifficultRationale: 300($60)(0.60) = $10,800 investment; 300($60) = $18,000 X (0.40) = $7,200 loan;Proceeds after selling stock and repaying loan: $13,500 - $7,200 = $6,300; Return = ($6,300 - $10,800)/$10,800 = - 41.67%.18. 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/share? The stock paid no dividends during the period, and you did not remove any money from the account beforemaking the offsetting transaction.A) 20%B) 25%C) 22%D) 77%E) none of the aboveAnswer: C Difficulty: ModerateRationale: Profit on stock = ($45 - $40) * 100 = $500, $500/$2,250 (initial investment) =22.22%.19. You sold short 300 shares of common stock at $55 per share. The initial margin is 60%. Atwhat stock price would you receive a margin call if the maintenance margin is 35%?A) $51B) $65C) $35D) $40E) none of the aboveAnswer: B Difficulty: DifficultRationale: Equity = 300($55) * 1.6 = $26,400; 0.35 = ($26,400 - 300P)/300P; 105P = 26,400 - 300P; 405P = 26,400; P = $65.1820. Assume you sold short 100 shares of common stock at $50 per share. The initial margin is 60%.What would be the maintenance margin if a margin call is made at a stock price of $60?A) 40%B) 33%C) 35%D) 25%E) none of the aboveAnswer: B Difficulty: DifficultRationale: $5,000 X 1.6 = $8,000; [$8,000 - 100($60)]/100($60) = 33%.21. Specialists on stock exchanges perform the following functionsA) Act as dealers in their own accounts.B) Analyze the securities in which they specialize.C) Provide liquidity to the market.D) A and B.E) A and C.Answer: E Difficulty: ModerateRationale: Specialists are both brokers and dealers and provide liquidity to the market; they are not analysts.22. Shares for short transactionsA) 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) B and C.E) none of the above.Answer: B Difficulty: ModerateRationale: Typically, the only source of shares for short transactions is those held by the short seller's broker in street name; often these are margined shares.23. Which of the following orders is most useful to short sellers who want to limit their potentiallosses?A) Limit orderB) Discretionary orderC) Limit-loss orderD) Stop-buy orderE) None of the aboveAnswer: D Difficulty: ModerateRationale: By issuing a stop-buy order, the short seller can limit potential losses by assuring that the stock will be purchased (and the short position closed) if the price increases to a certain level.24. Shelf registrationA) is a way of placing issues in the primary market.B) allows firms to register securities for sale over a two-year period.C) increases transaction costs to the issuing firm.D) A and B.E) A and C.Answer: D Difficulty: EasyRationale: Shelf registration lowers transactions costs to the firm as the firm may register issues for a longer period than in the past, and thus requires the services of the investment banker less frequently.25. NASDAQ subscriber levelsA) 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 entertheir own quotes.C) permit level 1 subscribers to receive general information about prices.D) include all OTC stocks.E) A, B, and C.Answer: E Difficulty: EasyRationale: NASDAQ links dealers in a loosely organized network with different levels of access to meet different needs.26. You want to buy 100 shares of Hotstock Inc. at the best possible price as quickly as possible.You would most likely place aA) stop-loss orderB) stop-buy orderC) market orderD) limit-sell orderE) limit-buy orderAnswer: C Difficulty: EasyRationale: A market order is for immediate execution at the best possible price.27. You want to purchase XYZ stock at $60 from your broker using as little of your own money aspossible. If initial margin is 50% and you have $3000 to invest, how many shares can you buy?A) 100 sharesB) 200 sharesC) 50 sharesD) 500 sharesE) 25 sharesAnswer: A Difficulty: ModerateRationale: .5 = [(Q * $60)-$3,000] / (Q * $60); $30Q = $60Q-$3,000; $30Q = $3,000; Q=100.28. A sale by IBM of new stock to the public would be a(n)A) short sale.B) seasoned new issue offering.C) private placement.D) secondary market transaction.E) initial public offering.Answer: B Difficulty: EasyRationale: When a firm whose stock already trades in the secondary market issues new shares to the public this is referred to as a seasoned new issue.29. The finalized registration statement for new securities approved by the SEC is calledA) a red herringB) the preliminary statementC) the prospectusD) a best-efforts agreementE) a firm commitmentAnswer: C Difficulty: ModerateRationale: The prospectus is the finalized registration statement approved by the SEC.30. The minimum market value required for an initial listing on the New York Stock Exchange isA) $2,000,000B) $2,500,000C) $1,100,000D) $60,000,000E) 100,000,000Answer: E Difficulty: ModerateRationale: See Table 3.3.31. In 2005, the price of a seat on the NYSE reached a high ofA) $1,000,000B) $4,000,000C) $1,750,000D) $2,225,000E) $3,000,000Answer: B Difficulty: ModerateRationale: See Table 3.2.32. The floor broker is best described asA) an independent member of the exchange who owns a seat and handles overload work forcommission brokers.B) someone who makes a market in one or more securities.C) a representative of a brokerage firm who is on the floor of the exchange to execute trade.D) a frequent trader who performs no public function but executes trades for himself.E) any counter party to a trade executed on the floor of the exchange.Answer: A Difficulty: EasyRationale: The floor broker is an independent member of the exchange who handles work for commission brokers when they have too many orders to handle.33. You sell short 100 shares of Loser Co. at a market price of $45 per share. Your maximumpossible loss isA) $4500B) unlimitedC) zeroD) $9000E) cannot tell from the information givenAnswer: B Difficulty: ModerateRationale: A short seller loses money when the stock price rises. Since there is no upper limit on the stock price, the maximum theoretical loss is unlimited.34. You buy 300 shares of Qualitycorp for $30 per share and deposit initial margin of 50%. Thenext day Qualitycorp's price drops to $25 per share. What is your actual margin?A) 50%B) 40%C) 33%D) 60%E) 25%Answer: B Difficulty: ModerateRationale: AM = [300 ($25) - .5 (300) ($30) ] / [300 ($25)] = .4035. When a firm markets new securities, a preliminary registration statement must be filed withA) 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.Answer: B Difficulty: EasyRationale: The SEC requires the registration statement and must approve it before the issue can take place.36. In a typical underwriting arrangement the investment banking firmI)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 public but does not actually purchase the securities.A) I, II, and IIIB) I, III, and IVC) I and IVD) II and IIIE) I and IIAnswer: A Difficulty: ModerateRationale: A typical underwriting arrangement is made on a firm commitment basis.37. Which of the following is true regarding private placements of primary security offerings?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 group of institutional or wealthy investors.E) They have greater liquidity than public offerings.Answer: D Difficulty: ModerateRationale: Firms can save on registration costs, but the result is that the securities cannot trade in the secondary markets and therefore are less liquid. Public offerings are better suited for very large issues.38. A specialist on the AMEX Stock Exchange is offering to buy a security for $37.50. A broker inOklahoma City wants to sell the security for his client. The Intermarket Trading System showsa bid price of $37.375 on the NYSE. What should the broker do?A) Route the order to the AMEX Stock Exchange.B) Route the order to the NYSE.C) Call the client to see if she has a preference.D) Route half of the order to AMEX and the other half to the NYSE.E) It doesn't matter - he should flip a coin and go with it.Answer: A Difficulty: ModerateRationale: The broker should try to obtain the best price for his client. Since the client wants to sell shares and the bid price is higher on the AMEX, he should route the order there.39. You sold short 100 shares of common stock at $45 per share. The initial margin is 50%. Yourinitial investment wasA) $4,800.B) $12,000.C) $2,250.D) $7,200.E) none of the above.Answer: C Difficulty: ModerateRationale: 100 shares * $45/share * 0.50 = $4,500 * 0.50 = $2,25040. You sold short 150 shares of common stock at $27 per share. The initial margin is 45%. Yourinitial investment wasA) $4,800.60.B) $12,000.25.C) $2,250.75.D) $1,822.50.E) none of the above.Answer: D Difficulty: ModerateRationale: 150 shares * $27/share * 0.45 = $4,050 * 0.45 = $1,822.5041. You purchased 100 shares of XON common stock on margin at $60 per share. Assume theinitial 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) $42.86B) $50.75C) $49.67D) $80.34E) none of the aboveAnswer: A Difficulty: DifficultRationale: 100 shares * $60 * .5 = $6,000 * 0.5 = $3,000 (loan amount); 0.30 = (100P -$3,000)/100P; 30P = 100P - $3,000; -70P = -$3,000; P = $42.8642. You purchased 1000 shares of CSCO common stock on margin at $19 per share. Assume theinitial 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 marginA) $12.86B) $15.75C) $19.67D) $13.57E) none of the aboveAnswer: D Difficulty: DifficultRationale: 1000 shares * $19 * .5 = $19,000 * 0.5 = $9,500 (loan amount); 0.30 = (1000P - $9,500)/1000P; 300P = 1000P - $9,500; -700P = -$9,500; P = $13.5743. You purchased 100 shares of common stock on margin at $40 per share. Assume the initialmargin 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) 0.33B) 0.55C) 0.20D) 0.23E) 0.25Answer: C Difficulty: DifficultRationale: 100 shares * $40/share * 0.5 = $4,000 * 0.5 = $2,000 (loan amount); X = [100($25) - $2,000]/100($25); X = 0.20.44. You purchased 1000 shares of common stock on margin at $30 per share. Assume the initialmargin 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? Ignore interest on margin.A) 0.33B) 0.375C) 0.20D) 0.23E) 0.25Answer: B Difficulty: DifficultRationale: 1000 shares * $30/share * 0.5 = $30,000 * 0.5 = $15,000 (loan amount); X =[1000($24) - $15,000]/1000($24); X = 0.375.45. You purchased 100 shares of common stock on margin for $50 per share. The initial margin is50% 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%Answer: E Difficulty: DifficultRationale: 100($50)(0.50) = $2,500 investment; gain on stock sale = (56-50)(100) = $600;Return = ($600/$2,500) = 24%.46. You purchased 100 shares of common stock on margin for $35 per share. The initial margin is50% and the stock pays no dividend. What would your rate of return be if you sell the stock at $42 per share? Ignore interest on margin.A) 28%B) 33%C) 14%D) 40%E) 24%Answer: D Difficulty: DifficultRationale: 100($35)(0.50) = $1,750 investment; gain on stock sale = (42-35)(100) = $700;Return = ($700/$1,750) = 40%.47. Assume you sell short 1000 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/share? The stock paid no dividends during the period, and you did not remove any money from the account beforemaking the offsetting transaction.A) 20.47%B) 25.63%C) 57.14%D) 77.23%E) none of the aboveAnswer: C Difficulty: ModerateRationale: Profit on stock = ($35 - $25)(1,000) = $10,000; initial investment = ($35)(1,000)(.5) = $17,500; return =$10,000/$17,500 = 57.14%.48. 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 the stock at $35/share? The stock paid no dividends during the period, and you did not remove any money from the account beforemaking the offsetting transaction.A) -33.33%B) -25.63%C) -57.14%D) -77.23%E) none of the aboveAnswer: A Difficulty: ModerateRationale: Profit on stock = ($30 - $35)(100) = -500; initial investment = ($30)(100)(.5) =$1,500; return =$-500/$1,500 = -33.33%.49. You want to purchase GM stock at $40 from your broker using as little of your own money aspossible. If initial margin is 50% and you have $4000 to invest, how many shares can you buy?A) 100 sharesB) 200 sharesC) 50 sharesD) 500 sharesE) 25 sharesAnswer: B Difficulty: ModerateRationale: you can buy ($4000/$40) = 100 shares outright and you can borrow $4,000 to buy another 100 shares.50. You want to purchase IBM stock at $80 from your broker using as little of your own money aspossible. If initial margin is 50% and you have $2000 to invest, how many shares can you buy?A) 100 sharesB) 200 sharesC) 50 sharesD) 500 sharesE) 25 sharesAnswer: C Difficulty: ModerateRationale: You can buy ($2000/$80) = 25 shares outright and you can borrow $2,000 to buy another 25 shares.51. 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 price of $50?A) 40%B) 20%C) 35%D) 25%E) none of the aboveAnswer: B Difficulty: DifficultRationale: $4,000 X 1.5 = $6,000; [$6,000 - 100($50)]/100($50) = 20%.52. 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%E) none of the aboveAnswer: D Difficulty: DifficultRationale: $7,000 X 1.5 = $10,500; [$10,500 - 100($85)]/100($85) = 23.5%.53. You sold short 100 shares of common stock at $45 per share. The initial margin is 50%. Atwhat stock price would you receive a margin call if the maintenance margin is 35%?A) $50B) $65C) $35D) $40E) none of the aboveAnswer: A Difficulty: DifficultRationale: Equity = 100($45) * 1.5 = $6,750; 0.35 = ($6,750 - 100P)/100P; 35P = 6,750 - 100P;135P = 6,750; P = $50.0054. You sold short 100 shares of common stock at $75 per share. The initial margin is 50%. Atwhat stock price would you receive a margin call if the maintenance margin is 30%?A) $90.23B) $88.52C) $86.54D) $87.12E) none of the aboveAnswer: C Difficulty: DifficultRationale: Equity = 100($75) * 1.5 = $11,250; 0.30 = ($11,250 - 100P)/100P; 30P = 11,250 - 100P; 130P = 11,250; P = $86.5455. IPO average first-day returns are largest in ____________.A) The United StatesB) DenmarkC) JapanD) ChinaE) FranceAnswer: D Difficulty: EasyRationale: See Figure 3.3.56. Despite large first-day IPO returns, average first-year returns in the US are approximately____________ percent.A) 6.7B) 18.2C) 26.4D) 4.8E) 9.1Answer: A Difficulty: EasyRationale: See Figure 3.4.57. Average second-year IPO returns in the US are approximately ____________ percent.A) 6.7B) 18.2C) 26.4D) 5.3E) 9.1Answer: D Difficulty: EasyRationale: See Figure 3.4.58. Average third-year IPO returns in the US are approximately ____________ percent.A) 6.7B) 18.2C) 26.4D) 5.3E) 10.3Answer: E Difficulty: EasyRationale: See Figure 3.4.59. The advertisement by the underwriting syndicate to announce an new security issue is referredto as the ____________.A) red herringB) preliminary prospectusC) prospectusD) tombstoneE) headstoneAnswer: D Difficulty: Easy60. The preliminary prospectus is referred to as a ____________.A) red herringB) indentureC) green mailD) tombstoneE) headstoneAnswer: A Difficulty: Easy61. The minimum revenue required for an initial listing on the New York Stock Exchange isA) $2,000,000B) $25,000,000C) $50,000,000D) $75,000,000E) 100,000,000Answer: D Difficulty: ModerateRationale: See Table 3.3.62. The annual dollar volume of trading on the NYSE in 2004 was approximately ____________dollars.A) 12 trillionB) 4 trillionC) 12 billionD) 4 billionE) none of the aboveAnswer: A Difficulty: EasyRationale: See Figure 3.7.63. The ____________ had the largest trading volume of securities in 2004.A) NASDAQB) NYSEC) LondonD) TokyoE) Hong KongAnswer: B Difficulty: EasyRationale: See Figure 3.7.64. The securities act of 1933 ____________.I)requires full disclosure of relevant information relating to the issue of new securitiesII)requires registration of new securitiesIII)requires issuance of a prospectus detailing financial prospects of the firmIV)established the SECV)requires periodic disclosure of relevant financial informationVI)empowers SEC to regulate exchanges, OTC trading, brokers, and dealersA) I, II and IIIB) I, II, III, IV, V, and VIC) I, II and VD) I, II and IVE) IV onlyAnswer: A Difficulty: Easy65. The securities act of 1934 ____________.I)requires full disclosure of relevant information relating to the issue of new securitiesII)requires registration of new securitiesIII)requires issuance of a prospectus detailing financial prospects of the firmIV)established the SECV)requires periodic disclosure of relevant financial informationVI)empowers SEC to regulate exchanges, OTC trading, brokers, and dealersA) I, II and IIIB) I, II, III, IV, V, and VIC) I, II and VD) I, II and IVE) IV, V, and VIAnswer: E Difficulty: Easy。
投资学第7版TestBank答案06
投资学第7版TestBank答案06Multiple Choice Questions1. 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 the risk-free rate.D) They are willing to accept lower returns and high risk.E) A and B.Answer: C Difficulty: Moderate2. Which of the following statements is (are) true?I)Risk-averse 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 onlyB) II onlyC) I and II onlyD) II and III onlyE) II, III, and IV onlyAnswer: C Difficulty: ModerateRationale: Risk-averse investors consider a risky investment only if the investmentoffers a risk premium. Risk-neutral investors look only at expected returns whenmaking an investment decision.3. In the mean-standard deviation graph an indifference curve has a ________ slope.A) negativeB) zeroC) positiveD) northeastE) cannot be determinedAnswer: C Difficulty: EasyRationale: The risk-return trade-off is one in which greater risk is taken if greater returns can be expected, resulting in a positive slope.4. In the mean-standard deviation graph, which one of the following statements is trueregarding the indifference curve of a risk-averse investor?A) It is the locus of portfolios that have the same expected rates of return and differentstandard deviations.B) It is the locus of portfolios that have the same standard deviations and different ratesof return.C) It is the locus of portfolios that offer the same utility according to returns andstandard deviations.D) It connects portfolios that offer increasing utilities according to returns and standarddeviations.E) none of the above.Answer: C Difficulty: ModerateRationale: Indifference curves plot trade-off alternatives that provide equal utility to the individual (in this case, the trade-offs are the risk-return characteristics of theportfolios).5. In a return-standard deviation space, which of the following statements is (are) true forrisk-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 curves, the highest offers the greatest utility.IV)Indifference curves of two investors might intersect.A) I and II onlyB) II and III onlyC) I and IV onlyD) III and IV onlyE) none of the aboveAnswer: D Difficulty: ModerateRationale: An investor's indifference curves are parallel, and thus cannot intersect and have positive slopes. The highest indifference curve (the one in the most northwestern position) offers the greatest utility. Indifference curves of investors with similarrisk-return trade-offs might intersect.6. 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.Answer: D Difficulty: ModerateRationale: The more risk averse the investor, the less risk that is tolerated, given a rate of return.7. When an investment advisor attempts to determine an investor's risk tolerance, whichfactor would they be least likely to assess?A) the investor's prior investing experienceB) the investor's degree of financial securityC) the investor's tendency to make risky or conservative choicesD) the level of return the investor prefersE) the investor's feeling about lossAnswer: D Difficulty: ModerateUse the following to answer questions 8-9:Assume an investor with the following utility function: U = E(r) - 3/2(s2).8. To maximize her expected utility, she would choose the asset with an expected rate ofreturn of _______ and a standard deviation of ________, respectively.A) 12%; 20%B) 10%; 15%C) 10%; 10%D) 8%; 10%E) none of the aboveAnswer: C Difficulty: ModerateRationale: U = 0.10 - 3/2(0.10)2 = 8.5%; highest utility of choices.9. To maximize her expected utility, which one of the following investment alternativeswould she choose?A) A portfolio that pays 10 percent with a 60 percent probability or 5 percent with 40percent probability.B) A portfolio that pays 10 percent with 40 percent probability or 5 percent with a 60percent probability.C) A portfolio that pays 12 percent with 60 percent probability or 5 percent with 40percent probability.D) A portfolio that pays 12 percent with 40 percent probability or 5 percent with 60percent probability.E) none of the above.Answer: C Difficulty: DifficultRationale: U(c) = 9.02%; highest utility of possibilities.10. A portfolio has an expected rate of return of 0.15 and a standard deviation of 0.15. Therisk-free rate is 6 percent. An investor has the following utility function: U = E(r) - (A/2)s2. Which value of A makes this investor indifferent between the risky portfolio and the risk-free asset?B) 6C) 7D) 8E) none of the aboveAnswer: D Difficulty: DifficultRationale: 0.06 = 0.15 - A/2(0.15)2; 0.06 - 0.15 = -A/2(0.0225); -0.09 = -0.01125A; A = 8; U = 0.15 - 8/2(0.15)2 = 6%; U(R f) = 6%.11. According to the mean-variance criterion, which one of the following investmentsdominates all others?A) E(r) = 0.15; Variance = 0.20B) E(r) = 0.10; Variance = 0.20C) E(r) = 0.10; Variance = 0.25D) E(r) = 0.15; Variance = 0.25E) none of these dominates the other alternatives.Answer: A Difficulty: DifficultRationale: A gives the highest return with the least risk; return per unit of risk is .75, which dominates the reward-risk ratio for the other choices.12. Consider a risky portfolio, A, with an expected rate of return of 0.15 and a standarddeviation of 0.15, that lies on a given indifference curve. Which one of the following portfolios might lie on the same indifference curve?A) E(r) = 0.15; Standard deviation = 0.20B) E(r) = 0.15; Standard deviation = 0.10C) E(r) = 0.10; Standard deviation = 0.10D) E(r) = 0.20; Standard deviation = 0.15E) E(r) = 0.10; Standard deviation = 0.20Answer: C Difficulty: DifficultRationale: Portfolio A has a reward to risk ratio of 1.0; portfolio C is the only choice with the same risk-return tradeoff.Use the following to answer questions 13-15:13. Based on the utility function above, which investment would you select?A) 1B) 2C) 3E) cannot tell from the information givenAnswer: C Difficulty: DifficultRationale: U(c) = 0.21 - 4/2(0.16)2 = 15.88 (highest utility of choices).14. Which investment would you select if you were risk neutral?A) 1B) 2C) 3D) 4E) cannot tell from the information givenAnswer: D Difficulty: DifficultRationale: If you are risk neutral, your only concern is with return, not risk.15. 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.E) none of the above.Answer: B Difficulty: ModerateRationale: A is an arbitrary scale factor used to measure investor risk tolerance. The higher the value of A, the more risk averse the investor.16. The exact indifference curves of different investorsA) cannot be known with perfect certainty.B) can be calculated precisely with the use of advanced calculus.C) although not known with perfect certainty, do allow the advisor to create moresuitable portfolios for the client.D) A and C.E) none of the above.Answer: D Difficulty: EasyRationale: Indifference curves cannot be calculated precisely, but the theory does allow for the creation of more suitable portfolios for investors of differing levels of risktolerance.17. The riskiness of individual assetsA) should be considered for the asset in isolation.B) should be considered in the context of the effect on overall portfolio volatility.C) combined with the riskiness of other individual assets (in the proportions theseassets constitute of the entire portfolio) should be the relevant risk measure.D) B and C.E) none of the above.Answer: D Difficulty: EasyRationale: The relevant risk is portfolio risk; thus, the riskiness of an individual security should be considered in the context of the portfolio as a whole.18. A fair gameA) 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) Both A and B are true.E) Both A and C are true.Answer: D Difficulty: ModerateRationale: A fair game is a risky investment with a payoff exactly equal to its expected value. Since it offers no risk premium, it will not be acceptable to a risk-averse investor.19. The presence of risk means thatA) 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 wealth will be greater than initial wealth.E) terminal wealth will be less than initial wealth.Answer: B Difficulty: EasyRationale: The presence of risk means that more than one outcome is possible.20. The utility score an investor assigns to a particular portfolio, other things equal,A) will decrease as the rate of return increases.B) will decrease as the standard deviation increases.C) will decrease as the variance increases.D) will increase as the variance increases.E) will increase as the rate of return increases.Answer: E Difficulty: EasyRationale: Utility is enhanced by higher expected returns and diminished by higher risk.21. The certainty equivalent rate of a portfolio isA) the rate that a risk-free investment would need to offer with certainty to beconsidered equally attractive as the risky portfolio.B) the rate that the investor must earn for certain to give up the use of his money.C) the minimum rate guaranteed by institutions such as banks.D) the rate that equates “A” in the utility fun ction with the average risk aversioncoefficient for all risk-averse investors.E) represented by the scaling factor “-.005” in the utility function.Answer: A Difficulty: Moderate22. According to the mean-variance criterion, which of the statements below is correct?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.Answer: B Difficulty: ModerateRationale: This question tests the student's understanding of how to apply themean-variance criterion.23. Steve is more risk-averse than Edie. On a graph that shows Steve and Edie'sindifference curves, which of the following is true? Assume that the graph showsexpected return on the vertical axis and standard deviation on the horizontal axis.I)Steve and Edie's indifference curves 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 VB) I and IIIC) III and IVD) I and IIE) II and IVAnswer: B Difficulty: ModerateRationale: This question tests whether the student understands the graphical properties of indifference curves and how they relate to the degree of risk tolerance.24. The Capital Allocation Line can be described as theA) 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 differentstandard deviations.E) none of the above.Answer: A Difficulty: ModerateRationale: The CAL has an intercept equal to the risk-free rate. It is a straight linethrough the point representing the risk-free asset and the risky portfolio, inexpected-return/standard deviation space.25. Which of the following statements regarding the Capital Allocation Line (CAL) isfalse?A) The CAL shows risk-return combinations.B) The slope of the CAL equals the increase in the expected return of a risky portfolioper unit of additional standard deviation.C) The slope of the CAL is also called the reward-to-variability ratio.D) The CAL is also called the efficient frontier of risky assets in the absence of arisk-free asset.E) Both A and D are true.Answer: D Difficulty: ModerateRationale: The CAL consists of combinations of a risky asset and a risk-free assetwhose slope is the reward-to-variability ratio; thus, all statements except d are true.26. Given the capital allocation line, an investor's optimal portfolio is the portfolio thatA) maximizes her expected profit.B) maximizes her risk.C) minimizes both her risk and return.D) maximizes her expected utility.E) none of the above.Answer: D Difficulty: ModerateRationale: By maximizing expected utility, the investor is obtaining the best risk-return relationships possible and acceptable for her.27. An investor invests 30 percent of his wealth in a risky asset with an expected rate ofreturn of 0.15 and a variance of 0.04 and 70 percent in a T-bill that pays 6 percent. His portfolio's expected return and standard deviation are __________ and __________,respectively.A) 0.114; 0.12B) 0.087;0.06C) 0.295; 0.12D) 0.087; 0.12E) none of the aboveAnswer: B Difficulty: ModerateRationale: E(r P) = 0.3(15%) + 0.7(6%) = 8.7%; s P = 0.3(0.04)1/2 = 6%.Use the following to answer questions 28-31: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 0.05.28. What percentages of your money must be invested in the risky asset and the risk-freeasset, respectively, to form a portfolio with an expected return of 0.09?A) 85% and 15%B) 75% and 25%C) 67% and 33%D) 57% and 43%E) cannot be determinedAnswer: D Difficulty: ModerateRationale: 9% = w1(12%) + (1 - w1)(5%); 9% = 12%w1 + 5% - 5%w1; 4% = 7%w1; w1 =0.57; 1 - w1 = 0.43; 0.57(12%) + 0.43(5%) = 8.99%.29. What percentages of your money must be invested in the risk-free asset and the riskyasset, 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 determinedAnswer: C Difficulty: ModerateRationale: 0.06 = x(0.15); x = 40% in risky asset.30. A portfolio that has an expected outcome of $115 is formed byA) 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 riskyasset.D) investing $43 in the risky asset and $57 in the riskless asset.E) Such a portfolio cannot be formed.Answer: C Difficulty: DifficultRationale: For $100, (115-100)/100=15%; .15 = w1(.12) + (1 - w1)(.05); .15 = .12w1 + .05 - .05w1; 0.10 = 0.07w1; w1 = 1.43($100) = $143; (1 - w1)$100 = -$43.31. The slope of the Capital Allocation Line formed with the risky asset and the risk-freeasset is equal toA) 0.4667.B) 0.8000.C) 2.14.D) 0.41667.E) Cannot be determined.Answer: A Difficulty: ModerateRationale: (0.12 - 0.05)/0.15 = 0.4667.32. Consider a T-bill with a rate of return of 5 percent and the following risky securities:Security A: E(r) = 0.15; Variance = 0.04Security B: E(r) = 0.10; Variance = 0.0225Security C: E(r) = 0.12; Variance = 0.01Security D: E(r) = 0.13; Variance = 0.0625From which set of portfolios, formed with the T-bill and any one of the 4 risky securities, would a risk-averse investor 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 set of portfolios formed with the T-bill and security D.E) Cannot be determined.Answer: C Difficulty: DifficultRationale: Security C has the highest reward-to-volatility ratio.Use the following to answer questions 33-36:You are considering investing $1,000 in a T-bill that pays 0.05 and a risky portfolio, P, constructed with 2 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 0.0081.33. If you want to form a portfolio with an expected rate of return of 0.11, what percentagesof your money must you invest in the T-bill and P, respectively?A) 0.25; 0.75B) 0.19; 0.81C) 0.65; 0.35D) 0.50; 0.50E) cannot be determinedAnswer: B Difficulty: ModerateRationale: E(r p) = 0.6(14%) + 0.4(10%) = 12.4%; 11% = 5x + 12.4(1 - x); x = 0.189(T-bills) (1-x) =0.811 (risky asset).34. If you want to form a portfolio with an expected rate of return of 0.10, what percentagesof 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; 0.30B) 0.19; 0.49; 0.32C) 0.32; 0.41; 0.27D) 0.50; 0.30; 0.20E) cannot be determinedAnswer: C Difficulty: DifficultRationale: E(r p) = .100.10 = 5w + 12.4(1 - w); x = 0.32 (weight of T-bills); Ascomposition of X and Y are .6 and .4 of P, respectively, then for 0.68 weight in P, the respective weights must be 0.41 and 0.27; .6(.68) = 41%; .4(.68) = 27%35. What would be the dollar values of your positions in X and Y, respectively, if youdecide to hold 40% percent of your money in the risky portfolio and 60% in T-bills?A) $240; $360B) $360; $240C) $100; $240D) $240; $160E) Cannot be determinedAnswer: D Difficulty: ModerateRationale: $400(0.6) = $240 in X; $400(0.4) = $160 in Y.36. 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 $1,200?A) Cannot be determinedB) $54; $568; $378C) $568; $54; $378D) $378; $54; $568E) $108; $514; $378Answer: B Difficulty: DifficultRationale: ($1,200 - $1,000)/$1,000 = 12%; (0.6)14% + (0.4)10% = 12.4%; 12% = w5% + 12.4%(1 - w);w=.054; 1-w=.946; w = 0.054($1,000) = $54 (T-bills); 1 - w = 1 -0.054 = 0.946($1,000) = $946; $946 x 0.6 = $568 in X; $946 x 0.4 = $378 in Y.37. A reward-to-volatility ratio is useful in:A) measuring 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 above.Answer: B Difficulty: ModerateRationale: B is the only choice relevant to the reward-to-volatility ratio (risk and return).38. 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 the portfolio proportion of the risk-free asset.E) none of the above.Answer: B Difficulty: DifficultRationale: The linear capital allocation line assumes that the investor may borrow and lend at the same rate (the risk-free rate), which obviously is not true. Relaxing this assumption and incorporating the higher borrowing rates into the model results in the kinked capital allocation line.39. The first major step in asset allocation is:A) assessing risk tolerance.B) analyzing financial statements.C) estimating security betas.D) identifying market anomalies.E) none of the above.Answer: A Difficulty: ModerateRationale: A should be the first consideration in asset allocation. B, C, and D refer to security selection.40. Based on their relative degrees of risk toleranceA) 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) A and C.E) none of the above.Answer: D Difficulty: EasyRationale: By determining levels of risk tolerance, investors can select the optimum portfolio for their own needs; these asset allocations will vary between amounts of risk-free and risky assets based on risk tolerance.41. Asset allocationA) may involve the decision as to the allocation between a risk-free asset and a riskyasset.B) may involve the decision as to the allocation among different risky assets.C) may involve considerable security analysis.D) A and B.E) A and C.Answer: D Difficulty: EasyRationale: A and B are possible steps in asset allocation. C is related to securityselection.42. In the mean-standard deviation graph, the line that connects the risk-free rate and theoptimal risky portfolio, P, is called ______________.A) the Security Market LineB) the Capital Allocation LineC) the Indifference CurveD) the investor's utility lineE) none of the aboveAnswer: B Difficulty: ModerateRationale: The Capital Allocation Line (CAL) illustrates the possible combinations of a risk-free asset and a risky asset available to the investor.43. Treasury bills are commonly viewed as risk-free assets becauseA) 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) Both A and B are true.E) Both B and C are true.Answer: D Difficulty: EasyRationale: Treasury bills do not exactly match most investor's desired holding periods, but because they mature in only a few weeks or months they are relatively free ofinterest rate sensitivity and inflation uncertainty.Use the following to answer questions 44-47: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.44. 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%Answer: A Difficulty: EasyRationale: E(r C) = .8*12.00% + .2*3.6% = 10.32%45. What is the standard deviation of Bo's complete portfolio?A) 7.20%B) 5.40%C) 6.92%D) 4.98%E) 5.76%Answer: E Difficulty: EasyRationale: Std. Dev. of C = .8*7.20% = 5.76%46. What is the equation of Bo's Capital Allocation Line?A) E(r C) = 7.2 + 3.6 * Standard Deviation of CB) E(r C) = 3.6 + 1.167 * Standard Deviation of CC) E(r C) = 3.6 + 12.0 * Standard Deviation of CD) E(r C) = 0.2 + 1.167 * Standard Deviation of CE) E(r C) = 3.6 + 0.857 * Standard Deviation of CAnswer: B Difficulty: ModerateRationale: The intercept is the risk-free rate (3.60%) and the slope is(12.00%-3.60%)/7.20% = 1.167.47. What are the proportions of Stocks A, B, and C, respectively in Bo's complete portfolio?A) 40%, 25%, 35%B) 8%, 5%, 7%C) 32%, 20%, 28%D) 16%, 10%, 14%E) 20%, 12.5%, 17.5%Answer: C Difficulty: ModerateRationale: Proportion in A = .8 * 40% = 32%; proportion in B = .8 * 25% = 20%; proportion in C = .8 * 35% = 28%.48. To build an indifference curve we can first find the utility of a portfolio with 100% inthe risk-free asset, thenA) 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 the portfolio and find the expected return theinvestor would require to maintain the same utility level.E) change the risk-free rate and find the utility level that results in the same standarddeviation.Answer: D Difficulty: DifficultRationale: This references the procedure described on page 207-208 of the text. The authors describe how to trace out indifference curves using a spreadsheet.49. The Capital Market LineI)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 IVB) II, III, and IVC) III and IVD) I, II, and IIIE) I, II, III, and IVAnswer: E Difficulty: ModerateRationale: 'The Capital Market Line is the Capital Allocation Line based on theone-month T-Bill rate and a broad index of common stocks. It applies to an investor pursuing a passive management strategy.50. An investor invests 40 percent of his wealth in a risky asset with an expected rate ofreturn of 0.18 and a variance of 0.10 and 60 percent in a T-bill that pays 4 percent. His portfolio's expected return and standard deviation are __________ and __________,respectively.A) 0.114; 0.112B) 0.087; 0.063C) 0.096; 0.126D) 0.087; 0.144E) none of the aboveAnswer: C Difficulty: ModerateRationale: E(r P) = 0.4(18%) + 0.6(4%) = 9.6%; s P = 0.4(0.10)1/2 = 12.6%.51. An investor invests 70 percent of his wealth in a risky asset with an expected rate ofreturn of 0.11 and a variance of 0.12 and 30 percent in a T-bill that pays 3 percent. His portfolio's expected return and standard deviation are __________ and __________,respectively.A) 0.086; 0.242B) 0.087; 0.267C) 0.295; 0.123D) 0.087; 0.182E) none of the aboveAnswer: A Difficulty: ModerateRationale: E(r P) = 0.7(11%) + 0.3(3%) = 8.6%; s P = 0.7(0.12)1/2 = 24.2%.Use the following to answer questions 52-54: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 0.03.52. What percentages of your money must be invested in the risky asset and the risk-freeasset, 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 determinedAnswer: C Difficulty: ModerateRationale: 8% = w1(11%) + (1 - w1)(3%); 8% = 11%w1 + 3% - 3%w1; 5% = 8%w1; w1 =0.625; 1 - w1 = 0.375; 0.625(11%) + 0.375(3%) = 8.0%.53. What percentages of your money must be invested in the risk-free asset and the riskyasset, 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) Cannot be determined.Answer: C Difficulty: ModerateRationale: 0.08 = x(0.20); x = 40% in risky asset.54. The slope of the Capital Allocation Line formed with the risky asset and the risk-freeasset is equal toA) 0.47B) 0.80C) 2.14D) 0.40E) Cannot be determined.Answer: D Difficulty: Moderate。
投资学第7版Test-Bank答案-04
Multiple Choice Questions1. Which one of the following statements regarding open-end mutual funds isfalse?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 return.D) B and C.E) A and B.Answer: C Difficulty: ModerateRationale: No investment offers a guaranteed rate of return.2. Which one of the following statements regarding closed-end mutual fundsis 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) A and B.E) None of the above.Answer: D Difficulty: ModerateRationale: Closed-end funds are sold at the prevailing market price.3. Which of the following functions do mutual fund companies perform for theirinvestors?A) Record keeping and administrationB) Diversification and divisibilityC) Professional managementD) Lower transaction costsE) All of the above.Answer: E Difficulty: EasyRationale: Mutual funds are attractive to investors because they offer all of the listed services.4. Multiple Mutual Funds had year-end assets of $457,000,000 and liabilitiesof $17,000,000. There were 24,300,000 shares in the fund at year-end.What was Multiple Mutual's Net Asset Value?A) $18.11B) $18.81C) $69.96D) $7.00E) $181.07Answer: A Difficulty: ModerateRationale: (457,000,000 - 17,000,000) / 24,300,000 = $18.115. 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) $28.17B) $25.24C) $19.62D) $26.01E) $21.56Answer: D Difficulty: ModerateRationale: (862,000,000 - 12,000,000) / 32,675,254 = $26.016. Diversified Portfolios had year-end assets of $279,000,000 andliabilities of $43,000,000. If Diversified's NAV was $42.13, how many shares must have been held in the fund?A) 43,000,000B) 6,488,372C) 5,601,709D) 1,182,203E) None of the above.Answer: C Difficulty: ModerateRationale: ($279,000,000 - 43,000,000) / $42.13 = 5,601,708.996.7. 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) 21,619,346,92B) 22,930,546.28C) 24,860,161.59D) 25,693,645.25E) None of the above.Answer: C Difficulty: ModerateRationale: ($825,000,000 - 25,000,000) / $32.18 = 24,860,161.59.8. Most actively managed mutual funds, when compared to a market index suchas 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 marketE) None of the above is a correct statement.Answer: D Difficulty: EasyRationale: Most actively managed mutual funds fail to equal the return earned by index funds, possibly due to higher transactions costs.9. Pools of money invested in a portfolio that is fixed for the life of thefund are calledA) closed-end funds.B) open-end funds.C) unit investment trusts.D) REITS.E) redeemable trust certificates.Answer: C Difficulty: EasyRationale: Unit investment trusts are funds that invest in a portfolio, often fixed-income securities, and hold it to maturity.10. Investors in closed-end funds who wish to liquidate their positions mustA) 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.Answer: A Difficulty: ModerateRationale: Closed-end fund shares are sold on organized exchanges through a broker.11. Closed end funds are frequently issued at a ______ to NAV and subsequentlytrade at a __________ to NAV.A) discount, discountB) discount, premiumC) premium, premiumD) premium, discountE) No consistent relationship has been observed.Answer: D Difficulty: ModerateRationale: Closed-end funds are typically issued at a premium to Net Asset Value and subsequently trade at a discount.12. At issue, offering prices of open-end funds will often beA) less than NAV due to loads and commissions.B) greater than NAV due to loads and commissions.C) less than NAV due to limited demand.D) greater than NAV due to excess demand.E) less than or greater than NAV with no apparent pattern.Answer: B Difficulty: DifficultRationale: Open-end funds are redeemable on demand at NAV so they should never sell for less than NAV. However, loads and commissions can increase the price above NAV.13. Which of the following statements about Real Estate Investment Trusts istrue?A) REITS invest in real estate or loans secured by real estate.B) REITS raise capital by borrowing from banks and issuing mortgages.C) REITS are similar to open-end funds, with shares redeemable at NAV.D) All of the above are true.E) Both A and B are true.Answer: E Difficulty: ModerateRationale: Real Estate Investment Trusts invest in real estate orreal-estate-secured loans. They may raise capital from banks and by issuing mortgages. They are similar to closed-end funds and shares are typically exchange traded.14. In 2004 the proportion of mutual funds specializing in common stocks wasA) 21.7%B) 28.0%C) 54.1%D) 73.4%E) 63.5%Answer: C Difficulty: ModerateRationale: See Table 4.1.15. In 2004 the proportion of mutual funds specializing in bonds wasA) 15.9%B) 28.0%C) 54.1%D) 73.4%E) 63.5%Answer: A Difficulty: ModerateRationale: See Table 4.1.16. In 2004 the proportion of mutual funds specializing in money marketsecurities wasA) 21.7%B) 28.0%C) 54.1%D) 73.4%E) 23.6%Answer: C Difficulty: ModerateRationale: See Table 4.1.17. Management fees and other expenses of mutual funds may includeA) front-end loads.B) back-end loads.C) 12b-1 charges.D) A and B only.E) A, B and C.Answer: E Difficulty: EasyRationale: All of the listed expenses may be included in the cost of owning a mutual fund.18. The Profitability Fund had NAV per share of $17.50 on January 1, 2005.On December 31 of the same year the fund's NAV was $19.47. Incomedistributions 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) 15.54%C) 16.97%D) 21.26%E) 9.83%Answer: D Difficulty: ModerateRationale: R = ($19.47 - 17.50 + .75 + 1.00) / $17.50 = 21.26%19. The Yachtsman Fund had NAV per share of $36.12 on January 1, 2005. OnDecember 31 of the same year the fund's NAV was $39.71. Incomedistributions were $0.64 and the fund had capital gain distributions of $1.13. Without considering taxes and transactions costs, what rate of return did an investor receive on the Yachtsman Fund last year?A) 22.92%B) 17.68%C) 14.39%D) 18.52%E) 14.84%Answer: E Difficulty: ModerateRationale: R = ($39.71 - 36.12 + .64 + 1.13) / $36.12 = 14.84%20. Investors' Choice Fund had NAV per share of $37.25 on January 1, 2005.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) $41.20B) $33.88C) $43.69D) $42.03E) $46.62Answer: A Difficulty: ModerateRationale: .173 = (P - $37.25 + 1.14 + 1.35) / $37.25; P = $41.2021. Which of the following is not an advantage of 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) A, B and C are all advantages of mutual funds.E) Neither A nor B nor C are advantages of mutual funds.Answer: C Difficulty: EasyRationale: A disadvantage of mutual funds is that investment income is passed through for tax purposes and investors may therefore lose the ability to engage in tax management.22. Which of the following would increase the net asset value of a mutual fundshare, assuming all other things remain unchanged?A) an increase in the number of fund shares outstandingB) an increase in the fund's accounts payableC) a change in the fund's managementD) an increase in the value of one of the fund's stocksE) a decrease in the fund's 12b-1 feeAnswer: D Difficulty: Easy23. 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 IVB) I and IIC) I, III, and IVD) I, II, and IIIE) I, II, III, and IVAnswer: C Difficulty: Moderate24. Jargon Rapid Growth is a mutual fund that has traditionally accepted fundsfrom new investors and issued new shares at net asset value. Jeremy Jargon manages the fund himself and has become concerned that its level of assets has become too high for his management abilities. He issues a statement that Jargon will no longer accept funds from new investors, but will continue to accept additional investments from current shareholders.Which of the following is true about Jargon Rapid Growth fund?A) Jargon used to be an open-end fund but has now become a closed-end fund.B) Jargon has always been an open-end fund and will remain an open-endfund.C) Jargon has always been a closed-end fund and will remain a closed-endfund.D) Jargon is an open-end fund but would change to a closed-end fund ifit wouldn't accept additional funds from current investors.E) Jargon is violating SEC policy by refusing to accept new investors.Answer: B Difficulty: Moderate25. As of December 31, 2004, which class of mutual funds had the largest amountof assets invested?A) stock fundsB) bond fundsC) mixed asset classes such as asset allocation fundsD) money market fundsE) global fundsAnswer: A Difficulty: EasyRationale: See Table 4.1.26. Commingled funds areA) amounts invested in equity and fixed-income mutual funds.B) funds that may be purchased at intervals of 3, 6, or 12 month intervalsat the discretion of management.C) amounts invested in domestic and global equities.D) closed-end funds that may be repurchased only once every two years atthe discretion of mutual fund management.E) partnerships of investors that pool their funds, which are then managedfor a fee.Answer: E Difficulty: Easy27. 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 securities as well as stock.IV)Two types of equity funds are income funds and growth funds.A) I and IVB) I, III, and IVC) I, II, and IVD) I, II, and IIIE) I, II, III, and IVAnswer: E Difficulty: Moderate28. The fee that mutual funds use to help pay for advertising and promotionalliterature is called aA) front-end load fee.B) back-end load fee.C) operating expense fee.D) 12b-1 fee.E) structured fee.Answer: D Difficulty: Easy29. Patty O'Furniture purchased 100 shares of Green Isle mutual fund at a netasset 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%Answer: B Difficulty: ModerateRationale: R = ($40-42+2+4.3)/$42 = 10.238%30. Assume that you purchased 200 shares of Super Performing mutual fund ata net asset value of $21 per share. During the year you received dividendincome 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 net asset value of $23 per share. What was your rate of return on this investment?A) 30.24%B) 25.37%C) 27.19%D) 22.44%E) 29.18%Answer: A Difficulty: ModerateRationale: R = ($23-21+1.5+2.85)/$21 = 30.238%31. Assume that you purchased shares of High Flying mutual fund at a net assetvalue of $12.50 per share. During the year you received dividend income distributions 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%Answer: B Difficulty: ModerateRationale: R = ($13.87-12.50+0.78+1.67)/$12.50 = 30.56%32. Assume that you purchased shares of a mutual fund at a net asset valueof $14.50 per share. During the year you received dividend incomedistributions 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) -1.18%Answer: C Difficulty: ModerateRationale: R = ($13.74-14.50+0.27+0.65)/$14.50 = 1.103%33. Assume that you purchased shares of a mutual fund at a net asset valueof $10.00 per share. During the year you received dividend incomedistributions 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 $8.16 per share. What was your rate of return on this investment?A) -18.24%B) -16.1%C) 16.10%D) -17.3%E) 17.3%Answer: D Difficulty: ModerateRationale: R = ($8.16-10.00+0.05+0.06)/$10.00 = -17.3%34. 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) $22.87B) $22.39C) $22.24D) $17.61E) $19.25Answer: B Difficulty: ModerateRationale: (560,000,000 - 26,000,000) / 23,850,000 = $22.38935. A mutual fund had year-end assets of $250,000,000 and liabilities of$4,000,000. There were 3,750,000 shares in the fund at year-end. What was the mutual fund's Net Asset Value?A) $92.53B) $67.39C) $63.24D) $65.60E) $17.46Answer: D Difficulty: ModerateRationale: (250,000,000 - 4,000,000) / 3,750,000 = $65.6036. A mutual fund had year-end assets of $700,000,000 and liabilities 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) $9.63B) $57.71C) $16.42D) $17.87E) $17.26Answer: E Difficulty: ModerateRationale: (700,000,000 - 7,000,000) / 40,150,000 = $17.2637. A mutual fund had year-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) 4,300,000B) 6,488,372C) 8,601,709D) 7,626,515E) None of the above.Answer: D Difficulty: ModerateRationale: ($465,000,000 - 37,000,000) / $56.12 = 7,626,515.38. 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) 17,534,456B) 16,488,372C) 18,601,742D) 17,542,515E) None of the above.Answer: A Difficulty: ModerateRationale: ($521,000,000 - 63,000,000) / $26.12 = 17,534,456.39. A mutual fund had year-end assets of $327,000,000 and liabilities of$46,000,000. If the fund NAV was $30.48, how many shares must have been held in the fund?A) 11,354,751B) 8,412,642C) 10,165,476D) 9,165,414E) 9,219,160Answer: E Difficulty: ModerateRationale: ($327,000,000 - 46,000,000) / $30.48 = 9,219,160.40. A mutual fund had NAV per share of $19.00 on January 1, 2005. On December31 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%Answer: E Difficulty: ModerateRationale: R = ($19.14 - 19.00 + .57 + 1.12) / $19.00 = 9.63%41. A mutual fund had NAV per share of $26.25 on January 1, 2005. On December31 of the same year the fund's rate of return for the year was 16.4%. Incomedistributions 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) $27.44B) $33.88C) $24.69D) $42.03E) $16.62Answer: A Difficulty: ModerateRationale: .164 = (P - $26.25 + 1.27 + 1.85) / $26.25; P = $27.43542. A mutual fund had NAV per share of $16.75 on January 1, 2005. On December31 of the same year the fund's rate of return for the year was 26.6%. Incomedistributions were $1.79 and the fund had capital gain distributions of $2.80. Without considering taxes and transactions costs, what ending NAV would you calculate?A) $17.44B) $13.28C) $14.96D) $17.25E) $16.62Answer: E Difficulty: ModerateRationale: .266 = (P - $16.75 + 1.79 + 2.80) / $16.75; P = $16.61543. A mutual fund had NAV per share of $36.15 on January 1, 2005. On December31 of the same year the fund's rate of return for the year was 14.0%. Incomedistributions were $1.16 and the fund had capital gain distributions of $2.12. Without considering taxes and transactions costs, what ending NAV would you calculate?A) $37.93B) $34.52C) $44.69D) $47.25E) $36.28Answer: A Difficulty: ModerateRationale: .14 = (P - $36.15 + 1.16 + 2.12) / $36.15; P = $37.93144. Differences between hedge funds and mutual funds are thatA) hedge funds are only subject to minimal SEC regulation.B) hedge funds are typically open only to wealthy or institutionalinvestors.C) hedge funds managers can pursue strategies not available to mutualfunds such as short selling, heavy use of derivatives, and leverage.D) hedge funds attempt to exploit temporary misalignments in securityvaluations.E) all of the aboveAnswer: E Difficulty: Moderate45. Of the following types of mutual funds, an investor that wishes to investin a diversified portfolio of stocks worldwide (including the U.S.) should chooseA) international funds.B) global funds.C) regional funds.D) emerging market funds.E) none of the above.Answer: B Difficulty: Moderate46. Of the following types of mutual funds, an investor that wishes to investin a diversified portfolio of foreign stocks (excluding the U.S.) should chooseA) International fundsB) Global fundsC) Regional fundsD) Emerging market fundsE) None of the aboveAnswer: A Difficulty: Moderate47. Of the following types of EFTs, an investor that wishes to invest in adiversified portfolio that tracks the S&P 500 should chooseA) SPY.B) DIA.C) QQQ.D) IWM.E) VTI.Answer: A Difficulty: Moderate48. Of the following types of EFTs, an investor that wishes to invest in adiversified portfolio that tracks the Dow Jones Industrials should chooseA) SPY.B) DIA.C) QQQ.D) IWM.E) VTI.Answer: B Difficulty: Moderate49. Of the following types of EFTs, an investor that wishes to invest in adiversified portfolio that tracks the Nasdaq 100 should chooseA) SPY.B) DIA.C) QQQ.D) IWM.E) VTI.Answer: C Difficulty: Moderate50. Of the following types of EFTs, an investor that wishes to invest in adiversified portfolio that tracks the Russell 2000 should chooseA) SPY.B) DIA.C) QQQ.D) IWM.E) VTI.Answer: D Difficulty: Moderate51. Of the following types of EFTs, an investor that wishes to invest in adiversified portfolio that tracks the Wilshire 5000 should chooseA) SPY.B) DIA.C) QQQ.D) IWM.E) VTI.Answer: E Difficulty: Moderate52. A mutual funds had average daily assets of $3.0 billion in 2005. The fundsold $600 million worth of stock and purchased $700 million worth of stock during the year. The funds turnover ratio is ___.A) 27.5%B) 12%C) 15%D) 25%E) 20%Answer: E Difficulty: ModerateRationale: 600,000,000 / 3,000,000,000 = 20%53. A mutual funds had average daily assets of $2.0 billion on 2005. The fundsold $500 million worth of stock and purchased $600 million worth of stock during the year. The funds turnover ratio is ___.A) 27.5%B) 12%C) 15%D) 25%E) 20%Answer: D Difficulty: ModerateRationale: 500,000,000 / 2,000,000,000 = 25%54. A mutual funds had average daily assets of $4.0 billion on 2005. The fundsold $1.5 billion worth of stock and purchased $1.6 billion worth of stock during the year. The funds turnover ratio is ____________.A) 37.5%B) 22%C) 15%D) 45%E) 20%Answer: A Difficulty: ModerateRationale: 1,500,000,000 / 4,000,000,000 = 37.5%55. You purchased shares of a mutual fund at a price of $20 per share at thebeginning of the year and paid a front-end load of 5.75%. If the securities in which the find invested increased in value by 11% during the year, and the funds expense ratio was 1.25%, your return if you sold the fund at the end of the year would be ____________.A) 4.33B) 3.44C) 2.45D) 6.87E) None of the aboveAnswer: B Difficulty: DifficultRationale: {[$20 * .9425*(1.11-.0125)]-$20} / $20 = 3.44%56. You purchased shares of a mutual fund at a price of $12 per share at thebeginning 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 funds expense ratio was 1.5%, your return if you sold the fund at the end of the year would be ____________.A) 4.75B) 3.54C) 2.65D) 2.39E) None of the aboveAnswer: D Difficulty: DifficultRationale: {[$12 * .9525*(1.09-.015)]-$12} / $12 = 2.39%57. You purchased shares of a mutual fund at a price of $17 per share at thebeginning of the year and paid a front-end load of 5.0%. If the securities in which the find invested increased in value by 12% during the year, and the funds expense ratio was 1.0%, your return if you sold the fund at the end of the year would be ____________.A) 4.75B) 5.45C) 5.65D) 4.39E) None of the aboveAnswer: B Difficulty: DifficultRationale: {[$17 * .95*(1.12-.01)]-$17} / $17 = 5.45%Essay Questions58. List and describe the more important types of mutual funds according totheir investment policy and use.Difficulty: ModerateAnswer:Some of the more important fund types, classified by investment policy, are:Money Market Funds - These funds invest in money market securities. They usually offer check-writing features and NAV is fixed at $1 per share, so that there are no tax implications associated with redemption of shares.They provide low risk, relatively low return and high liquidity.Equity Funds - These funds invest primarily in stock, although they may hold other types of securities at the manager's discretion. They may also hold some money market securities to provide liquidity for shareredemption. Typical objectives are capital gain, growth, growth andincome, income, and income and security.Bond Funds - These funds specialize in fixed-income securities such as corporate bonds, Treasury bonds, mortgage-backed securities or municipal bonds. These funds may specialize by maturity or credit risk as well.Balanced Funds - These funds may substitute for an investor's entireportfolio. They hold a mix of fixed-income and equity securities. Income funds try to maintain safety of principal but achieve liberal current income, while balanced funds seek to minimize risk.Asset Allocation Funds- These funds also hold both stocks and bonds, but vary the proportions in accord with the portfolio manager's forecast of the relative performance of each sector. These funds are engaged in market timing and are therefore higher risk.Index Funds - These funds try to match the performance of a broad market index. They buy shares in securities included in a particular index in proportion to the security's representation in that index. Index funds are a low-cost way for small investors to pursue a passive investment strategy.Specialized Sector Funds - These funds concentrate on a particularindustry or industries. Held alone, they are not well diversified and may be higher risk.The question is designed to test the student's knowledge of the various types of funds available and their suitability for different needs.59. Discuss the taxation of mutual fund income.Difficulty: DifficultAnswer:Investment returns of mutual funds are granted "pass-through status" under the U.S. tax code, meaning that taxes are paid only by the investor in the mutual fund, not by the fund itself. The income is treated as passed through to the investor as long as all income is distributed toshareholders.Investors will pay taxes at the appropriate rate depending on the type of income. One drawback is that investors cannot time the sale ofsecurities for maximum tax advantage, unless the funds are held intax-deferred retirement accounts.The purpose of the question is to determine whether students understand the tax differences of owning mutual funds as compared to individualinvestments.60. What is an Exchange-traded fund? Give two examples of specific ETFs. Whatare some advantages they have over ordinary open-end mutual funds? What are some disadvantages?Difficulty: DifficultAnswer:ETFs allow investors to trade index portfolios. Some examples are spiders (SPDR), which track the S&P500 index, diamonds (DIA), which track the Dow Jones Industrial Average, and qubes (QQQ), which track the NASDAQ 100 index.Other examples are listed in Table 4-3. (It is anticipated that there may soon be ETFs that track actively managed funds as well ad the current ones that track indexes.)Advantages -1.ETFs may be bought and sold during the trading day at prices that reflectthe current value of the underlying index. This is different fromordinary open-end mutual funds, which are bought or sold only at theend of the day NAV.2.ETFs can be sold short.3.ETFs can be purchased on margin.4.ETFs may have tax advantages. Managers are not forced to sellsecurities from a portfolio to meet redemption demands, as they would be with open-end funds. Small investors simply sell their ETF shares to other traders without affecting the composition of the underlying portfolio. Institutional investors who want to sell their shares receive shares of stock in the underlying portfolio.5.ETFs may be cheaper to buy than mutual funds because they are purchasedfrom brokers. The fund doesn't have to incur the costs of marketing itself, so the investor incurs lower management fees.。
投资学第7版Test Bank答案03
Multiple Choice Questions1. A purchase of a new issue of stock takes placeA) in the secondary market.B) in the primary market.C) usually with the assistance of an investment banker.D) A and B.E) B and C.Answer: E Difficulty: EasyRationale: Funds from the sale of new issues flow to the issuing corporation,making this a primary market transaction. Investment bankers usually assist by pricing the issue and finding buyers.2. 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 stand ready to trade at quoted bid and ask prices.D) Specialists cannot trade in their own accounts.E) A, B, and C are all true.Answer: E Difficulty: ModerateRationale: The specialists' functions are all of the items listed in A, B, andC. In addition, specialists trade in their own accounts.3. Investment bankersA) act as intermediaries between issuers of stocks and investors.B) act as advisors to companies in helping them analyze their financialneeds and find buyers for newly issued securities.C) accept deposits from savers and lend them out to companies.D) A and B.E) A, B, and C.Answer: D Difficulty: ModerateRationale: The role of the investment banker is to assist the firm in issuing new securities, both in advisory and marketing capacities. Theinvestment banker does not have a role comparable to a commercial bank, as indicated in C.4. In a "firm commitment"A) the investment banker buys the stock from the company and resellsthe issue to the public.B) the investment banker agrees to help the firm sell the stock at afavorable price.C) the investment banker finds the best marketing arrangement for theinvestment banking firm.D) B and C.E) A and B.Answer: A Difficulty: Moderate5. The secondary market consists ofA) transactions on the AMEX.B) transactions in the OTC market.C) transactions through the investment banker.D) A and B.E) A, B, and C.Answer: D Difficulty: ModerateRationale: The secondary market consists of transactions on theorganized exchanges and in the OTC market. The investment banker isinvolved in the placement of new issues in the primary market.6. The use of the Internet to trade and underwrite securitiesA) is illegal under SEC regulations.B) is regulated by the New York Stock Exchange.C) decreases underwriting costs for a new security issue.D) increases underwriting costs for a new security issue.E) is regulated by the National Association of Securities Dealers.Answer: C Difficulty: ModerateRationale: The SEC permits trading and underwriting of securities over the Internet, but has required firms participating in this activity to take steps to safeguard investment funds. This form of underwriting isexpected to grow quickly due to its lower cost.7. Initial margin requirements are determined byA) the Securities and Exchange Commission.B) the Federal Reserve System.C) the New York Stock Exchange.D) B and C.E) A and BAnswer: B Difficulty: ModerateRationale: The Board of Governors of the Federal Reserve Systemdetermines initial margin requirements. The New York Stock Exchange determines maintenance margin requirements on NYSE-listed stocks;however, brokers usually set maintenance margin requirements above those established by the NYSE.8. You purchased XYZ stock at $50 per share. The stock is currently sellingat $65. Your gains may be protected by placing a __________A) stop-buy orderB) limit-buy orderC) market orderD) limit-sell orderE) none of the above.Answer: D Difficulty: ModerateRationale: With a limit-sell order, your stock will be sold only at aspecified price, or better. Thus, such an order would protect your gains.None of the other orders are applicable to this situation.9. You sold ABC stock short at $80 per share. Your losses could beminimized by placing a __________:A) limit-sell orderB) limit-buy orderC) stop-buy orderD) day-orderE) none of the above.Answer: C Difficulty: ModerateRationale: With a stop-buy order, the stock would be purchased if the price increased to a specified level, thus limiting your loss. None of the other orders are applicable to this situation.10. 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 atthe prevailing market price.B) A limit sell order is where investors specify prices at which they arewilling to sell a security.C) If stock ABC is selling at $50, a limit-buy order may instruct the brokerto buy the stock if and when the share price falls below $45.D) A day order expires at the close of the trading day.E) None of the above.Answer: E Difficulty: ModerateRationale: All of the order descriptions above are correct.11. Restrictions on trading involving insider information apply to thefollowing exceptA) corporate officers and directors.B) relatives of corporate directors and officers.C) major stockholders.D) All of the above are subject to insider trading restrictions.E) None of the above is subject to insider trading restrictions.Answer: D Difficulty: ModerateRationale: A, B, and C are corporate insiders and are subject torestrictions on trading on inside information. Further, the Supreme Court held that traders may not trade on nonpublic information even if they are not insiders.12. The cost of buying and selling a stock consists of __________.A) broker's commissionsB) dealer's bid-asked spreadC) a price concession an investor may be forced to make.D) A and B.E) A, B, and C.Answer: E Difficulty: ModerateRationale: All of the above are possible costs of buying and selling a stock.13. Assume you purchased 200 shares of XYZ common stock on margin at$70 per share from your broker. If the initial margin is 55%, how much did you borrow from the broker?A) $6,000B) $4,000C) $7,700D) $7,000E) $6,300Answer: E Difficulty: ModerateRationale: 200 shares * $70/share * = $14,000 * = $6,300.14. You sold short 200 shares of common stock at $60 per share. The initialmargin is 60%. Your initial investment wasA) $4,800.B) $12,000.C) $5,600.D) $7,200.E) none of the above.Answer: D Difficulty: ModerateRationale: 200 shares * $60/share * = $12,000 * = $7,20015. You purchased 100 shares of ABC common stock on margin at $70 pershare. 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) $21B) $50C) $49D) $80E) none of the aboveAnswer: B Difficulty: DifficultRationale: 100 shares * $70 * .5 = $7,000 * = $3,500 (loan amount); = (100P - $3,500)/100P; 30P = 100P - $3,500; -70P = -$3,500; P = $50.16. 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)B)C)D)E)Answer: E Difficulty: DifficultRationale: 100 shares * $45/share * = $4,500 * = $2,250 (loan amount); X = [100($30) - $2,250]/100($30); X = .17. 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? Ignoreinterest on margin.A) 25%B) -33%C) 44%D) -42%E) –54%Answer: D Difficulty: DifficultRationale: 300($60) = $10,800 investment; 300($60) = $18,000 X =$7,200 loan; Proceeds after selling stock and repaying loan: $13,500 -$7,200 = $6,300; Return = ($6,300 - $10,800)/$10,800 = - %.18. Assume you sell short 100 shares of common stock at $45 per share, withinitial margin at 50%. What would be your rate of return if yourepurchase the stock at $40/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%B) 25%C) 22%D) 77%E) none of the aboveAnswer: C Difficulty: ModerateRationale: Profit on stock = ($45 - $40) * 100 = $500, $500/$2,250 (initial investment) = %.19. You sold short 300 shares of common stock at $55 per share. The initialmargin is 60%. At what stock price would you receive a margin call if the maintenance margin is 35%?A) $51B) $65C) $35D) $40E) none of the aboveAnswer: B Difficulty: DifficultRationale: Equity = 300($55) * = $26,400; = ($26,400 - 300P)/300P; 105P = 26,400 - 300P; 405P = 26,400; P = $20. Assume you sold short 100 shares of common stock at $50 per share.The initial margin is 60%. What would be the maintenance margin if a margin call is made at a stock price of $60?A) 40%B) 33%C) 35%D) 25%E) none of the aboveAnswer: B Difficulty: DifficultRationale: $5,000 X = $8,000; [$8,000 - 100($60)]/100($60) = 33%.21. Specialists on stock exchanges perform the following functionsA) Act as dealers in their own accounts.B) Analyze the securities in which they specialize.C) Provide liquidity to the market.D) A and B.E) A and C.Answer: E Difficulty: ModerateRationale: Specialists are both brokers and dealers and provide liquidity to the market; they are not analysts.22. Shares for short transactionsA) 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) B and C.E) none of the above.Answer: B Difficulty: ModerateRationale: Typically, the only source of shares for short transactions is those held by the short seller's broker in street name; often these aremargined shares.23. Which of the following orders is most useful to short sellers who want tolimit their potential losses?A) Limit orderB) Discretionary orderC) Limit-loss orderD) Stop-buy orderE) None of the aboveAnswer: D Difficulty: ModerateRationale: By issuing a stop-buy order, the short seller can limit potentiallosses by assuring that the stock will be purchased (and the short position closed) if the price increases to a certain level.24. Shelf registrationA) is a way of placing issues in the primary market.B) allows firms to register securities for sale over a two-year period.C) increases transaction costs to the issuing firm.D) A and B.E) A and C.Answer: D Difficulty: EasyRationale: Shelf registration lowers transactions costs to the firm as the firm may register issues for a longer period than in the past, and thusrequires the services of the investment banker less frequently.25. NASDAQ subscriber levelsA) permit those with the highest level, 3, to "make a market" in thesecurity.B) permit those with a level 2 subscription to receive all bid and askquotes, but not to enter their own quotes.C) permit level 1 subscribers to receive general information about prices.D) include all OTC stocks.E) A, B, and C.Answer: E Difficulty: EasyRationale: NASDAQ links dealers in a loosely organized network withdifferent levels of access to meet different needs.26. You want to buy 100 shares of Hotstock Inc. at the best possible price asquickly as possible. You would most likely place aA) stop-loss orderB) stop-buy orderC) market orderD) limit-sell orderE) limit-buy orderAnswer: C Difficulty: EasyRationale: A market order is for immediate execution at the best possible price.27. You want to purchase XYZ stock at $60 from your broker using as little ofyour own money as possible. If initial margin is 50% and you have $3000 to invest, how many shares can you buy?A) 100 sharesB) 200 sharesC) 50 sharesD) 500 sharesE) 25 sharesAnswer: A Difficulty: ModerateRationale: .5 = [(Q * $60)-$3,000] / (Q * $60); $30Q = $60Q-$3,000; $30Q = $3,000; Q=100.28. A sale by IBM of new stock to the public would be a(n)A) short sale.B) seasoned new issue offering.C) private placement.D) secondary market transaction.E) initial public offering.Answer: B Difficulty: EasyRationale: When a firm whose stock already trades in the secondarymarket issues new shares to the public this is referred to as a seasoned new issue.29. The finalized registration statement for new securities approved by theSEC is calledA) a red herringB) the preliminary statementC) the prospectusD) a best-efforts agreementE) a firm commitmentAnswer: C Difficulty: ModerateRationale: The prospectus is the finalized registration statementapproved by the SEC.30. The minimum market value required for an initial listing on the New YorkStock Exchange isA) $2,000,000B) $2,500,000C) $1,100,000D) $60,000,000E) 100,000,000Answer: E Difficulty: ModerateRationale: See Table .31. In 2005, the price of a seat on the NYSE reached a high ofA) $1,000,000B) $4,000,000C) $1,750,000D) $2,225,000E) $3,000,000Answer: B Difficulty: ModerateRationale: See Table .32. The floor broker is best described asA) an independent member of the exchange who owns a seat andhandles overload work for commission brokers.B) someone who makes a market in one or more securities.C) a representative of a brokerage firm who is on the floor of theexchange to execute trade.D) a frequent trader who performs no public function but executestrades for himself.E) any counter party to a trade executed on the floor of the exchange.Answer: A Difficulty: EasyRationale: The floor broker is an independent member of the exchange who handles work for commission brokers when they have too manyorders to handle.33. You sell short 100 shares of Loser Co. at a market price of $45 per share.Your maximum possible loss isA) $4500B) unlimitedC) zeroD) $9000E) cannot tell from the information givenAnswer: B Difficulty: ModerateRationale: A short seller loses money when the stock price rises. Since there is no upper limit on the stock price, the maximum theoretical loss is unlimited.34. You buy 300 shares of Qualitycorp for $30 per share and deposit initialmargin 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%Answer: B Difficulty: ModerateRationale: AM = [300 ($25) - .5 (300) ($30) ] / [300 ($25)] = .4035. When a firm markets new securities, a preliminary registration statementmust be filed withA) the exchange on which the security will be listed.B) the Securities and Exchange Commission.C) the Federal Reserve.D) all other companies in the same line of business.E) the Federal Deposit Insurance Corporation.Answer: B Difficulty: EasyRationale: The SEC requires the registration statement and must approve it before the issue can take place.36. In a typical underwriting arrangement the investment banking firmI)sells shares to the public via an underwriting syndicate.II)purchases the securities from the issuing company.III)assumes the full risk that the shares may not be sold at the offering price.IV)agrees to help the firm sell the issue to the public but does not actually purchase the securities.A) I, II, and IIIB) I, III, and IVC) I and IVD) II and IIIE) I and IIAnswer: A Difficulty: ModerateRationale: A typical underwriting arrangement is made on a firmcommitment basis.37. Which of the following is true regarding private placements of primarysecurity offerings?A) Extensive and costly registration statements are required by the SEC.B) For very large issues, they are better suited than public offerings.C) They trade in secondary markets.D) The shares are sold directly to a small group of institutional or wealthyinvestors.E) They have greater liquidity than public offerings.Answer: D Difficulty: ModerateRationale: Firms can save on registration costs, but the result is that the securities cannot trade in the secondary markets and therefore are less liquid. Public offerings are better suited for very large issues.38. A specialist on the AMEX Stock Exchange is offering to buy a security for$. A broker in Oklahoma City wants to sell the security for his client. The Intermarket Trading System shows a bid price of $ on the NYSE. What should the broker do?A) Route the order to the AMEX Stock Exchange.B) Route the order to the NYSE.C) Call the client to see if she has a preference.D) Route half of the order to AMEX and the other half to the NYSE.E) It doesn't matter - he should flip a coin and go with it.Answer: A Difficulty: ModerateRationale: The broker should try to obtain the best price for his client.Since the client wants to sell shares and the bid price is higher on theAMEX, he should route the order there.39. You sold short 100 shares of common stock at $45 per share. The initialmargin is 50%. Your initial investment wasA) $4,800.B) $12,000.C) $2,250.D) $7,200.E) none of the above.Answer: C Difficulty: ModerateRationale: 100 shares * $45/share * = $4,500 * = $2,25040. You sold short 150 shares of common stock at $27 per share. The initialmargin is 45%. Your initial investment wasA) $4,.B) $12,.C) $2,.D) $1,.E) none of the above.Answer: D Difficulty: ModerateRationale: 150 shares * $27/share * = $4,050 * = $1,41. You purchased 100 shares of XON common stock on margin at $60 pershare. 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) $B) $C) $D) $E) none of the aboveAnswer: A Difficulty: DifficultRationale: 100 shares * $60 * .5 = $6,000 * = $3,000 (loan amount); = (100P - $3,000)/100P; 30P = 100P - $3,000; -70P = -$3,000; P = $42. You purchased 1000 shares of CSCO common stock on margin at $19 pershare. 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 marginA) $B) $C) $D) $E) none of the aboveAnswer: D Difficulty: DifficultRationale: 1000 shares * $19 * .5 = $19,000 * = $9,500 (loan amount); = (1000P - $9,500)/1000P; 300P = 1000P - $9,500; -700P = -$9,500; P = $ 43. You purchased 100 shares of common stock on margin 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)B)C)D)E)Answer: C Difficulty: DifficultRationale: 100 shares * $40/share * = $4,000 * = $2,000 (loan amount); X = [100($25) - $2,000]/100($25); X = .44. You purchased 1000 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? Ignore interest on margin.A)B)C)D)E)Answer: B Difficulty: DifficultRationale: 1000 shares * $30/share * = $30,000 * = $15,000 (loanamount); X = [1000($24) - $15,000]/1000($24); X = .45. 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? Ignoreinterest on margin.A) 28%B) 33%C) 14%D) 42%E) 24%Answer: E Difficulty: DifficultRationale: 100($50) = $2,500 investment; gain on stock sale =(56-50)(100) = $600; Return = ($600/$2,500) = 24%.46. You purchased 100 shares of common stock on margin for $35 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 $42 per share? Ignoreinterest on margin.A) 28%B) 33%C) 14%D) 40%E) 24%Answer: D Difficulty: DifficultRationale: 100($35) = $1,750 investment; gain on stock sale =(42-35)(100) = $700; Return = ($700/$1,750) = 40%.47. Assume you sell short 1000 shares of common stock at $35 per share,with initial margin at 50%. What would be your rate of return if yourepurchase the stock at $25/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) %B) %C) %D) %E) none of the aboveAnswer: C Difficulty: ModerateRationale: Profit on stock = ($35 - $25)(1,000) = $10,000; initialinvestment = ($35)(1,000)(.5) = $17,500; return =$10,000/$17,500 = %.48. Assume you sell short 100 shares of common stock at $30 per share, withinitial margin at 50%. What would be your rate of return if yourepurchase the stock at $35/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) %B) %C) %D) %E) none of the aboveAnswer: A Difficulty: ModerateRationale: Profit on stock = ($30 - $35)(100) = -500; initial investment = ($30)(100)(.5) = $1,500; return =$-500/$1,500 = %.49. You want to purchase GM stock at $40 from your broker using as little ofyour own money as possible. If initial margin is 50% and you have $4000 to invest, how many shares can you buy?A) 100 sharesB) 200 sharesC) 50 sharesD) 500 sharesE) 25 sharesAnswer: B Difficulty: ModerateRationale: you can buy ($4000/$40) = 100 shares outright and you can borrow $4,000 to buy another 100 shares.50. You want to purchase IBM stock at $80 from your broker using as little ofyour own money as possible. If initial margin is 50% and you have $2000 to invest, how many shares can you buy?A) 100 sharesB) 200 sharesC) 50 sharesD) 500 sharesE) 25 sharesAnswer: C Difficulty: ModerateRationale: You can buy ($2000/$80) = 25 shares outright and you canborrow $2,000 to buy another 25 shares.51. 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 price of $50?A) 40%B) 20%C) 35%D) 25%E) none of the aboveAnswer: B Difficulty: DifficultRationale: $4,000 X = $6,000; [$6,000 - 100($50)]/100($50) = 20%. 52. 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) %B) %C) %D) %E) none of the aboveAnswer: D Difficulty: DifficultRationale: $7,000 X = $10,500; [$10,500 - 100($85)]/100($85) = %.53. You sold short 100 shares of common stock at $45 per share. The initialmargin is 50%. At what stock price would you receive a margin call if the maintenance margin is 35%?A) $50B) $65C) $35D) $40E) none of the aboveAnswer: A Difficulty: DifficultRationale: Equity = 100($45) * = $6,750; = ($6,750 - 100P)/100P; 35P = 6,750 - 100P; 135P = 6,750; P = $54. You sold short 100 shares of common stock at $75 per share. The initialmargin is 50%. At what stock price would you receive a margin call if the maintenance margin is 30%?A) $B) $C) $D) $E) none of the aboveAnswer: C Difficulty: DifficultRationale: Equity = 100($75) * = $11,250; = ($11,250 - 100P)/100P; 30P = 11,250 - 100P; 130P = 11,250; P = $55. IPO average first-day returns are largest in ____________.A) The United StatesB) DenmarkC) JapanD) ChinaE) FranceAnswer: D Difficulty: EasyRationale: See Figure .56. Despite large first-day IPO returns, average first-year returns in the USare approximately ____________ percent.A)B)C)D)E)Answer: A Difficulty: EasyRationale: See Figure .57. Average second-year IPO returns in the US are approximately ____________percent.A)B)C)D)E)Answer: D Difficulty: EasyRationale: See Figure .58. Average third-year IPO returns in the US are approximately ____________percent.A)B)C)D)E)Answer: E Difficulty: EasyRationale: See Figure .59. The advertisement by the underwriting syndicate to announce an newsecurity issue is referred to as the ____________.A) red herringB) preliminary prospectusC) prospectusD) tombstoneE) headstoneAnswer: D Difficulty: Easy60. The preliminary prospectus is referred to as a ____________.A) red herringB) indentureC) green mailD) tombstoneE) headstoneAnswer: A Difficulty: Easy61. The minimum revenue required for an initial listing on the New YorkStock Exchange isA) $2,000,000B) $25,000,000C) $50,000,000D) $75,000,000E) 100,000,000Answer: D Difficulty: ModerateRationale: See Table .62. The annual dollar volume of trading on the NYSE in 2004 wasapproximately ____________ dollars.A) 12 trillionB) 4 trillionC) 12 billionD) 4 billionE) none of the aboveAnswer: A Difficulty: EasyRationale: See Figure .63. The ____________ had the largest trading volume of securities in 2004.A) NASDAQB) NYSEC) LondonD) TokyoE) Hong KongAnswer: B Difficulty: EasyRationale: See Figure .64. The securities act of 1933 ____________.I)requires full disclosure of relevant information relating to the issueof new securitiesII)requires registration of new securitiesIII)requires issuance of a prospectus detailing financial prospects of the firmIV)established the SECV)requires periodic disclosure of relevant financial informationVI)empowers SEC to regulate exchanges, OTC trading, brokers, and dealersA) I, II and IIIB) I, II, III, IV, V, and VIC) I, II and VD) I, II and IVE) IV onlyAnswer: A Difficulty: Easy65. The securities act of 1934 ____________.I)requires full disclosure of relevant information relating to the issueofnew securitiesII)requires registration of new securitiesIII)requires issuance of a prospectus detailing financial prospects of the firmIV)established the SECV)requires periodic disclosure of relevant financial informationVI)empowers SEC to regulate exchanges, OTC trading, brokers, and dealersA) I, II and IIIB) I, II, III, IV, V, and VIC) I, II and VD) I, II and IVE) IV, V, and VIAnswer: E Difficulty: Easy66. Which of the following is not required under the CFA Institute standardsof professional conduct?A) knowledge of all applicable laws, rules and regulationsB) disclosure of all personal investments whether or not they mayconflict with a client's investmentsC) disclosure of all conflicts to clients and prospectsD) reasonable inquiry into a client's financial situationE) All of the above are required under the CFA Institute standards.Answer: B Difficulty: ModerateRationale: See text box page 87. Personal investments need not bedisclosed unless they are in potential or actual conflict.67. According to the CFA Institute Standards of Professional Conduct, CFAInstitute members have responsibilities to all of the following except:A) the governmentB) the professionC) the publicD) the employerE) clients and prospective clientsAnswer: A Difficulty: Moderate。
投资学第7版testbank答案05
Multiple Choice Questions1. Over the past year you earned a nominal rate of interest of 10 percenton your money. The inflation rate was 5 percent over the same period.The exact actual growth rate of your purchasing power wasA) %.B) %.C) %.D) %.E) %Answer: D Difficulty: ModerateRationale: r = (1+R) / (1+I) - 1; % / % - 1 = %.2. A year ago, you invested $1,000 in a savings account that pays an annualinterest rate of 7%. What is your approximate annual real rate of return if the rate of inflation was 3% over the yearA) 4%.B) 10%.C) 7%.D) 3%.E) none of the above.Answer: A Difficulty: EasyRationale: 7% - 3% = 4%.3. If the annual real rate of interest is 5% and the expected inflation rateis 4%, the nominal rate of interest would be approximatelyA) 1%.B) 9%.C) 20%.D) 15%.E) none of the above.Answer: B Difficulty: EasyRationale: 5% + 4% = 9%.4. You purchased a share of stock for $20. One year later you received $1as dividend and sold the share for $29. What was your holding period returnA) 45%B) 50%C) 5%D) 40%E) none of the aboveAnswer: B Difficulty: ModerateRationale: ($1 + $29 - $20)/$20 = , or 50%.5. Which of the following determine(s) the level of real interest ratesI)the supply of savings by households and business firmsII)the demand for investment fundsIII)the government's net supply and/or demand for fundsA) I onlyB) II onlyC) I and II onlyD) I, II, and IIIE) none of the aboveAnswer: D Difficulty: ModerateRationale: The value of savings by households is the major supply of funds;the demand for investment funds is a portion of the total demand for funds;the government's position can be one of either net supplier, or netdemander of funds. The above factors constitute the total supply and demand for funds, which determine real interest rates.6. Which of the following statement(s) is (are) trueI)The real rate of interest is determined by the supply and demand forfunds.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 rate of interest is equal to the nominal interest rate plus the expected rate of inflation.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 onlyAnswer: B Difficulty: ModerateRationale: The expected rate of inflation is a determinant of nominal, not real, interest rates. Real rates are determined by the supply and demand for funds, which can be affected by the Fed.7. Which of the following statements is trueA) Inflation has no effect on the nominal rate of interest.B) The realized nominal rate of interest is always greater than the realrate of interest.C) Certificates of deposit offer a guaranteed real rate of interest.D) None of the above is true.E) A, B and CAnswer: D Difficulty: ModerateRationale: Expected inflation rates are a determinant of nominal interest rates. The realized nominal rate of interest would be negative if the difference between actual and anticipated inflation rates exceeded the real rate. The realized nominal rate of interest would be less than the real rate if the unexpected inflation were greater than the real rate of interest. Certificates of deposit contain a real rate based on an estimate of inflation that is not guaranteed.8. Other things equal, an increase in the government budget deficitA) drives the interest rate down.B) drives the interest rate up.C) might not have any effect on interest rates.D) increases business prospects.E) none of the above.Answer: B Difficulty: ModerateRationale: An increase in the government budget deficit, other things equal, causes the government to increase its borrowing, which increases the demand for funds and drives interest rates up.9. Ceteris paribus, a decrease in the demand for loanable fundsA) drives the interest rate down.B) drives the interest rate up.C) might not have any effect on interest rate.D) results from an increase in business prospects and a decrease in thelevel of savings.E) none of the above.Answer: A Difficulty: ModerateRationale: A decrease in demand, ceteris paribus, always drives interest rates down. An increase in business prospects would increase the demand for funds. The savings level affects the supply of, not the demand for, funds.10. The holding period return (HPR) on a share of stock is equal toA) 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) the change in stock price.Answer: B Difficulty: ModerateRationale: The HPR of any investment is the sum of the capital gain and the cash flow over the period, which for common stock is B.11. Historical records regarding return on stocks, Treasury bonds, andTreasury bills between 1926 and 2005 show thatA) 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.Answer: A Difficulty: ModerateRationale: The historical data show that, as expected, stocks offer a greater return and greater volatility than the other investmentalternatives. Inflation sometimes exceeded the T-bill return.12. If the interest rate paid by borrowers and the interest rate received bysavers accurately reflects 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 or lose.E) both borrowers and savers gain.Answer: D Difficulty: ModerateRationale: If the described interest rate accurately reflects the rate of inflation, both borrowers and lenders are paying and receiving,respectively, the real rate of interest; thus, neither group gains.Use the following to answer questions 13-15:You have been given this probability distribution for the holding period return for KMP stock:13. What is the expected holding period return for KMP stockA) %B) %C) %D) %E) %Answer: A Difficulty: ModerateRationale: HPR = .30 (18%) + .50 (12%) + .20 (-5%) = %14. What is the expected standard deviation for KMP stockA) %B) %C) %D) %E) %Answer: B Difficulty: DifficultRationale: s = [.30 (18 - 2 + .50 (12 - 2 + .20 (-5 - 2]1/2 = %15. What is the expected variance for KMP stockA) %B) %C) %D) %E) %Answer: A Difficulty: DifficultRationale: s = [.30 (18 - 2 + .50 (12 - 2 + .20 (-5 - 2] = %16. If the nominal return is constant, the after-tax real rate of returnA) 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) A and D.Answer: E Difficulty: ModerateRationale: Inflation rates have an inverse effect on after-tax real rates of return.17. The risk premium for common stocksA) cannot be zero, for investors would be unwilling to invest in commonstocks.B) must always be positive, in theory.C) is negative, as common stocks are risky.D) A and B.E) A and C.Answer: D Difficulty: ModerateRationale: If the risk premium for common stocks were zero or negative, investors would be unwilling to accept the lower returns for the increased risk.18. A risk-free intermediate or long-term investmentA) is free of all types of risk.B) does not guarantee the future purchasing power of its cash flows.C) does guarantee the future purchasing power of its cash flows as it isinsured by the U. S. Treasury.D) A and B.E) B and C.Answer: B Difficulty: ModerateRationale: A risk-free U. S. Treasury bond is a fixed income instrument, and thus does not guarantee the future purchasing power of its cash flows.As a result, purchasing power risk is present.19. You purchase a share of Boeing stock for $90. One year later, afterreceiving a dividend of $3, you sell the stock for $92. What was your holding period returnA) %B) %C) %D) %E) none of the aboveAnswer: D Difficulty: ModerateRationale: HPR = (92 - 90 + 3) / 90 = %20. Toyota stock has the following probability distribution of expected pricesone year from now:If you buy Toyota today for $55 and it will pay a dividend during the year of $4 per share, what is your expected holding period return on ToyotaA) %B) %C) %D) %E) None of the aboveAnswer: D Difficulty: DifficultRationale: E(P1) = .25 (54/55 - 1) + .40 (64/55 - 1) + .35 (74/55 - 1) = %.21. Which of the following factors would not be expected to affect the nominalinterest rateA) the supply of loanable fundsB) the demand for loanable fundsC) the coupon rate on previously issued government bondsD) the expected rate of inflationE) government spending and borrowingAnswer: C Difficulty: EasyRationale: The nominal interest rate is affected by supply, demand, government actions and inflation. Coupon rates on previously issued government bonds reflect historical interest rates but should not affect the current level of interest rates.22. Your Certificate of Deposit will mature in one week and you are consideringhow to invest the proceeds. If you invest in a 30-day CD the bank will pay you 4%. If you invest in a 2-year CD the bank will pay you 6% interest.Which option would you chooseA) the 30-day CD, no matter what you expect interest rates to do in thefutureB) the 2-year CD, no matter what you expect interest rates to do in thefutureC) the 30-day CD if you expect that interest rates will fall in the futureD) the 2-year CD if you expect that interest rates will fall in the futureE) You would be indifferent between the 30-day and the 2-year CDs.Answer: D Difficulty: ModerateRationale: You would prefer to lock in the higher rate on the 2-year CD rather than subject yourself to reinvestment rate risk. If you expected interest rates to rise in the future the opposite choice would be better.23. In words, the real rate of interest is approximately equal toA) 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.Answer: A Difficulty: EasyRationale: The actual relationship is (1 + real rate) = (1 + nominal rate)/ (1 + inflation rate). This can be approximated by the equation: real rate = nominal rate - inflation rate.24. If the Federal Reserve lowers the discount rate, ceteris paribus, theequilibrium levels of funds lent will __________ and the equilibrium level of real interest rates will ___________A) increase; increaseB) increase; decreaseC) decrease; increaseD) decrease; decreaseE) reverse direction from their previous trendsAnswer: B Difficulty: ModerateRationale: A lower discount rate would encourage banks to make more loans, which would increase the money supply. The supply curve would shift to the right and the equilibrium level of funds would increase while the equilibrium interest rate would fall.25. What has been the relationship between T-Bill rates and inflation ratessince the 1980sA) The T-Bill rate was sometimes higher than and sometimes lower than theinflation rate.B) The T-Bill rate has equaled the inflation rate plus a constantpercentage.C) The inflation rate has equaled the T-Bill rate plus a constantpercentage.D) The T-Bill rate has been higher than the inflation rate almost theentire period.E) The T-Bill rate has been lower than the inflation rate almost the entireperiod.Answer: D Difficulty: ModerateRationale: The T-Bill rate was higher than the inflation rate for over two decades.26. “Bracket Creep” happens whenA) tax liabilities are based on real income and there is a negativeinflation rate.B) tax liabilities are based on real income and there is a positiveinflation rate.C) tax liabilities are based on nominal income and there is a negativeinflation rate.D) tax liabilities are based on nominal income and there is a positiveinflation rate.E) too many peculiar people make their way into the highest tax bracket.Answer: D Difficulty: ModerateRationale: A positive inflation rate typically leads to higher nominal income. Higher nominal income means people will have higher taxliabilities and in some cases will put them in higher tax brackets. This can happen even when real income has declined.27. The holding-period return (HPR) for a stock is equal toA) 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.Answer: E Difficulty: EasyRationale: HPR consists of an income component and a price change component.The income component on a stock is the dividend yield. The price change component is the capital gains yield.28. The historical arithmetic rate of return on small stocks over the 1926-2005period has been _______. The standard deviation of small stocks' returns has been ________ than the standard deviation of large stocks' returns.A) %, lowerB) %, lowerC) %, higherD) %, higherE) %, higherAnswer: D Difficulty: ModerateRationale: See Table 5-5.Use the following to answer question 29:You have been given this probability distribution for the holding period return for Cheese, Inc stock:29. Assuming that the expected return on Cheese's stock is %, what is thestandard deviation of these returnsA) %B) %C) %D) %E) None of the aboveAnswer: D Difficulty: ModerateRationale: Variance = .20*2 + .45*2 + .35*2 = . Standard deviation = = .30. An investor purchased a bond 45 days ago for $985. He received $15 ininterest and sold the bond for $980. What is the holding period return on his investmentA) %B) %C) %D) %E) None of the aboveAnswer: E Difficulty: EasyRationale: HPR = ($15+980-985)/$985 = .0 = approximately %.31. Over the past year you earned a nominal rate of interest of 8 percent onyour money. The inflation rate was percent over the same period. The exact actual growth rate of your purchasing power wasA) %.B) %.C) %.D) %.E) %Answer: B Difficulty: ModerateRationale: r = (1+R) / (1+I) - 1; / - 1 = %.32. Over the past year you earned a nominal rate of interest of 14 percenton your money. The inflation rate was 2 percent over the same period.The exact actual growth rate of your purchasing power wasA) %.B) %.C) %.D) %.E) none of the above.Answer: A Difficulty: ModerateRationale: r = (1+R) / (1+I) - 1; / - 1 = %.33. Over the past year you earned a nominal rate of interest of percent onyour money. The inflation rate was percent over the same period. The exact actual growth rate of your purchasing power wasA) %.B) %.C) %.D) %.E) none of the above.Answer: C Difficulty: ModerateRationale: r = (1+R) / (1+I) - 1; / - 1 = %.34. A year ago, you invested $1,000 in a savings account that pays an annualinterest rate of 4%. What is your approximate annual real rate of return if the rate of inflation was 2% over the yearA) 4%.B) 2%.C) 6%.D) 3%.E) none of the above.Answer: B Difficulty: EasyRationale: 4% - 2% = 2%.35. A year ago, you invested $2,500 in a savings account that pays an annualinterest rate of %. What is your approximate annual real rate of returnif the rate of inflation was % over the yearA) %.B) %.C) %.D) %.E) none of the above.Answer: E Difficulty: EasyRationale: % - % = %.36. A year ago, you invested $12,000 in an investment that produced a returnof 16%. What is your approximate annual real rate of return if the rate of inflation was 2% over the yearA) 18%.B) 2%.C) 16%.D) 15%.E) none of the above.Answer: E Difficulty: EasyRationale: 16% - 2% = 14%.37. If the annual real rate of interest is % and the expected inflation rateis %, the nominal rate of interest would be approximatelyA) %.B) %.C) 1%.D) %.E) none of the above.Answer: E Difficulty: EasyRationale: % + % = 6%.38. If the annual real rate of interest is % and the expected inflation rateis %, the nominal rate of interest would be approximatelyA) %.B) %.C) %.D) 7%.E) none of the above.Answer: E Difficulty: Easy Rationale: % + % = %.39. If the annual real rate of interest is 4% and the expected inflation rateis 3%, the nominal rate of interest would be approximatelyA) 4%.B) 3%.C) 1%.D) 5%.E) none of the above.Answer: E Difficulty: EasyRationale: 4% + 3% = 7%.40. You purchased a share of stock for $12. One year later you received $ asdividend and sold the share for $. What was your holding period returnA) %B) %C) %D) %E) none of the aboveAnswer: A Difficulty: ModerateRationale: ($ + $ - $12)/$12 = , or %.41. You purchased a share of stock for $120. One year later you received $ asdividend and sold the share for $136. What was your holding period returnA) %B) %C) %D) %E) none of the aboveAnswer: E Difficulty: ModerateRationale: ($ + $136 - $120)/$120 = , or %.42. You purchased a share of stock for $65. One year later you received $ asdividend and sold the share for $63. What was your holding period returnA) %B) %C) %D) %E) none of the aboveAnswer: A Difficulty: ModerateRationale: ($ + $63 - $65)/$65 = , or %.Use the following to answer questions 43-45:You have been given this probability distribution for the holding period return for a stock:43. What is the expected holding period return for the stockA) %B) %C) %D) %E) None of the aboveAnswer: E Difficulty: ModerateRationale: HPR = .40 (22%) + .35 (11%) + .25 (-9%) = %44. What is the expected standard deviation for the stockA) %B) %C) %D) %E) None of the aboveAnswer: E Difficulty: DifficultRationale: s = [.40 (22 - 2 + .35 (11 - 2 + .25 (-9 - 2]1/2 = %45. What is the expected variance for the stockA) %B) %C) %D) %E) None of the aboveAnswer: E Difficulty: DifficultRationale: s = [ .40 (22 - 2 + .35 (11 - 2 + .25 (-9 - 2] = %46. Which of the following measures of risk best highlights the potential lossfrom extreme negative returnsA) Standard deviationB) VarianceC) Upper partial standard deviationD) Value at Risk (VaR)E) None of the aboveAnswer: D Difficulty: Moderate47. Over the past year you earned a nominal rate of interest of percent onyour money. The inflation rate was percent over the same period. The exact actual growth rate of your purchasing power wasA) %.B) %.C) %.D) %.E) none of the aboveAnswer: E Difficulty: ModerateRationale: r = (1+R) / (1+I) - 1; % - 1 = %.48. A year ago, you invested $1,000 in a savings account that pays an annualinterest rate of %. What is your approximate annual real rate of return if the rate of inflation was 3% over the yearA) %.B) %.C) %.D) 3%.E) none of the above.Answer: E Difficulty: Easy Rationale: % - 3% = %.49. If the annual real rate of interest is % and the expected inflation rateis %, the nominal rate of interest would be approximatelyA) 0%.B) %.C) %.D) 7%.E) none of the above.Answer: D Difficulty: EasyRationale: % + % = 7%.50. You purchased a share of CSCO stock for $20. One year later you received$2 as dividend and sold the share for $31. What was your holding period returnA) 45%B) 50%C) 60%D) 40%E) none of the aboveAnswer: E Difficulty: ModerateRationale: ($2 + $31 - $20)/$20 = , or 65%.Use the following to answer questions 51-53:You have been given this probability distribution for the holding period return for GM stock:51. What is the expected holding period return for GM stockA) %B) %C) %D) %E) %Answer: E Difficulty: ModerateRationale: HPR = .40 (30%) + .40 (11%) + .20 (-10%) = %52. What is the expected standard deviation for GM stockA) %B) %C) %D) %E) %Answer: E Difficulty: DifficultRationale: s = [.40 (30 - 2 + .40 (11 - 2 + .20 (-10 - 2]1/2 = %53. What is the expected variance for GM stockA) %B) %C) %D) %E) %Answer: B Difficulty: DifficultRationale: s = [.40 (30 - 2 + .40 (11 - 2 + .20 (-10 - 2] = %54. You purchase a share of CAT stock for $90. One year later, after receivinga dividend of $4, you sell the stock for $97. What was your holding periodreturnA) %B) %C) %D) %E) none of the aboveAnswer: B Difficulty: ModerateRationale: HPR = ([97 - 90] + 4) / 90 = %55. When comparing investments with different horizons the ____________provides the more accurate comparison.A) arithmetic averageB) effective annual rateC) average annual returnD) historical annual averageE) none of the aboveAnswer: B Difficulty: Easy56. Annual Percentage Rates (APRs) are computed usingA) simple interest.B) compound interest.C) either A or B can be used.D) best estimates of expected real costs.E) none of the above.Answer: B Difficulty: Easy57. An investment provides a 2% return semi-annually, its effective annualrate isA) 2%.B) 4%.C) %D) %E) none of the aboveAnswer: D Difficulty: ModerateRationale: 2 -1 = %58. An investment provides a 3% return semi-annually, its effective annualrate isA) 3%.B) 6%.C) %D) %E) none of the aboveAnswer: D Difficulty: ModerateRationale: 2 -1 = %59. An investment provides a % return quarterly, its effective annual rateisA) %.B) %.C) %D) %E) none of the aboveAnswer: D Difficulty: ModerateRationale: 4 -1 = %60. Skewnes is a measure of ____________.A) how fat the tails of a distribution areB) the downside risk of a distributionC) the normality of a distributionD) the dividend yield of the distributionE) None of the aboveAnswer: C Difficulty: Moderate61. Kurtosis is a measure of ____________.A) how fat the tails of a distribution areB) the downside risk of a distributionC) the normality of a distributionD) the dividend yield of the distributionE) A and CAnswer: C Difficulty: Moderate62. When a distribution is positively skewed, ____________.A) standard deviation overestimates riskB) standard deviation correctly estimates riskC) standard deviation underestimates riskD) the tails are fatter than in a normal distributionE) none of the aboveAnswer: A Difficulty: Moderate63. When a distribution is negatively skewed, ____________.A) standard deviation overestimates riskB) standard deviation correctly estimates riskC) standard deviation underestimates riskD) the tails are fatter than in a normal distributionE) none of the aboveAnswer: C Difficulty: Moderate64. If a distribution has “fat tails” i t exhibitsA) positive skewnessB) negative skewnessC) a kurtosis of zeroD) kutrosisE) A and DAnswer: D Difficulty: ModerateEssay Questions65. Discuss the relationships between interest rates (both real and nominal),expected inflation rates, and tax rates on investment returns.Difficulty: ModerateAnswer:The nominal interest rate is the quoted interest rate; however this rate is approximately equal to the real rate of interest plus the expected rate of inflation. Thus, an investor is expecting to earn the real rate in terms of the increased purchasing power resulting from the investment.In addition, the investor should consider the after-tax returns on the investment. The higher the inflation rate, the lower the real after-tax rate of return. Investors suffer an inflation penalty equal to the tax rate times the inflation rate.The rationale for this question is to ascertain that the studentunderstands the relationships among these basic determinants of the after-tax real rate of return.66. Discuss why common stocks must earn a risk premium.Difficulty: EasyAnswer:Most investors are risk averse; that is, in order to accept the risk involved in investing in common stocks, the investors expect a return from the stocks over and above the return the investors could earn from a risk-free investment, such as U. S. Treasury issues. This excess return (the return in excess of the risk-free rate) is the risk premium required by the investors to invest in common stocks.The purpose of this question is to ascertain that the studentsunderstanding the basic risk-return relationship, as the relationship applies to investing in common stocks vs. a risk-free asset ., why would investors be willing to assume the risk of common stock as investment vehicles)67. Discuss the law of one price and how this concept relates to the possibilityof earning arbitrage profitsDifficulty: ModerateAnswer:The law of one price states that equivalent securities are equally (or almost equally) priced when sold on different markets. As a result, risk-free arbitrage profits should not be possible.The purpose of this question to introduce the student to arbitrage profits and market efficiency.68. Discuss the historical distributions of each of the following in termsof their average return and the dispersion of their returns: U. S. small company stocks, U. S. large company stocks, U. S. long-term government bonds, and . T-bills. Would any of these investments cause a loss in purchasing power during a 1926-2005 holding periodDifficulty: DifficultAnswer:The data given in Tables &Whether the averages are measured on a geometric basis or an arithmetic basis, the ranking is always the same, with small company average>large company average>government bond average>T-bill average. With regard to risk, the relationships among the standard deviations are small company>large company>government bonds>T-bills. These ranks indicate that the ex-post data confirm what would be expected - higher returns are earned to compensate for the increased risk. None of these investments would have caused a loss in purchasing power during the 1926-2002 period, because all had average returns higher than the average inflation rate. The goal of this question is to see if students have a general idea of the historical relationships among the returns and risk levels of various categories of investments relative to each other and to the level of inflation.69. Discuss some reasons why an investor with a long time horizon might chooseto invest in common stocks, even though they have historically been riskier than government bonds or T-bills.Difficulty: EasyAnswer:Common stocks can be expected to provide for the best growth in purchasing power based on historical data. An investor with a long time horizon can tolerate fluctuations in stock returns because of the long-term upward trend in stock returns. How much common stock an investor is willing to hold and what types of stocks he chooses for his portfolio will depend on his level of risk aversion.。
投资学第7版Test-Bank答案07
投资学第7版Test-Bank答案07Multiple Choice Questions1. Market risk is also referred to asA) systematic risk, diversifiable risk.B) systematic risk, nondiversifiable risk.C) unique risk, nondiversifiable risk.D) unique risk, diversifiable risk.E) none of the above.Answer: B Difficulty: EasyRationale: Market, systematic, and nondiversifiable risk are synonyms referring to the risk that cannot be eliminated from the portfolio. Diversifiable, unique, nonsystematic, and firm-specific risks are synonyms referring to the risk that can be eliminated from the portfolio by diversification.2. The risk that can be diversified away isA) firm specific risk.B) beta.C) systematic risk.D) market risk.E) none of the above.Answer: A Difficulty: EasyRationale: See explanations for 1 and 2 above.3. The variance of a portfolio of risky securitiesA) 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 of the above.Answer: C Difficulty: ModerateRationale: The variance of a portfolio of risky securities is a weighted sum taking into account both the variance of the individual securities and the covariances betweensecurities.4. The expected return of a portfolio of risky securitiesA) 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) A and C.E) none of the above.Answer: A Difficulty: Easy5. Other things equal, diversification is most effective whenA) securities' returns are uncorrelated.B) securities' returns are positively correlated.C) securities' returns are high.D) securities' returns are negatively correlated.E) B and C.Answer: D Difficulty: ModerateRationale: Negative correlation among securities results in the greatest reduction of portfolio risk, which is the goal of diversification.6. The efficient frontier of risky assets isA) the portion of the investment opportunity set that lies above the global minimumvariance portfolio.B) the portion of the investment opportunity set that represents the highest standarddeviations.C) the portion of the investment opportunity set which includes the portfolios with thelowest standard deviation.D) the set of portfolios that have zero standard deviation.E) both A and B are true.Answer: A Difficulty: ModerateRationale: Portfolios on the efficient frontier are those providing the greatest expected return for a given amount of risk. Only those portfolios above the global minimum variance portfolio meet this criterion.7. The Capital Allocation Line provided by a risk-free security and N risky securities isA) the line that connects the risk-free rate and the global minimum-variance portfolioof the risky securities.B) the line that connects the risk-free rate and the portfolio of the risky securities thathas the highest expected return on the efficient frontier.C) the line tangent to the efficient frontier of risky securities drawn from the risk-freerate.D) the horizontal line drawn from the risk-free rate.E) none of the above.Answer: C Difficulty: ModerateRationale: The Capital Allocation Line represents the most efficient combinations of the risk-free asset and risky securities. OnlyC meets that definition.8. Consider an investment opportunity set formed with two securities that are perfectlynegatively correlated. The global minimum variance portfolio has a standard deviation that is alwaysA) greater than zero.B) equal to zero.C) equal to the sum of the securities' standard deviations.D) equal to -1.E) none of the above.Answer: B Difficulty: DifficultRationale: If two securities were perfectly negatively correlated, the weights for the minimum variance portfolio for those securities could be calculated, and the standard deviation of the resulting portfolio would be zero.9. Which of the following statements is (are) true regarding the variance of a portfolio oftwo risky securities?A) The higher the coefficient of correlation between securities, the greater thereduction in the portfolio variance.B) There is a linear relationship between the securities' coefficient of correlation andthe portfolio variance.C) The degree to which the portfolio variance is reduced depends on the degree ofcorrelation between securities.D) A and B.E) A and C.Answer: C Difficulty: ModerateRationale: The lower the correlation between the returns of the securities, the more portfolio risk is reduced.10. Efficient portfolios of N risky securities are portfolios thatA) are formed with the securities that have the highest rates of return regardless of theirstandard 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 oftheir returns.D) have the highest risk and rates of return and the highest standard deviations.E) have the lowest standard deviations and the lowest rates of return.Answer: B Difficulty: ModerateRationale: Portfolios that are efficient are those that provide the highest expected return for a given level of risk.11. Which of the following statement(s) is (are) true regarding the selection of a portfoliofrom those that lie on the Capital Allocation Line?A) Less risk-averse investors will invest more in the risk-free security and less in theoptimal risky portfolio than more risk-averse investors.B) More risk-averse investors will invest less in the optimal risky portfolio and more inthe risk-free security than less risk-averse investors.C) Investors choose the portfolio that maximizes their expected utility.D) A and C.E) B and C.Answer: E Difficulty: ModerateRationale: All rational investors select the portfolio that maximizes their expectedutility; for investors who are relatively more risk-averse, doing so means investing less in the optimal risky portfolio and more in the risk-free asset.Use the following to answer questions 12-18:Consider the following probability distribution for stocks A and B:12. 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%E) none of the aboveAnswer: C Difficulty: EasyRationale: E(RA) = 0.1(10%) + 0.2(13%) + 0.2(12%) + 0.3(14%) + 0.2(15%) = 13.2%;E(RB) = 0.1(8%) + 0.2(7%) + 0.2(6%) + 0.3(9%) + 0.2(8%) = 7.7%.13. The standard deviations of stocks A and B are _____ and _____, respectively.A) 1.5%; 1.9%B) 2.5%; 1.1%C) 3.2%; 2.0%D) 1.5%; 1.1%E) none of the aboveAnswer: D Difficulty: ModerateRationale: s A = [0.1(10% - 13.2%)2 + 0.2(13% - 13.2%)2 + 0.2(12% - 13.2%)2 +0.3(14% - 13.2%)2 + 0.2(15% - 13.2%)2]1/2 = 1.5%; s B = [0.1(8% - 7.7%)2 + 0.2(7% -7.7%)2 + 0.2(6% - 7.7%)2 + 0.3(9% - 7.7%)2 + 0.2(8% - 7.7%)2 = 1.1%.14. The coefficient of correlation between A and B isA) 0.47.B) 0.60.C) 0.58D) 1.20.E) none of the above.Answer: A Difficulty: DifficultRationale: covA,B = 0.1(10% - 13.2%)(8% - 7.7%) + 0.2(13% - 13.2%)(7% - 7.7%) +0.2(12% - 13.2%)(6% - 7.7%) + 0.3(14% - 13.2%)(9% - 7.7%) + 0.2(15% - 13.2%)(8%- 7.7%) = 0.76; rA,B = 0.76/[(1.1)(1.5)] = 0.47.15. If you invest 40% of your money in A and 60% in B, what would be your portfolio'sexpected 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 aboveAnswer: B Difficulty: DifficultRationale: E(R P) = 0.4(13.2%) + 0.6(7.7%) = 9.9%; s P = [(0.4)2(1.5)2 + (0.6)2(1.1)2 + 2(0.4)(0.6)(1.5)(1.1)(0.46)]1/2 = 1.1%.16. Let G be the global minimum variance portfolio. The weights of A and B in G are__________ and __________, respectively.A) 0.40; 0.60B) 0.66; 0.34C) 0.34; 0.66D) 0.76; 0.24E) 0.24; 0.76Answer: E Difficulty: DifficultRationale: w A = [(1.1)2 - (1.5)(1.1)(0.46)]/[(1.5)2 + (1.1)2 - (2)(1.5)(1.1)(0.46) = 0.23;w B = 1 - 0.23 = 0.77.Note that the above solution assumes the solutions obtained in question 13 and 14.17. The expected rate of return and standard deviation of the global minimum varianceportfolio, G, are __________ and __________, respectively.A) 10.07%; 1.05%B) 9.04%; 2.03%C) 10.07%; 3.01%D) 9.04%; 1.05%E) none of the aboveAnswer: D Difficulty: ModerateRationale: E(R G) = 0.23(13.2%) + 0.77(7.7%) = 8.97% . 9%; s G = [(0.23)2(1.5)2 +(0.77)2(1.1)2 + (2)(0.23)(0.77)(1.5)(1.1)(0.46)]1/2 = 1.05%.18. 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 percent 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.Answer: C Difficulty: DifficultRationale: The Portfolio's E(Rp), sp, Reward/volatility ratios are 20A/80B: 8.8%,1.05%, 8.38; 15A/85B: 8.53%, 1.06%, 8.07; 26A/74B: 9.13%, 1.05%, 8.70; 10A/90B:8.25%, 1.07%, 7.73. The portfolio with 26% in A and 74% in B dominates all of theother portfolios by the mean-variance criterion.Use the following to answer questions 19-21: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%.19. The weights of A and B in the global minimum variance portfolio are _____ and _____,respectively.A) 0.24; 0.76B) 0.50; 0.50C) 0.57; 0.43D) 0.43; 0.57E) 0.76; 0.24Answer: D Difficulty: ModerateRationale: wA = 12 /(16 + 12) = 0.4286; wB = 1 - 0.4286 = 0.5714.20. The risk-free portfolio that can be formed with the two securities will earn _____ rate ofreturn.A) 8.5%B) 9.0%C) 8.9%D) 9.9%E) none of the aboveAnswer: C Difficulty: DifficultRationale: E(R P) = 0.43(10%) + 0.57(8%) = 8.86%.21. Which of the following portfolio(s) is (are) most efficient?A) 45 percent in A and 55 percent in B.B) 65 percent in A and 35 percent in B.C) 35 percent in A and 65 percent in B.D) A and B are both efficient.E) A and C are both efficient.Answer: D Difficulty: DifficultRationale: The Portfolio E(Rp), sp, and Reward/volatility ratios are 45A/55B: 8.9%,0.6%, 14.83; 65A/35B: 9.3%, 6.2%, 1.5; 35A/65B: 8.7%, 2.2%, 3.95. Both A and B areefficient according to the mean-variance criterion. A has a much higherReward/volatility ratio.22. An investor who wishes to form a portfolio that lies to the right of the optimal riskyportfolio on the Capital Allocation Line must:A) lend some of her money at the risk-free rate and invest the remainder in the optimalrisky portfolio.B) borrow some money at the risk-free rate and invest in the optimal risky portfolio.C) invest only in risky securities.D) such a portfolio cannot be formed.E) B and CAnswer: E Difficulty: ModerateRationale: The only way that an investor can create portfolios to the right of the Capital Allocation Line is to create a borrowing portfolio (buy stocks on margin). In this case, the investor will not hold any of the risk-free security, but will hold only risky securities.23. Which one of the following portfolios cannot lie on the efficient frontier as describedby Markowitz?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 tell from the information given.Answer: A Difficulty: ModerateRationale: When plotting the above portfolios, only W lies below the efficient frontier as described by Markowitz. It has a higher standard deviation than Z with a lower expected return.24. Which one of the following portfolios cannot lie on the efficient frontier as describedby Markowitz?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 tell from the information given.Answer: D Difficulty: ModerateRationale: When plotting the above portfolios, only W lies below the efficient frontier as described by Markowitz. It has a higherstandard deviation than Z with a lower expected return.25. Portfolio theory as described by Markowitz 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.E) none of the above.Answer: B Difficulty: ModerateRationale: Markowitz was concerned with reducing portfolio risk by combining risky securities with differing return patterns.26. The measure of risk in a Markowitz efficient frontier is:A) specific risk.B) standard deviation of returns.C) reinvestment risk.D) beta.E) none of the above.Answer: B Difficulty: ModerateRationale: Markowitz was interested in eliminating diversifiable risk (and thuslessening total risk) and thus was interested in decreasing the standard deviation of the returns of the portfolio.27. A statistic that measures how the returns of two risky assets move together is:A) variance.B) standard deviation.C) covariance.D) correlation.E) C and D.Answer: E Difficulty: ModerateRationale: Covariance measures whether security returns move together or inopposition; however, only the sign, not the magnitude, of covariance may be interpreted.Correlation, which is covariance standardized by the product of the standard deviations of the two securities, may assume values only between +1 and -1; thus, both the sign and the magnitude may be interpreted regarding the movement of one security's returnrelative to that of another security.28. The unsystematic risk of a specific securityA) 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.E) none of the above.Answer: B Difficulty: ModerateRationale: Unsystematic (or diversifiable or firm-specific) risk refers to factors unique to the firm. Such risk may be diversified away; however, market risk will remain.29. Which statement about portfolio diversification is correct?A) Proper diversification can reduce or eliminate systematic risk.B) The risk-reducing benefits of diversification do not occur meaningfully until at least50-60 individual securities have been purchased.C) Because diversification reduces a portfolio's total risk, it necessarily reduces theportfolio's expected return.D) Typically, as more securities are added to a portfolio, total risk would be expectedto decrease at a decreasing rate.E) None of the above statements is correct.Answer: D Difficulty: ModerateRationale: Diversification can eliminate only nonsystematic risk; relatively fewsecurities are required to reduce this risk, thus diminishing returns result quickly.Diversification does not necessarily reduce returns.30. 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 the capital allocation line.D) The point of the highest reward to variability ratio in the indifference curve.E) None of the above.Answer: A Difficulty: ModerateRationale: The indifference curve represents what is acceptable to the investor; the capital allocation line represents what is available in the market. The point of tangency represents where the investor can obtain the greatest utility from what is available.31. For a two-stock portfolio, what would be the preferred correlation coefficient betweenthe two stocks?A) +1.00.B) +0.50.C) 0.00.D) -1.00.E) none of the above.Answer: D Difficulty: ModerateRationale: The correlation coefficient of -1.00 provides the greatest diversificationbenefits.32. In a two-security minimum variance portfolio where the correlation between securitiesis greater than -1.0A) 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.Answer: B Difficulty: DifficultRationale: The security with the higher standard deviation will be weighted less heavily to produce minimum variance. The return will not be zero; the risk will not be zero unless the correlation coefficient is -1.33. Which of the following is not a source of systematic risk?A) the business cycle.B) interest rates.C) personnel changesD) the inflation rate.E) exchange rates.Answer: C Difficulty: EasyRationale: Personnel changes are a firm-specific event that is a component ofnon-systematic risk. The others are all sources of systematic risk.34. The global minimum variance portfolio formed from two risky securities will beriskless when the correlation coefficient between the two securities isA) 0.0B) 1.0C) 0.5D) -1.0E) negativeAnswer: D Difficulty: ModerateRationale: The global minimum variance portfolio will have a standard deviation of zero whenever the two securities are perfectly negatively correlated.35. Security X has expected return of 12% and standard deviation of 20%. Security Y hasexpected return of 15% and standard deviation of 27%. If the two securities have a correlation coefficient of 0.7, what is their covariance?A) 0.038B) 0.070C) 0.018D) 0.013E) 0.054Answer: A Difficulty: ModerateRationale: Cov(r X, r Y) = (.7)(.20)(.27) = .037836. When two risky securities that are positively correlated but not perfectly correlated areheld in a portfolio,A) the portfolio standard deviation will be greater than the weighted average of theindividual security standard deviations.B) the portfolio standard deviation will be less than the weighted average of theindividual security standard deviations.C) the portfolio standard deviation will be equal to the weighted average of theindividual security standard deviations.D) the portfolio standard deviation will always be equal to the securities' covariance.E) none of the above is true.Answer: B Difficulty: ModerateRationale: Whenever two securities are less than perfectly positively correlated, the standard deviation of the portfolio of the two assets will be less than the weightedaverage of the two securities' standard deviations. There is some benefit todiversification in this case.37. The line representing all combinations of portfolio expected returns and standarddeviations that can be constructed from two available assets is called theA) risk/reward tradeoff lineB) Capital Allocation LineC) efficient frontierD) portfolio opportunity setE) Security Market LineAnswer: D Difficulty: EasyRationale: The portfolio opportunity set is the line describing all combinations ofexpected returns and standard deviations that can be achieved by a portfolio of risky assets.38. Given an optimal risky portfolio with expected return of 14% and standard deviation of22% and a risk free rate of 6%, what is the slope of the best feasible CAL?A) 0.64B) 0.14C) 0.08D) 0.33E) 0.36Answer: E Difficulty: ModerateRationale: Slope = (14-6)/22 = .363639. The risk that can be diversified away in a portfolio is referred to as ___________.I)diversifiable riskII)unique riskIII)systematic riskIV)firm-specific riskA) I, III, and IVB) II, III, and IVC) III and IVD) I, II, and IVE) I, II, III, and IVAnswer: D Difficulty: ModerateRationale: All of these terms are used interchangeably to refer to the risk that can be removed from a portfolio through diversification.40. As the number of securities in a portfolio is increased, what happens to the averageportfolio 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.Answer: D Difficulty: ModerateRationale: Statman's study showed that the risk of the portfolio would decrease asrandom stocks were added. At first the risk decreases quickly, but then the rate ofdecrease slows substantially, as shown in Figure 7.2. The minimum portfolio risk in the study was 19.2%.41. In words, the covariance considers the probability of each scenario happening and theinteraction betweenA) 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 portfoliovariance.Answer: B Difficulty: DifficultRationale: As written in equation 7.4, the covariance of the returns between twosecurities is the sum over all scenarios of the product of three things. The first item is the probability that the scenario will happen. The second and third terms represent the deviations of the securities' returns in that scenario from their own expected returns. 42. The standard deviation of a two-asset portfolio is a linear function of the assets' weightswhenA) the 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.Answer: D Difficulty: ModerateRationale: When there is a perfect positive correlation (or a perfect negative correlation), the equation for the portfolio variance simplifies to a perfect square. The result is that the portfolio's standard deviation is linear relative to the assets' weights in the portfolio.43. A two-asset portfolio with a standard deviation of zero can be formed whenA) the 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 equal to negative one.Answer: E Difficulty: ModerateRationale: When there is a perfect negative correlation, the equation for the portfolio variance simplifies to a perfect square. The result is that the portfolio’s standarddeviation equals |w AσA– w BσB|, which can be set equal to zero. The solution w A = σB/(σA+ σB) and w B = 1 – w A will yielda zero-standard deviation portfolio.44. When borrowing and lending at a risk-free rate are allowed, which Capital AllocationLine (CAL) should the investor choose to combine with the efficient frontier?I)with the highest reward-to-variability ratio.II)that will maximize his utility.III)with the steepest slope.IV)with the lowest slope.A) I and IIIB) I and IVC) II and IVD) I onlyE) I, II, and IIIAnswer: E Difficulty: DifficultRationale: The optimal CAL is the one that is tangent to the efficient frontier. This CAL offers the highest reward-to-variability ratio, which is the slope of the CAL. It will also allow the investor to reach his highest feasible level of utility.45. Which Excel tool can be used to find the points along an efficient frontier?A) RegressionB) SolverC) ScenariosD) Goal SeekE) Data AnalysisAnswer: B Difficulty: ModerateRationale: Even if the student isn't familiar with Excel's Solver tool, he shouldrecognize it from the discussion in the text.46. The separation property refers to the conclusion thatA) the determination of the best risky portfolio is objective and the choice of the bestcomplete portfolio is subjective.B) the choice of the best complete portfolio is objective and the determination of thebest risky portfolio is objective.C) the choice of inputs to be used to determine the efficient frontier is objective and thechoice of the best CAL is subjective.D) the determination of the best CAL is objective and the choice of the inputs to beused to determine the efficient frontier is subjective.E) investors are separate beings and will therefore have different preferences regardingthe risk-return tradeoff.Answer: A Difficulty: DifficultRationale: The determination of the optimal risky portfolio is purely technical and can be done by a manager. The complete portfolio, which consists of the optimal riskyportfolio and the risk-free asset, must be chosen by each investor based on preferences. Use the following to answer questions 47-50:Consider the following probability distribution for stocks A and B:47. 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%E) none of the aboveAnswer: B Difficulty: EasyRationale: E(RA) = 0.15(8%) + 0.2(13%) + 0.15(12%) + 0.3(14%) + 0.2(16%) = 13%;E(RB) = 0.15(8%) + 0.2(7%) + 0.15(6%) + 0.3(9%) + 0.2(11%) = 8.4%.48. The standard deviations of stocks A and B are _____ and _____, respectively.A) 1.56%; 1.99%B) 2.45%; 1.68%C) 3.22%; 2.01%D) 1.54%; 1.11%E) none of the aboveAnswer: B Difficulty: ModerateRationale: s A = [0.15(8% - 13%)2 + 0.2(13% - 13%)2 + 0.15(12% - 13%)2 + 0.3(14% - 13%)2 + 0.2(16% - 13%)2] 1/2 = 2.449%; sB = [0.15(8% - 8.4%)2 + 0.2(7% - 8.4%)2 +0.15(6% - 8.4%)2 + 0.3(9% - 8.4%)2 + 0.2(11% - 8.4%)2 ] 1/2= 1.676%.49. The coefficient of correlation between A and B isA) 0.474.B) 0.612.C) 0.583.D) 1.206.E) none of the above.Answer: C Difficulty: DifficultRationale: covA,B = 0.15(8% - 13%)(8% - 8.4%) + 0.2(13% - 13%)(7% - 8.4%) +0.15(12% - 13%)(6% - 8.4%) + 0.3(14% - 13%)(9% - 8.4%) + 0.2(16% - 13%)(11% -8.4%) = 2.40; rA,B = 2.40/[(2.45)(1.68)] = 0.583.50. If you invest 35% of your money in A and 65% in B, what would be your portfolio'sexpected rate of return and standard deviation?A) 9.9%; 3%B) 9.9%; 1.1%C) 10%; 1.7%D) 10%; 3%E) none of the aboveAnswer: C Difficulty: DifficultRationale: E(R P) = 0.35(13%) + 0.65(8.4%) = 10.01%; s P = [(0.35)2(2.45%)2 +(0.65)2(1.68)2 + 2(0.35)(0.65)(2.45)(1.68)(0.583)]1/2 = 1.7%.Use the following to answer questions 51-52: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%.51. The weights of A and B in the global minimum variance portfolio are _____ and _____,respectively.A) 0.24; 0.76B) 0.50; 0.50C) 0.57; 0.43D) 0.45; 0.55E) 0.76; 0.24Answer: D Difficulty: ModerateRationale: wA = 14 /(17 + 14) = 0.45; wB = 1 - 0.45 = 0.55.52. The risk-free portfolio that can be formed with the two securities will earn _____ rate ofreturn.。
投资学第7版Test-Bank答案24
Multiple Choice Questions1. Trading activity by mutual funds just prior to quarterly reporting dates is known asA) insider trading.B) program trading.C) passive security selection.D) window dressing.E) none of the above.Answer: D Difficulty: ModerateRationale: Mutual funds must disclose portfolio composition quarterly, and trading activity that immediately precedes the reporting date is referred to as "window dressing". Thespeculation is that window dressing involves changes in portfolio composition, which gives the appearance of successful stock selection.2. The comparison universe is __________.A) a concept found only in astronomyB) the set of all mutual funds in the worldC) the set of all mutual funds in the U. S.D) a set of mutual funds with similar risk characteristics to your mutual fundE) none of the aboveAnswer: D Difficulty: EasyRationale: A mutual fund manager is evaluated against the performance of managers of funds of similar risk characteristics.3. __________ did not develop a popular method for risk-adjusted performanceevaluation of mutual funds.A) Eugene FamaB) Michael JensenC) William SharpeD) Jack TreynorE) A and BAnswer: A Difficulty: EasyRationale: Michael Jensen, William Sharpe, and Jack Treynor developed popular models for mutual fund performance evaluation.4. Henriksson (1984) found that, on average, betas of funds __________ during marketadvancesA) increased very significantlyB) increased slightlyC) decreased slightlyD) decreased very significantlyE) did not changeAnswer: C Difficulty: ModerateRationale: Portfolio betas should have a large value if the market is expected to perform well and a small value if the market is not expected to perform well; thus, these results reflect the poor timing ability of mutual fund managers.5. Most professionally managed equity funds generally __________.A) outperform the S&P 500 index on both raw and risk-adjusted return measuresB) underperform the S&P 500 index on both raw and risk-adjusted return measuresC) outperform the S&P 500 index on raw return measures and underperform the S&P500 index on risk-adjusted return measuresD) underperform the S&P 500 index on raw return measures and outperform the S&P500 index on risk-adjusted return measuresE) match the performance of the S&P 500 index on both raw and risk-adjusted returnmeasuresAnswer: B Difficulty: ModerateRationale: Most mutual funds do not consistently, over time, outperform the S&P 500 index on the basis of either raw or risk-adjusted return measures.6. Suppose two portfolios have the same average return, the same standard deviation ofreturns, but portfolio A has a higher beta than portfolio B. According to the Sharpemeasure, the performance of portfolio A __________.A) is better than the performance of portfolio BB) is the same as the performance of portfolio BC) is poorer than the performance of portfolio BD) cannot be measured as there is no data on the alpha of the portfolioE) none of the above is true.Answer: B Difficulty: ModerateRationale: The Sharpe index is a measure of average portfolio returns (in excess of the risk free return) per unit of total risk (as measured by standard deviation).7. Consider the Sharpe and Treynor performance measures. When a pension fund is largeand has many managers, the __________ measure is better for evaluating individualmanagers while the __________ measure is better for evaluating the manager of a small fund with only one manager responsible for all investments.A) Sharpe, SharpeB) Sharpe, TreynorC) Treynor, SharpeD) Treynor, TreynorE) Both measures are equally good in both cases.Answer: C Difficulty: ModerateRationale: The Treynor measure is the superior measure if the portfolio is a small portion of many portfolios combined into a large investment fund. The Sharpe measure is superiorif the portfolio represents the investor's total risky investment position.8. Suppose you purchase 100 shares of GM stock at the beginning of year 1, and purchaseanother 100 shares at the end of year 1. You sell all 200 shares at the end of year 2.Assume that the price of GM stock is $50 at the beginning of year 1, $55 at the end of year 1, and $65 at the end of year 2. Assume no dividends were paid on GM stock.Your dollar-weighted return on the stock will be __________; your time-weightedreturn on the stock.A) higher thanB) the same asC) less thanD) exactly proportional toE) more information is necessary to answer this questionAnswer: A Difficulty: ModerateRationale: In the dollar-weighted return, the stock's performance in the second year, when 200 shares are held, has a greater influence on the overall dollar-weighted return. Thetime-weighted return ignores the number of shares held.9. Suppose the risk-free return is 4%. The beta of a managed portfolio is 1.2, the alpha is1%, and the average return is 14%. Based on Jensen's measure of portfolio performance, you would calculate the return on the market portfolio asA) 11.5%B) 14%C) 15%D) 16%E) none of the aboveAnswer: A Difficulty: DifficultRationale: 1% = 14% - [4% + 1.2(x - 4%)]; x = 11.5%.10. Suppose the risk-free return is 3%. The beta of a managed portfolio is 1.75, the alpha is0%, and the average return is 16%. Based on Jensen's measure of portfolio performance, you would calculate the return on the market portfolio asA) 12.3%B) 10.4%C) 15.1%D) 16.7%E) none of the aboveAnswer: B Difficulty: DifficultRationale: 0% = 16% - [3% + 1.75(x - 3%)]; x = 10.4%.11. Suppose the risk-free return is 6%. The beta of a managed portfolio is 1.5, the alpha is3%, and the average return is 18%. Based on Jensen's measure of portfolio performance, you would calculate the return on the market portfolio asA) 12%B) 14%C) 15%D) 16%E) none of the aboveAnswer: A Difficulty: DifficultRationale: 3% = 18% - [6% + 1.5(x - 6%)]; x = 12%.12. Suppose a particular investment earns an arithmetic return of 10% in year 1, 20% inyear 2 and 30% in year 3. The geometric average return for the year period will be__________.A) greater than the arithmetic average returnB) equal to the arithmetic average returnC) less than the arithmetic average returnD) equal to the market returnE) cannot tell from the information givenAnswer: C Difficulty: ModerateRationale: The geometric mean will always be less than the arithmetic mean unless the returns in all periods are equal (in which case the two means will be equal).13. Suppose you buy 100 shares of Abolishing Dividend Corporation at the beginning ofyear 1 for $80. Abolishing Dividend Corporation pays no dividends. The stock price at the end of year 1 is $100, the price $120 at the end of year 2, and the price is $150 at the end of year 3. The stock price declines to $100 at the end of year 4, and you sell your 100 shares. For the four years, your geometric average return isA) 0.0%B) 1.0%C) 5.7%D) 9.2%E) 34.5%Answer: C Difficulty: DifficultRationale: [(1.25)(1.20)(1.25)(0.6667)]1/4 - 1.0 = 5.7%14. You want to evaluate three mutual funds using the information ratio measure forperformance evaluation. The risk-free return during the sample period is 6%, and the average return on the market portfolio is 19%. The average returns, residual standard deviations, and betas for the three funds are given below.The fund with the highest information ratio measure is __________.A) Fund AB) Fund BC) Fund CD) Funds A and B are tied for highestE) Funds A and C are tied for highestAnswer: B Difficulty: DifficultRationale:Information ratio = αP/σ(e P); A: αP = 20 - 6 - .8(19 - 6) = 3.6; 3.6/4 = 0.9; B: αP = 21 -6 - 1(19 - 6) = 2.0; 2/1.25 = 1.6; C: αP = 23 - 6 - 1.2(19 - 6) = 1.4; 1.4/1.20 = 1.16. 15. You want to evaluate three mutual funds using the Sharpe measure for performanceevaluation. The risk-free return during the sample period is 6%. The average returns, standard deviations and betas for the three funds are given below, as is the data for the S&P 500 index.The fund with the highest Sharpe measure is __________.A) Fund AB) Fund BC) Fund CD) Funds A and B are tied for highestE) Funds A and C are tied for highestAnswer: C Difficulty: ModerateRationale: A: (24% - 6%)/30% = 0.60; B: (12% - 6%)/10% = 0.60; C: (22% - 6%)/20% = 0.80;S&P 500: (18% - 6%)/16% = 0.75.16. You want to evaluate three mutual funds using the Sharpe measure for performanceevaluation. The risk-free return during the sample period is 4%. The average returns, standard deviations and betas for the three funds are given below, as is the data for the S&P 500 index.The fund with the highest Sharpe measure is __________.A) Fund AB) Fund BC) Fund CD) Funds A and B are tied for highestE) Funds A and C are tied for highestAnswer: B Difficulty: ModerateRationale: A: (18% - 4%)/38% = 0.368; B: (15% - 4%)/27% = 0.407; C: (11% - 4%)/24% =0.292; S&P 500: (10% - 4%)/22% = 0.273.17. You want to evaluate three mutual funds using the Sharpe measure for performanceevaluation. The risk-free return during the sample period is 5%. The average returns, standard deviations and betas for the three funds are given below, as is the data for the S&P 500 index.The investment with the highest Sharpe measure is __________.A) Fund AB) Fund BC) Fund CD) the indexE) Funds A and C are tied for highestAnswer: D Difficulty: ModerateRationale: A: (23% - 5%)/30% = 0.60; B: (20% - 5%)/19% = 0.789; C: (19% - 5%)/17% =0.824; S&P 500: (18% - 5%)/15% = 0.867.18. You want to evaluate three mutual funds using the Treynor measure for performanceevaluation. The risk-free return during the sample period is 6%. The average returns, standard deviations, and betas for the three funds are given below, in addition toinformation regarding the S&P 500 index.The fund with the highest Treynor measure is __________.A) Fund AB) Fund BC) Fund CD) Funds A and B are tied for highestE) Funds A and C are tied for highestAnswer: A Difficulty: DifficultRationale: A: (13% - 6%)/0.5 = 14; B: (19% - 6%)/1.0 = 13; C: (25% - 6%)/1.5 = 12.7; S&P 500: (18% - 6%)/1.0 = 12.19. You want to evaluate three mutual funds using the Jensen measure for performanceevaluation. The risk-free return during the sample period is 6%, and the average return on the market portfolio is 18%. The average returns, standard deviations, and betas for the three funds are given below.The fund with the highest Jensen measure is __________.A) Fund AB) Fund BC) Fund CD) Funds A and B are tied for highestE) Funds A and C are tied for highestAnswer: C Difficulty: DifficultRationale: A: 17.6% -[6% + 1.2(18% - 6%)] = - 2.8%; B: 17.5% - [6% + 1.0(18% - 6%)] = - 0.5;C: 17.4% - [6% + 0.8(18% - 6%)] = + 1.8.20. Suppose you purchase one share of the stock of Volatile Engineering Corporation at thebeginning of year 1 for $36. At the end of year 1, you receive a $2 dividend, and buyone more share for $30. At the end of year 2, you receive total dividends of $4 (i.e., $2 for each share), and sell the shares for $36.45 each. The time-weighted return on your investment is ________.A) -1.75%B) 4.08%C) 8.53%D) 11.46%E) 12.35%Answer: C Difficulty: ModerateRationale: Year 1: ($30 + $2 - $36)/$36 = - 11.11%; Year 2: ($36.45 + $2 - $30)/$30 = 28.17%;Average: 8.53%.21. Suppose you purchase one share of the stock of Volatile Engineering Corporation at thebeginning of year 1 for $36. At the end of year 1, you receive a $2 dividend, and buy one more share for $30. At the end of year 2, you receive total dividends of $4 (i.e., $2 for each share), and sell the shares for $36.45 each. The dollar-weighted return on your investment is _______.A) -1.75%B) 4.08%C) 8.53%D) 8.00%E) 12.35%Answer: E Difficulty: ModerateRationale: $36 + $30/(1 + r) = $2/(1 + r) + $4/(1 + r)2 + $72.90/(1 + r)2; r = 12.35%.22. Suppose you purchase one share of the stock of Cereal Correlation Company at thebeginning of year 1 for $50. At the end of year 1, you receive a $1 dividend, and buy one more share for $72. At the end of year 2, you receive total dividends of $2 (i.e., $1 for each share), and sell the shares for $67.20 each. The time-weighted return on your investment is __________.A) 10.00%B) 8.78%C) 19.71%D) 20.36%E) none of the aboveAnswer: D Difficulty: ModerateRationale: Year 1: ($72 + $1 - $50)/$50 = 46%; Year 2: ($67.20 + $1 - $72)/$72 = -5.28%;Average: 20.36%.23. Suppose you purchase one share of the stock of Cereal Correlation Company at thebeginning of year 1 for $50. At the end of year 1, you receive a $1 dividend, and buy one more share for $72. At the end of year 2, you receive total dividends of $2 (i.e., $1 for each share), and sell the shares for $67.20 each. The dollar-weighted return on your investment is __________.A) 10.00%B) 8.78%C) 19.71D) 20.36%E) none of the aboveAnswer: B Difficulty: ModerateRationale: $50 + $72 /(1 + r) = $1/(1 + r) + $2/(1 + r)2 + $134.40/(1 + r)2; r = 8.78%.24. Suppose you own two stocks, A and B. In year 1, stock A earns a 2% return and stock Bearns a 9% return. In year 2, stock A earns an 18% return and stock B earns an 11%return. __________ has the higher arithmetic average return.A) stock AB) stock BC) the two stocks have the same arithmetic average returnD) at least three periods are needed to calculate the arithmetic average returnE) none of the aboveAnswer: C Difficulty: ModerateRationale: A: (2% + 18%)/2 = 10%; B: (9% + 11%)/2 = 10%.25. Suppose you own two stocks, A and B. In year 1, stock A earns a 2% return and stock Bearns a 9% return. In year 2, stock A earns an 18% return and stock B earns an 11%return. Which stock has the higher geometric average return?A) stock AB) stock BC) the two stocks have the same geometric average returnD) at least three periods are needed to calculate the geometric average return.E) none of the aboveAnswer: B Difficulty: ModerateRationale: A: [(1.02)(1.18)]1/2 - 1 = 9.71%; B: [(1.09)(1.11)]1/2 - 1 = 10.00%.Use the following to answer questions 26-29:The following data are available relating to the performance of Sooner Stock Fund and the market portfolio:26. What is the Sharpe measure of performance evaluation for Sooner Stock Fund?A) 1.33%B) 4.00%C) 8.67%D) 38.6%E) 37.14%Answer: D Difficulty: ModerateRationale: (20% - 3%)/44% = 0.386, or 38.6%.27. What is the Treynor measure of performance evaluation for Sooner Stock Fund?A) 1.33%B) 4.00%C) 8.67%D) 9.44%E) 37.14%Answer: D Difficulty: ModerateRationale: (20% - 3%)/1.8 = 9.44%.28. Calculate the Jensen measure of performance evaluation for Sooner Stock Fund.A) 2.6%B) 4.00%C) 8.67%D) 31.43%E) 37.14%Answer: A Difficulty: ModerateRationale:αP = 20% - [3% + 1.8(11% - 3%)] = 2.6%.29. Calculate the information ratio for Sooner Stock Fund.A) 1.53B) 1.30C) 8.67D) 31.43E) 37.14Answer: B Difficulty: ModerateRationale:αP = 20% - [3% + 1.8(11% - 3%)] = 2.6%, 2.6% / 2.00% = 1.3.Use the following to answer questions 30-33:The following data are available relating to the performance of Monarch Stock Fund and the market portfolio:30. What is the information ratio measure of performance evaluation for Monarch StockFund?A) 1.00%B) 280.00%C) 44.00%D) 50.00%E) none of the aboveAnswer: B Difficulty: ModerateRationale: αP = 16% - [4% +1.15(12% - 4%)] = 2.8%; αP/σ(e P) = 2.8%/1% = 2.8, or280%.31. Calculate Sharpe's measure of performance for Monarch Stock Fund.A) 1.00%B) 46.00%C) 44.00%D) 50.00%E) none of the aboveAnswer: B Difficulty: ModerateRationale: (16 - 4)/ 26 = .4632.Calculate Treynor's measure of performance for Monarch Stock Fund.A) 10.40%B) 8.80%C) 44.00%D) 50.00%E) none of the aboveAnswer: A Difficulty: ModerateRationale: (16 - 4)/1.15 = 10.433. Calculate Jensen's measure of performance for Monarch Stock Fund.A) 1.00%B) 2.80%C) 44.00%D) 50.00%E) none of the aboveAnswer: B Difficulty: ModerateRationale: 16 - [4 + 1.15 (12 - 4)] = 2.80%Use the following to answer questions 34-37:The following data are available relating to the performance of Seminole Fund and the market portfolio:34. If you wanted to evaluate the Seminole Fund using the M2 measure, what percent of theadjusted portfolio would need to be invested in T-Bills?A) -36% (borrow)B) 50%C) 8%D) 36%E) 73%Answer: E Difficulty: ModerateRationale: 22/30 = .733335. Calculate the M2 measure for the Seminole Fund.A) 4.0%B) 20.0%C) 2.86%D) 0.8%E) 40.0%Answer: D Difficulty: ModerateRationale: 22/30 = .7333; 1 - .7333 = .2667; M2 = [.7333 (18) + .2667 (6)] - 14 = 0.8%.36. If the Seminole Fund is actively managed, fairly priced, and will be mixed with themarket index portfolio, calculate the value of the measure that should be used forevaluation.A) 4.0%B) 20.0%C) 2.86%D) 0.8%E) 40%Answer: E Difficulty: DifficultRationale: The Sharpe ratio is the correct measure to use in this case. (18 - 6) / 30 = 40% 37. If the Seminole Fund is actively managed and will be mixed with the market indexportfolio, but you suspect it may be mispriced, calculate the value of the measure that should be used for evaluation.A) 4.0%C) 2.86%D) 0.8%E) 40%Answer: B Difficulty: DifficultRationale: The information ratio is the correct measure to use in this case. AP=18% - [6%+1.4*(14%-6%)] = 0.8%, Information Ratio= 0.8%/4.0%=.20= 20%Use the following to answer questions 38-41:The following data are available relating to the performance of Wildcat Fund and the market portfolio:38. What is the information ratio measure of performance evaluation for Wildcat Fund?A) 1.00%B) 8.80%C) 44.00%D) 50.00%E) none of the aboveAnswer: D Difficulty: ModerateRationale:αP = 18% - [7% +1.25(15% - 7%)] = 1%; αP/σ(e P) = 1%/2% = 0.50, or 50.00%.39. Calculate Sharpe's measure of performance for Wildcat Fund.A) 1.00%B) 8.80%C) 44.00%D) 50.00%E) none of the aboveAnswer: C Difficulty: ModerateRationale: (18 - 7)/ 25 = .4440. Calculate Treynor's measure of performance for Wildcat Fund.A) 1.00%B) 8.80%D) 50.00%E) none of the aboveAnswer: B Difficulty: ModerateRationale: (18 - 7)/1.25 = 8.841. Calculate Jensen's measure of performance for Wildcat Fund.A) 1.00%B) 8.80%C) 44.00%D) 50.00%E) none of the aboveAnswer: A Difficulty: ModerateRationale: 18 - [7 + 1.25 (15 - 7)] = 1.00%Use the following to answer questions 42-45:The following data are available relating to the performance of Long Horn Stock Fund and the market portfolio:42. What is the Sharpe measure of performance evaluation for Long Horn Stock Fund?A) 1.33%B) 4.00%C) 8.67%D) 31.43%E) 37.14%Answer: E Difficulty: ModerateRationale: (19% - 6%)/35% = 0.3714, or 37.14%.43. What is the Treynor measure of performance evaluation for Long Horn Stock Fund?A) 1.33%B) 4.00%C) 8.67%D) 31.43%Answer: C Difficulty: ModerateRationale: (19% - 6%)/1.5 = 8.67%.44. Calculate the Jensen measure of performance evaluation for Long Horn Stock Fund.A) 1.33%B) 4.00%C) 8.67%D) 31.43%E) 37.14%Answer: B Difficulty: ModerateRationale: αP = 19% - [6% + 1.5(12% - 6%)] = 4.00%.45. Calculate the information ratio for Long Horn Stock Fund.A) 1.33B) 4.00C) 8.67D) 31.43E) 37.14Answer: A Difficulty: ModerateRationale:αP = 19% - [6% + 1.5(12% - 6%)] = 4.00%, 4.00% / 3.00% = 1.33.Use the following to answer questions 46-48:In a particular year, Razorback Mutual Fund earned a return of 1% by making the following investments in asset classes:46. The total excess return on the Razorback Fund's managed portfolio was __________.A) -1.80%B) -1.00%C) 0.80%D) 1.00%E) none of the aboveAnswer: B Difficulty: ModerateRationale: 1% - 2% = -1%.47. The contribution of asset allocation across markets to the Razorback Fund's total excessreturn was __________.A) -1.80%B) -1.00%C) 0.80%D) 1.00%E) none of the aboveAnswer: A Difficulty: DifficultRationale: See table below.48. The contribution of selection within markets to the Razorback Fund's total excess returnwas __________.A) -1.80%B) -1.00%C) 0.80%D) 1.00%E) none of the aboveAnswer: C Difficulty: DifficultRationale: See table below.Use the following to answer questions 49-51:In a particular year, Aggie Mutual Fund earned a return of 15% by making the following investments in the following asset classes49. The total excess return on the Aggie managed portfolio was __________.A) 1%B) 3%C) 4%D) 5%E) none of the aboveAnswer: D Difficulty: EasyRationale: 15% - 10% = 5%.50. The contribution of asset allocation across markets to the total excess return wasA) 1%B) 3%C) 4%D) 5%E) none of the aboveAnswer: C Difficulty: DifficultRationale: See table below.51. The contribution of selection within markets to total excess return wasA) 1%B) 3%C) 4%D) 5%E) none of the aboveAnswer: A Difficulty: DifficultRationale: See table below.52. In measuring the comparative performance of different fund managers, the preferredmethod of calculating rate of return is __________.A) internal rate of returnB) arithmetic averageC) dollar-weightedD) time-weightedE) none of the aboveAnswer: D Difficulty: EasyRationale: For the investor, the internal rate of return (or dollar-weighted rate of return) is the preferred measure because if the investor chooses to invest heavily in one investment vehicle that performs extremely well, an increased return results, which is reflected in A (or C). However, the mutual fund manager does not usually make the decision as to the amount to invest in a particular vehicle; therefore, the time-weighted rate of return isusually used to evaluate these managers. Arithmetic average is a good measure forestimating future returns (if expectations are unchanged).53. The __________ measures the reward to volatility trade-off by dividing the averageportfolio excess return by the standard deviation of returns.A) Sharpe measureB) Treynor measureC) Jensen measureD) information ratioE) none of the aboveAnswer: A Difficulty: EasyRationale: The Sharpe measure is a measure of excess average portfolio returns over time per unit of total risk of the portfolio returns (standard deviation).54. A pension fund that begins with $500,000 earns 15% the first year and 10% the secondyear. At the beginning of the second year, the sponsor contributes another $300,000.The dollar-weighted and time-weighted rates of return, respectively, wereA) 11.7% and 12.5%B) 12.1% and 12.5%C) 12.5% and 11.7%D) 12.5% and 12.1%E) none of the aboveAnswer: B Difficulty: ModerateRationale: $500,000 + $300,000/(1 + r) = $75,000/(1 + r) + $880,000/(1 + r)2; r = 12.059%; (15+ 10)/2 = 12.5%55. The Value Line Index is an equally weighted geometric average of the returns of about1,700 firms. The value of an index based on the geometric average returns of 3 stocks where the returns on the 3 stocks during a given period were 32%, 5%, and -10%,respectively, is __________.A) 4.3%B) 7.6%C) 9.0%D) 13.4%E) 5.0%Answer: B Difficulty: ModerateRationale: [(1.32)(1.05)(0.90)]1/3 - 1.0 = 7.6%.56. Risk-adjusted mutual fund performance measures have decreased in popularity becauseA) in nearly efficient markets it is extremely difficult for portfolio managers tooutperform the market.B) the measures usually result in negative performance results for the portfoliomanagers.C) the high rates of return earned by the mutual funds in recent years have made themeasures useless.D) A and B.E) none of the above.Answer: D Difficulty: ModerateRationale: C is not true because the overall market has performed extremely well in the recent years of mutual fund growth and positive performance. In fact, the funds have grown and performed well because of the sustained market rally, and still do not show superior performance when compared to the market.57. The Sharpe, Treynor, and Jensen portfolio performance measures are derived from theCAPM,A) therefore, it does not matter which measure is used to evaluate a portfolio manager.B) however, the Sharpe and Treynor measures use different risk measures, thereforethe measures vary as to whether or not they are appropriate, depending on theinvestment scenario.C) therefore, all measure the same attributes.D) A and B.E) none of the above.Answer: B Difficulty: ModerateRationale: The Sharpe measure uses standard deviation, or total risk, as the risk measure; the Treynor measure uses beta, or systematic risk, as the risk measure.58. The Jensen portfolio evaluation measureA) is a measure of return per unit of risk, as measured by standard deviation.B) is an absolute measure of return over and above that predicted by the CAPM.C) is a measure of return per unit of risk, as measured by beta.D) A and B.E) B and C.Answer: B Difficulty: ModerateRationale: A is the Sharpe measure, C is the Treynor measure.59. The M-squared measureA) considers only the return when evaluating mutual funds.B) considers the risk-adjusted return when evaluating mutual funds.C) considers only the total risk when evaluating mutual funds.D) considers only the market risk when evaluating mutual funds.E) none of the above.Answer: B Difficulty: ModerateRationale: The M-squared measure adjusts the fund by hypothetically borrowing or lending until the total portfolio matches the risk level of an index, then ranks the fund on thebasis of this risk-adjusted return. .60. The dollar-weighted return on a portfolio is equivalent toA) the time-weighted return.B) the geometric average return.C) the arithmetic average return.D) the portfolio's internal rate of return.E) none of the above.Answer: D Difficulty: EasyRationale: The dollar-weighted return on a portfolio is equivalent to finding the internal rate of return on the cash flows to the portfolio.61. A portfolio manager's ranking within a comparison universe may not provide a goodmeasure of performance becauseA) portfolio returns may not be calculated in the same way.B) portfolio durations can vary across managers.C) if managers follow a particular style or subgroup, portfolios may not be comparable.D) both B and C.E) all of the above.Answer: D Difficulty: ModerateRationale: Returns are typically time-weighted for all portfolios and broad risk classes or styles are grouped together, but particular subgroups and differences in duration are typically not considered.62. The geometric average rate of return is based on。
(完整word版)投资学第7版Test Bank答案09
Multiple Choice Questions1. In the context of the Capital Asset Pricing Model (CAPM) the relevant measure of riskisA) unique risk.B) beta.C) standard deviation of returns.D) variance of returns.E) none of the above.Answer: B Difficulty: EasyRationale: Once, a portfolio is diversified, the only risk remaining is systematic risk,which is measured by beta.2. According to the Capital Asset Pricing Model (CAPM) a well diversified portfolio's rateof return is a function ofA) market riskB) unsystematic riskC) unique risk.D) reinvestment risk.E) none of the above.Answer: A Difficulty: EasyRationale: With a diversified portfolio, the only risk remaining is market, or systematic, risk. This is the only risk that influences return according to the CAPM.3. The market portfolio has a beta ofA) 0.B) 1.C) -1.D) 0.5.E) none of the aboveAnswer: B Difficulty: EasyRationale: By definition, the beta of the market portfolio is 1.4. The risk-free rate and the expected market rate of return are 0.06 and 0.12, respectively.According to the capital asset pricing model (CAPM), the expected rate of return on security X with a beta of 1.2 is equal toA) 0.06.B) 0.144.C) 0.12.D) 0.132E) 0.18Answer: D Difficulty: EasyRationale: E(R) = 6% + 1.2(12 - 6) = 13.2%.5. The risk-free rate and the expected market rate of return are 0.056 and 0.125,respectively. According to the capital asset pricing model (CAPM), the expected rate of return on a security with a beta of 1.25 is equal toA) 0.1225B) 0.144.C) 0.153.D) 0.134E) 0.117Answer: A Difficulty: EasyRationale: E(R) = 5.6% + 1.25(12.5 - 5.6) = 14.225%.6. Which statement is not true regarding the market portfolio?A) It includes all publicly traded financial assets.B) It lies on the efficient frontier.C) All securities in the market portfolio are held in proportion to their market values.D) It is the tangency point between the capital market line and the indifference curve.E) All of the above are true.Answer: D Difficulty: ModerateRationale: The tangency point between the capital market line and the indifference curve is the optimal portfolio for a particular investor.7. Which statement is not true regarding the Capital Market Line (CML)?A) The CML is the line from the risk-free rate through the market portfolio.B) The CML is the best attainable capital allocation line.C) The CML is also called the security market line.D) The CML always has a positive slope.E) The risk measure for the CML is standard deviation.Answer: C Difficulty: ModerateRationale: Both the Capital Market Line and the Security Market Line depict risk/return relationships. However, the risk measure for the CML is standard deviation and the risk measure for the SML is beta (thus C is not true; the other statements are true).8. The market risk, beta, of a security is equal toA) the covariance between the security's return and the market return divided by thevariance of the market's returns.B) the covariance between the security and market returns divided by the standarddeviation of the market's returns.C) the variance of the security's returns divided by the covariance between the securityand market returns.D) the variance of the security's returns divided by the variance of the market's returns.E) none of the above.Answer: A Difficulty: ModerateRationale: Beta is a measure of how a security's return covaries with the market returns, normalized by the market variance.9. According to the Capital Asset Pricing Model (CAPM), the expected rate of return onany security is equal toA) R f+ β [E(R M)].B) R f + β [E(R M) - R f].C) β [E(R M) - R f].D) E(R M) + R f.E) none of the above.Answer: B Difficulty: ModerateRationale: The expected rate of return on any security is equal to the risk free rate plus the systematic risk of the security (beta) times the market risk premium, E(R M - R f).10. The Security Market Line (SML) isA) the line that describes the expected return-beta relationship for well-diversifiedportfolios only.B) also called the Capital Allocation Line.C) the line that is tangent to the efficient frontier of all risky assets.D) the line that represents the expected return-beta relationship.E) the line that represents the relationship between an individual security's return andthe market's return.Answer: D Difficulty: ModerateRationale: The SML is a measure of expected return per unit of risk, where risk isdefined as beta (systematic risk).11. According to the Capital Asset Pricing Model (CAPM), fairly priced securitiesA) have positive betas.B) have zero alphas.C) have negative betas.D) have positive alphas.E) none of the above.Answer: B Difficulty: ModerateRationale: A zero alpha results when the security is in equilibrium (fairly priced for the level of risk).12. According to the Capital Asset Pricing Model (CAPM), under priced securitiesA) have positive betas.B) have zero alphas.C) have negative betas.D) have positive alphas.E) none of the above.Answer: D Difficulty: Moderate13. According to the Capital Asset Pricing Model (CAPM), over priced securitiesA) have positive betas.B) have zero alphas.C) have negative betas.D) have positive alphas.E) none of the above.Answer: C Difficulty: ModerateRationale: A zero alpha results when the security is in equilibrium (fairly priced for the level of risk).14. According to the Capital Asset Pricing Model (CAPM),A) a security with a positive alpha is considered overpriced.B) a security with a zero alpha is considered to be a good buy.C) a security with a negative alpha is considered to be a good buy.D) a security with a positive alpha is considered to be underpriced.E) none of the above.Answer: D Difficulty: ModerateRationale: A security with a positive alpha is one that is expected to yield an abnormal positive rate of return, based on the perceived risk of the security, and thus isunderpriced.15. According to the Capital Asset Pricing Model (CAPM), which one of the followingstatements is false?A) The expected rate of return on a security decreases in direct proportion to a decreasein the risk-free rate.B) The expected rate of return on a security increases as its beta increases.C) A fairly priced security has an alpha of zero.D) In equilibrium, all securities lie on the security market line.E) All of the above statements are true.Answer: A Difficulty: ModerateRationale: Statements B, C, and D are true, but statement A is false.16. In a well diversified portfolioA) market risk is negligible.B) systematic risk is negligible.C) unsystematic risk is negligible.D) nondiversifiable risk is negligible.E) none of the above.Answer: C Difficulty: ModerateRationale: Market, or systematic, or nondiversifiable, risk is present in a diversified portfolio; the unsystematic risk has been eliminated.17. Empirical results regarding betas estimated from historical data indicate thatA) betas are constant over time.B) betas of all securities are always greater than one.C) betas are always near zero.D) betas appear to regress toward one over time.E) betas are always positive.Answer: D Difficulty: ModerateRationale: Betas vary over time, betas may be negative or less than one, betas are not always near zero; however, betas do appear to regress toward one over time.18. Your personal opinion is that a security has an expected rate of return of 0.11. It has abeta of 1.5. The risk-free rate is 0.05 and the market expected rate of return is 0.09.According to the Capital Asset Pricing Model, this security isA) underpriced.B) overpriced.C) fairly priced.D) cannot be determined from data provided.E) none of the above.Answer: C Difficulty: ModerateRationale: 11% = 5% + 1.5(9% - 5%) = 11.0%; therefore, the security is fairly priced.19. The risk-free rate is 7 percent. The expected market rate of return is 15 percent. If youexpect a stock with a beta of 1.3 to offer a rate of return of 12 percent, you shouldA) buy the stock because it is overpriced.B) sell short the stock because it is overpriced.C) sell the stock short because it is underpriced.D) buy the stock because it is underpriced.E) none of the above, as the stock is fairly priced.Answer: B Difficulty: ModerateRationale: 12% < 7% + 1.3(15% - 7%) = 17.40%; therefore, stock is overpriced and should be shorted.20. You invest $600 in a security with a beta of 1.2 and $400 in another security with a betaof 0.90. The beta of the resulting portfolio isA) 1.40B) 1.00C) 0.36D) 1.08E) 0.80Answer: D Difficulty: ModerateRationale: 0.6(1.2) + 0.4(0.90) = 1.08.21. A security has an expected rate of return of 0.10 and a beta of 1.1. The market expectedrate of return is 0.08 and the risk-free rate is 0.05. The alpha of the stock isA) 1.7%.B) -1.7%.C) 8.3%.D) 5.5%.E) none of the above.Answer: A Difficulty: ModerateRationale: 10% - [5% +1.1(8% - 5%)] = 1.7%.22. Your opinion is that CSCO has an expected rate of return of 0.13. It has a beta of 1.3.The risk-free rate is 0.04 and the market expected rate of return is 0.115. According to the Capital Asset Pricing Model, this security isA) underpriced.B) overpriced.C) fairly priced.D) cannot be determined from data provided.E) none of the above.Answer: B Difficulty: ModerateRationale: 11.5% - 4% + 1.3(11.5% - 4%) = -2.25%; therefore, the security isoverpriced.23. Your opinion is that CSCO has an expected rate of return of 0.1375. It has a beta of 1.3.The risk-free rate is 0.04 and the market expected rate of return is 0.115. According to the Capital Asset Pricing Model, this security isA) underpriced.B) overpriced.C) fairly priced.D) cannot be determined from data provided.E) none of the above.Answer: C Difficulty: ModerateRationale: 13.75% - 4% + 1.3(11.5% - 4%) = 0.0%; therefore, the security is fairlypriced.24. Your opinion is that CSCO has an expected rate of return of 0.15. It has a beta of 1.3.The risk-free rate is 0.04 and the market expected rate of return is 0.115. According to the Capital Asset Pricing Model, this security isA) underpriced.B) overpriced.C) fairly priced.D) cannot be determined from data provided.E) none of the above.Answer: A Difficulty: ModerateRationale: 15% - 4% + 1.3(11.5% - 4%) = 1.25%; therefore, the security is under priced.25. Your opinion is that Boeing has an expected rate of return of 0.112. It has a beta of 0.92.The risk-free rate is 0.04 and the market expected rate of return is 0.10. According to the Capital Asset Pricing Model, this security isA) underpriced.B) overpriced.C) fairly priced.D) cannot be determined from data provided.E) none of the above.Answer: A Difficulty: ModerateRationale: 11.2% - 4% + 0.92(10% - 4%) = 1.68%; therefore, the security is underpriced.26. Your opinion is that Boeing has an expected rate of return of 0.0952. It has a beta of0.92. The risk-free rate is 0.04 and the market expected rate of return is 0.10.According to the Capital Asset Pricing Model, this security isA) underpriced.B) overpriced.C) fairly priced.D) cannot be determined from data provided.E) none of the above.Answer: C Difficulty: ModerateRationale: 9.52% - 4% + 0.92(10% - 4%) = 0.0%; therefore, the security is fairly priced.27. Your opinion is that Boeing has an expected rate of return of 0.08. It has a beta of 0.92.The risk-free rate is 0.04 and the market expected rate of return is 0.10. According to the Capital Asset Pricing Model, this security isA) underpriced.B) overpriced.C) fairly priced.D) cannot be determined from data provided.E) none of the above.Answer: C Difficulty: ModerateRationale: 8.0% - 4% + 0.92(10% - 4%) = -1.52%; therefore, the security is overpriced.28. The risk-free rate is 4 percent. The expected market rate of return is 11 percent. If youexpect CAT with a beta of 1.0 to offer a rate of return of 10 percent, you shouldA) buy stock X because it is overpriced.B) sell short stock X because it is overpriced.C) sell stock short X because it is underpriced.D) buy stock X because it is underpriced.E) none of the above, as the stock is fairly priced.Answer: B Difficulty: ModerateRationale: 10% < 4% + 1.0(11% - 4%) = 11.0%; therefore, stock is overpriced andshould be shorted.29. The risk-free rate is 4 percent. The expected market rate of return is 11 percent. If youexpect CAT with a beta of 1.0 to offer a rate of return of 11 percent, you shouldA) buy stock X because it is overpriced.B) sell short stock X because it is overpriced.C) sell stock short X because it is underpriced.D) buy stock X because it is underpriced.E) none of the above, as the stock is fairly priced.Answer: E Difficulty: ModerateRationale: 11% = 4% + 1.0(11% - 4%) = 11.0%; therefore, stock is fairly priced. 30. The risk-free rate is 4 percent. The expected market rate of return is 11 percent. If youexpect CAT with a beta of 1.0 to offer a rate of return of 13 percent, you shouldA) buy stock X because it is overpriced.B) sell short stock X because it is overpriced.C) sell stock short X because it is underpriced.D) buy stock X because it is underpriced.E) none of the above, as the stock is fairly priced.Answer: D Difficulty: ModerateRationale: 13% > 4% + 1.0(11% - 4%) = 11.0%; therefore, stock is under priced. 31. You invest 55% of your money in security A with a beta of 1.4 and the rest of yourmoney in security B with a beta of 0.9. The beta of the resulting portfolio isA) 1.466B) 1.157C) 0.968D) 1.082E) 1.175Answer: E Difficulty: ModerateRationale: 0.55(1.4) + 0.45(0.90) = 1.175.32. Given the following two stocks A and BIf the expected market rate of return is 0.09 and the risk-free rate is 0.05, which security would be considered the better buy and why?A) A because it offers an expected excess return of 1.2%.B) B because it offers an expected excess return of 1.8%.C) A because it offers an expected excess return of 2.2%.D) B because it offers an expected return of 14%.E) B because it has a higher beta.Answer: C Difficulty: ModerateRationale: A's excess return is expected to be 12% - [5% + 1.2(9% - 5%)] = 2.2%. B's excess return is expected to be 14% - [5% + 1.8(9% - 5%)] = 1.8%.33. Capital Asset Pricing Theory asserts that portfolio returns are best explained by:A) economic factors.B) specific risk.C) systematic risk.D) diversification.E) none of the above.Answer: C Difficulty: EasyRationale: The risk remaining in diversified portfolios is systematic risk; thus, portfolio returns are commensurate with systematic risk.34. According to the CAPM, the risk premium an investor expects to receive on any stockor portfolio increases:A) directly with alpha.B) inversely with alpha.C) directly with beta.D) inversely with beta.E) in proportion to its standard deviation.Answer: C Difficulty: EasyRationale: The market rewards systematic risk, which is measured by beta, and thus, the risk premium on a stock or portfolio varies directly with beta.35. What is the expected return of a zero-beta security?A) The market rate of return.B) Zero rate of return.C) A negative rate of return.D) The risk-free rate.E) None of the above.Answer: D Difficulty: ModerateRationale: E(R S) = r f + 0(R M - r f) = r f.36. Standard deviation and beta both measure risk, but they are different in thatA) beta measures both systematic and unsystematic risk.B) beta measures only systematic risk while standard deviation is a measure of totalrisk.C) beta measures only unsystematic risk while standard deviation is a measure of totalrisk.D) beta measures both systematic and unsystematic risk while standard deviationmeasures only systematic risk.E) beta measures total risk while standard deviation measures only nonsystematic risk.Answer: B Difficulty: EasyRationale: B is the only true statement.37. The expected return-beta relationshipA) is the most familiar expression of the CAPM to practitioners.B) refers to the way in which the covariance between the returns on a stock and returnson the market measures the contribution of the stock to the variance of the marketportfolio, which is beta.C) assumes that investors hold well-diversified portfolios.D) all of the above are true.E) none of the above is true.Answer: D Difficulty: ModerateRationale: Statements A, B and C all describe the expected return-beta relationship.38. The security market line (SML)A) can be portrayed graphically as the expected return-beta relationship.B) can be portrayed graphically as the expected return-standard deviation of marketreturns relationship.C) provides a benchmark for evaluation of investment performance.D) A and C.E) B and C.Answer: D Difficulty: ModerateRationale: The SML is a measure of expected return-beta (the CML is a measure of expected return-standard deviation of market returns). The SML provides the expected return-beta relationship for "fairly priced" securities; thus if a portfolio manager selects securities that are underpriced and produces a portfolio with a positive alpha, thisportfolio manager would receive a positive evaluation.39. Research by Jeremy Stein of MIT resolves the dispute over whether beta is a sufficientpricing factor by suggesting that managers should use beta to estimateA) long-term returns but not short-term returns.B) short-term returns but not long-term returns.C) both long- and short-term returns.D) book-to-market ratios.E) None of the above was suggested by Stein.Answer: A Difficulty: Difficult40. Studies of liquidity spreads in security markets have shown thatA) liquid stocks earn higher returns than illiquid stocks.B) illiquid stocks earn higher returns than liquid stocks.C) both liquid and illiquid stocks earn the same returns.D) illiquid stocks are good investments for frequent, short-term traders.E) None of the above is true.Answer: B Difficulty: Difficult41. An underpriced security will plotA) on the Security Market Line.B) below the Security Market Line.C) above the Security Market Line.D) either above or below the Security Market Line depending on its covariance withthe market.E) either above or below the Security Market Line depending on its standard deviation.Answer: C Difficulty: EasyRationale: An underpriced security will have a higher expected return than the SML would predict; therefore it will plot above the SML.42. The risk premium on the market portfolio will be proportional toA) the average degree of risk aversion of the investor population.B) the risk of the market portfolio as measured by its variance.C) the risk of the market portfolio as measured by its beta.D) both A and B are true.E) both A and C are true.Answer: D Difficulty: ModerateRationale: The risk premium on the market portfolio is proportional to the averagedegree of risk aversion of the investor population and the risk of the market portfolio measured by its variance.43. In equilibrium, the marginal price of risk for a risky security must beA) equal to the marginal price of risk for the market portfolio.B) greater than the marginal price of risk for the market portfolio.C) less than the marginal price of risk for the market portfolio.D) adjusted by its degree of nonsystematic risk.E) none of the above is true.Answer: A Difficulty: ModerateRationale: In equilibrium, the marginal price of risk for a risky security must be equal to the marginal price of risk for the market. If not, investors will buy or sell the security until they are equal.44. The capital asset pricing model assumesA) all investors are price takers.B) all investors have the same holding period.C) investors pay taxes on capital gains.D) both A and B are true.E) A, B and C are all true.Answer: D Difficulty: EasyRationale: The CAPM assumes that investors are price-takers with the same single holding period and that there are no taxes or transaction costs.45. If investors do not know their investment horizons for certainA) the CAPM is no longer valid.B) the CAPM underlying assumptions are not violated.C) the implications of the CAPM are not violated as long as investors' liquidity needsare not priced.D) the implications of the CAPM are no longer useful.E) none of the above is true.Answer: C Difficulty: ModerateRationale: This is discussed in the chapter's section about extensions to the CAPM. It examines what the consequences are when the assumptions are removed.46. The value of the market portfolio equalsA) the sum of the values of all equity securities.B) the sum of the values of all equity and fixed income securities.C) the sum the values of all equity, fixed income, and derivative securities.D) the sum of the values of all equity, fixed income, and derivative securities plus thevalue of all mutual funds.E) the entire wealth of the economy.Answer: E Difficulty: ModerateRationale: The market portfolio includes all assets in existence.47. The amount that an investor allocates to the market portfolio is negatively related toI)the expected return on the market portfolio.II)the investor's risk aversion coefficient.III)the risk-free rate of return.IV)the variance of the market portfolioA) I and IIB) II and IIIC) II and IVD) II, III, and IVE) I, III, and IVAnswer: D Difficulty: ModerateRationale: The optimal proportion is given by y = (E(R M)-r f)/(.01xAσ2M). This amount will decrease as r f, A, and σ2M decrease.48. One of the assumptions of the CAPM is that investors exhibit myopic behavior. Whatdoes this mean?A) They plan for one identical holding period.B) They are price-takers who can't affect market prices through their trades.C) They are mean-variance optimizers.D) They have the same economic view of the world.E) They pay no taxes or transactions costs.Answer: A Difficulty: ModerateRationale: Myopic behavior is shortsighted, with no concern for medium-term orlong-term implications.49. The CAPM applies toA) portfolios of securities only.B) individual securities only.C) efficient portfolios of securities only.D) efficient portfolios and efficient individual securities only.E) all portfolios and individual securities.Answer: E Difficulty: ModerateRationale: The CAPM is an equilibrium model for all assets. Each asset's risk premium is a function of its beta coefficient and the risk premium on the market portfolio.50. Which of the following statements about the mutual fund theorem is true?I)It is similar to the separation property.II)It implies that a passive investment strategy can be efficient.III)It implies that efficient portfolios can be formed only through active strategies.IV)It means that professional managers have superior security selection strategies.A) I and IVB) I, II, and IVC) I and IID) III and IVE) II and IVAnswer: C Difficulty: ModerateRationale: The mutual fund theorem is similar to the separation property. The technical task of creating mutual funds can be delegated to professional managers; thenindividuals combine the mutual funds with risk-free assets according to theirpreferences. The passive strategy of investing in a market index fund is efficient.51. The expected return -- beta relationship of the CAPM is graphically represented byA) the security market line.B) the capital market line.C) the capital allocation line.D) the efficient frontier with a risk-free asset.E) the efficient frontier without a risk-free asset.Answer: A Difficulty: EasyRationale: The security market line shows expected return on the vertical axis and beta on the horizontal axis. It has an intercept of r f and a slope of E(R M) - r f.52. A “fairly priced” asset liesA) above the security market line.B) on the security market line.C) on the capital market line.D) above the capital market line.E) below the security market line.Answer: B Difficulty: EasyRationale: Securities that lie on the SML earn exactly the expected return generated by the CAPM. Their prices are proportional to their beta coefficients and they have alphas equal to zero.53. For the CAPM that examines illiquidity premiums, if there is correlation among assetsdue to common systematic risk factors, the illiquidity premium on asset i is a function ofA) the market's volatility.B) asset i's volatility.C) the trading costs of security i.D) the risk-free rate.E) the money supply.Answer: C Difficulty: ModerateRationale: The formula for this extension to the CAPM relaxes the assumption thattrading is costless.54. Your opinion is that security A has an expected rate of return of 0.145. It has a beta of1.5. The risk-free rate is 0.04 and the market expected rate of return is 0.11. Accordingto the Capital Asset Pricing Model, this security isA) underpriced.B) overpriced.C) fairly priced.D) cannot be determined from data provided.E) none of the above.Answer: C Difficulty: ModerateRationale: 14.5% = 4% + 1.5(11% - 4%) = 14.5%; therefore, the security is fairlypriced.55. Your opinion is that security C has an expected rate of return of 0.106. It has a beta of1.1. The risk-free rate is 0.04 and the market expected rate of return is 0.10. Accordingto the Capital Asset Pricing Model, this security isA) underpriced.B) overpriced.C) fairly priced.D) cannot be determined from data provided.E) none of the above.Answer: A Difficulty: ModerateRationale: 4% + 1.1(10% - 4%) = 10.6%; therefore, the security is fairly priced.56. The risk-free rate is 4 percent. The expected market rate of return is 12 percent. If youexpect stock X with a beta of 1.0 to offer a rate of return of 10 percent, you shouldA) buy stock X because it is overpriced.B) sell short stock X because it is overpriced.C) sell stock short X because it is underpriced.D) buy stock X because it is underpriced.E) none of the above, as the stock is fairly priced.Answer: B Difficulty: ModerateRationale: 10% < 4% + 1.0(12% - 4%) = 12.0%; therefore, stock is overpriced and should be shorted.57. The risk-free rate is 5 percent. The expected market rate of return is 11 percent. If youexpect stock X with a beta of 2.1 to offer a rate of return of 15 percent, you shouldA) buy stock X because it is overpriced.B) sell short stock X because it is overpriced.C) sell stock short X because it is underpriced.D) buy stock X because it is underpriced.E) none of the above, as the stock is fairly priced.Answer: B Difficulty: ModerateRationale: 15% < 5% + 2.1(11% - 5%) = 17.6%; therefore, stock is overpriced and should be shorted.58. You invest 50% of your money in security A with a beta of 1.6 and the rest of yourmoney in security B with a beta of 0.7. The beta of the resulting portfolio isA) 1.40B) 1.15C) 0.36D) 1.08E) 0.80Answer: B Difficulty: ModerateRationale: 0.5(1.6) + 0.5(0.70) = 1.15.。
投资学第7版testbank答案18
Multiple Choice Questions1. ________ is equal to the total market value of the firm's common stock divided by (thereplacement cost of the firm's assets less liabilities).A) Book value per shareB) Liquidation value per shareC) Market value per shareD) Tobin's QE) None of the above.Answer: D Difficulty: EasyRationale: Book value per share is assets minus liabilities divided by number of shares.Liquidation value per share is the amount a shareholder would receive in the event ofbankruptcy. Market value per share is the market price of the stock.2. High P/E ratios tend to indicate that a company will _______, ceteris paribus.A) grow quicklyB) grow at the same speed as the average companyC) grow slowlyD) not growE) none of the aboveAnswer: A Difficulty: EasyRationale: Investors pay for growth; hence the high P/E ratio for growth firms; however, the investor should be sure that he or she is paying for expected, not historic, growth.3. _________ is equal to (common shareholders' equity/common shares outstanding).A) Book value per shareB) Liquidation value per shareC) Market value per shareD) Tobin's QE) none of the aboveAnswer: A Difficulty: EasyRationale: See rationale for test bank question 18.14. ________ are analysts who use information concerning current and prospectiveprofitability of a firms to assess the firm's fair market value.A) Credit analystsB) Fundamental analystsC) Systems analystsD) Technical analystsE) SpecialistsAnswer: B Difficulty: EasyRationale: Fundamentalists use all public information in an attempt to value stock(while hoping to identify undervalued securities).5. The _______ is defined as the present value of all cash proceeds to the investor in thestock.A) dividend payout ratioB) intrinsic valueC) market capitalization rateD) plowback ratioE) none of the aboveAnswer: B Difficulty: EasyRationale: The cash flows from the stock discounted at the appropriate rate, based on the perceived riskiness of the stock, the market risk premium and the risk free rate, determine the intrinsic value of the stock.6. _______ is the amount of money per common share that could be realized by breakingup the firm, selling the assets, repaying the debt, and distributing the remainder toshareholders.A) Book value per shareB) Liquidation value per shareC) Market value per shareD) Tobin's QE) None of the aboveAnswer: B Difficulty: EasyRationale: See explanation for test bank question 18.1.7. Since 1955, Treasury bond yields and earnings yields on stocks were_______.A) identicalB) negatively correlatedC) positively correlatedD) uncorrelatedAnswer: C Difficulty: EasyRationale: The earnings yield on stocks equals the expected real rate of return on the stock market, which should be equal to the yield to maturity on Treasury bonds plus a risk premium, which may change slowly over time. The yields are plotted in Figure18.8.8. Historically, P/E ratios have tended to be _________.A) higher when inflation has been highB) lower when inflation has been highC) uncorrelated with inflation rates but correlated with other macroeconomic variablesD) uncorrelated with any macroeconomic variables including inflation ratesE) none of the aboveAnswer: B Difficulty: EasyRationale: P/E ratios have tended to be lower when inflation has been high, reflecting the market's assessment that earnings in these periods are of "lower quality", i.e.,artificially distorted by inflation, and warranting lower P/E ratios.9. The ______ is a common term for the market consensus value of the required return ona stock.A) dividend payout ratioB) intrinsic valueC) market capitalization rateD) plowback rateE) none of the aboveAnswer: C Difficulty: EasyRationale: The market capitalization rate, which consists of the risk-free rate, thesystematic risk of the stock and the market risk premium, is the rate at which a stock'scash flows are discounted in order to determine intrinsic value.10. The _________ is the fraction of earnings reinvested in the firm.A) dividend payout ratioB) retention rateC) plowback ratioD) A and CE) B and CAnswer: E Difficulty: EasyRationale: Retention rate, or plowback ratio, represents the earnings reinvested in the firm. The retention rate, or (1 - plowback) = dividend payout.11. The Gordon modelA) is a generalization of the perpetuity formula to cover the case of a growingperpetuity.B) is valid only when g is less than k.C) is valid only when k is less than g.D) A and B.E) A and C.Answer: D Difficulty: EasyRationale: The Gordon model assumes constant growth indefinitely. Mathematically, g must be less than k; otherwise, the intrinsic value is undefined.12. You wish to earn a return of 13% on each of two stocks, X and Y. Stock X is expectedto pay a dividend of $3 in the upcoming year while Stock Y is expected to pay adividend of $4 in the upcoming year. The expected growth rate of dividends for bothstocks is 7%. The intrinsic value of stock X ______.A) cannot be calculated without knowing the market rate of returnB) will be greater than the intrinsic value of stock YC) will be the same as the intrinsic value of stock YD) will be less than the intrinsic value of stock YE) none of the above is a correct answer.Answer: D Difficulty: EasyRationale: PV0 = D1/(k-g); given k and g are equal, the stock with the larger dividend will have the higher value.13. You wish to earn a return of 11% on each of two stocks, C and D. Stock C is expected topay a dividend of $3 in the upcoming year while Stock D is expected to pay a dividend of $4 in the upcoming year. The expected growth rate of dividends for both stocks is7%. The intrinsic value of stock C ______.A) will be greater than the intrinsic value of stock DB) will be the same as the intrinsic value of stock DC) will be less than the intrinsic value of stock DD) cannot be calculated without knowing the market rate of returnE) none of the above is a correct answer.Answer: C Difficulty: EasyRationale: PV0 = D1/(k-g); given k and g are equal, the stock with the larger dividend will have the higher value.14. You wish to earn a return of 12% on each of two stocks, A and B. Each of the stocks isexpected to pay a dividend of $2 in the upcoming year. The expected growth rate ofdividends is 9% for stock A and 10% for stock B. The intrinsic value of stock A _____.A) will be greater than the intrinsic value of stock BB) will be the same as the intrinsic value of stock BC) will be less than the intrinsic value of stock BD) cannot be calculated without knowing the rate of return on the market portfolio.E) none of the above is a correct statement.Answer: C Difficulty: EasyRationale: PV0 = D1/(k-g); given that dividends are equal, the stock with the highergrowth rate will have the higher value.15. You wish to earn a return of 10% on each of two stocks, C and D. Each of the stocks isexpected to pay a dividend of $2 in the upcoming year. The expected growth rate ofdividends is 9% for stock C and 10% for stock D. The intrinsic value of stock C _____.A) will be greater than the intrinsic value of stock DB) will be the same as the intrinsic value of stock DC) will be less than the intrinsic value of stock DD) cannot be calculated without knowing the rate of return on the market portfolio.E) none of the above is a correct statement.Answer: C Difficulty: EasyRationale: PV0 = D1/(k-g); given that dividends are equal, the stock with the highergrowth rate will have the higher value.16. Each of two stocks, A and B, are expected to pay a dividend of $5 in the upcoming year.The expected growth rate of dividends is 10% for both stocks. You require a rate ofreturn of 11% on stock A and a return of 20% on stock B. The intrinsic value of stock A _____.A) will be greater than the intrinsic value of stock BB) will be the same as the intrinsic value of stock BC) will be less than the intrinsic value of stock BD) cannot be calculated without knowing the market rate of return.E) none of the above is true.Answer: A Difficulty: EasyRationale: PV0 = D1/(k-g); given that dividends are equal, the stock with the largerrequired return will have the lower value.17. Each of two stocks, C and D, are expected to pay a dividend of $3 in the upcoming year.The expected growth rate of dividends is 9% for both stocks. You require a rate ofreturn of 10% on stock C and a return of 13% on stock D. The intrinsic value of stock C _____.A) will be greater than the intrinsic value of stock DB) will be the same as the intrinsic value of stock DC) will be less than the intrinsic value of stock DD) cannot be calculated without knowing the market rate of return.E) none of the above is true.Answer: A Difficulty: EasyRationale: PV0 = D1/(k-g); given that dividends are equal, the stock with the largerrequired return will have the lower value.18. If the expected ROE on reinvested earnings is equal to k, the multistage DDM reducestoA) V0 = (Expected Dividend Per Share in Year 1)/kB) V0 = (Expected EPS in Year 1)/kC) V0 = (Treasury Bond Yield in Year 1)/kD) V0 = (Market return in Year 1)/kE) none of the aboveAnswer: B Difficulty: ModerateRationale: If ROE = k, no growth is occurring; b = 0; EPS = DPS19. Low Tech Company has an expected ROE of 10%. The dividend growth rate will be________ if the firm follows a policy of paying 40% of earnings in the form ofdividends.A) 6.0%B) 4.8%C) 7.2%D) 3.0%E) none of the aboveAnswer: A Difficulty: EasyRationale: 10% X 0.60 = 6.0%.20. Music Doctors Company has an expected ROE of 14%. The dividend growth rate willbe ________ if the firm follows a policy of paying 60% of earnings in the form ofdividends.A) 4.8%B) 5.6%C) 7.2%D) 6.0%E) none of the aboveAnswer: B Difficulty: EasyRationale: 14% X 0.40 = 5.6%.21. Medtronic Company has an expected ROE of 16%. The dividend growth rate will be________ if the firm follows a policy of paying 70% of earnings in the form ofdividends.A) 3.0%B) 6.0%C) 7.2%D) 4.8%E) none of the aboveAnswer: D Difficulty: EasyRationale: 16% X 0.30 = 4.8%.22. High Speed Company has an expected ROE of 15%. The dividend growth rate will be________ if the firm follows a policy of paying 50% of earnings in the form ofdividends.A) 3.0%B) 4.8%C) 7.5%D) 6.0%E) none of the aboveAnswer: C Difficulty: EasyRationale: 15% X 0.50 = 7.5%.23. Light Construction Machinery Company has an expected ROE of 11%. The dividendgrowth rate will be _______ if the firm follows a policy of paying 25% of earnings inthe form of dividends.A) 3.0%B) 4.8%C) 8.25%D) 9.0%E) none of the aboveAnswer: C Difficulty: EasyRationale: 11% X 0.75 = 8.25%.24. Xlink Company has an expected ROE of 15%. The dividend growth rate will be_______ if the firm follows a policy of plowing back 75% of earnings.A) 3.75%B) 11.25%C) 8.25%D) 15.0%E) none of the aboveAnswer: B Difficulty: EasyRationale: 15% X 0.75 = 11.25%.25. Think Tank Company has an expected ROE of 26%. The dividend growth rate will be_______ if the firm follows a policy of plowing back 90% of earnings.A) 2.6%B) 10%C) 23.4%D) 90%E) none of the aboveAnswer: C Difficulty: EasyRationale: 26% X 0.90 = 23.4%.26. Bubba Gumm Company has an expected ROE of 9%. The dividend growth rate will be_______ if the firm follows a policy of plowing back 10% of earnings.A) 90%B) 10%C) 9%D) 0.9%E) none of the aboveAnswer: D Difficulty: EasyRationale: 9% X 0.10 = 0.9%.27. A preferred stock will pay a dividend of $2.75 in the upcoming year, and every yearthereafter, i.e., dividends are not expected to grow. You require a return of 10% on this stock. Use the constant growth DDM to calculate the intrinsic value of this preferred stock.A) $0.275B) $27.50C) $31.82D) $56.25E) none of the aboveAnswer: B Difficulty: ModerateRationale: 2.75 / .10 = 27.5028. A preferred stock will pay a dividend of $3.00in the upcoming year, and every yearthereafter, i.e., dividends are not expected to grow. You require a return of 9% on this stock. Use the constant growth DDM to calculate the intrinsic value of this preferred stock.A) $33.33B) $0..27C) $31.82D) $56.25E) none of the aboveAnswer: A Difficulty: ModerateRationale: 3.00 / .09 = 33.3329. A preferred stock will pay a dividend of $1.25 in the upcoming year, and every yearthereafter, i.e., dividends are not expected to grow. You require a return of 12% on this stock. Use the constant growth DDM to calculate the intrinsic value of this preferred stock.A) $11.56B) $9.65C) $11.82D) $10.42E) none of the aboveAnswer: D Difficulty: ModerateRationale: 1.25 / .12 = 10.4230. A preferred stock will pay a dividend of $3.50 in the upcoming year, and every yearthereafter, i.e., dividends are not expected to grow. You require a return of 11% on this stock. Use the constant growth DDM to calculate the intrinsic value of this preferred stock.A) $0.39B) $0.56C) $31.82D) $56.25E) none of the aboveAnswer: C Difficulty: ModerateRationale: 3.50 / .11 = 31.8231. A preferred stock will pay a dividend of $7.50 in the upcoming year, and every yearthereafter, i.e., dividends are not expected to grow. You require a return of 10% on this stock. Use the constant growth DDM to calculate the intrinsic value of this preferred stock.A) $0.75B) $7.50C) $64.12D) $56.25E) none of the aboveAnswer: E Difficulty: ModerateRationale: 7.50 / .10 = 75.0032. A preferred stock will pay a dividend of $6.00 in the upcoming year, and every yearthereafter, i.e., dividends are not expected to grow. You require a return of 10% on this stock. Use the constant growth DDM to calculate the intrinsic value of this preferred stock.A) $0.60B) $6.00C) $600D) $5.40E) none of the aboveAnswer: E Difficulty: ModerateRationale: 6.00 / .10 = 60.0033. You are considering acquiring a common stock that you would like to hold for one year.You expect to receive both $1.25 in dividends and $32 from the sale of the stock at the end of the year. The maximum price you would pay for the stock today is _____ if you wanted to earn a 10% return.A) $30.23B) $24.11C) $26.52D) $27.50E) none of the aboveAnswer: A Difficulty: ModerateRationale: .10 = (32 - P + 1.25) / P; .10P = 32 - P + 1.25; 1.10P = 33.25; P = 30.23. 34. You are considering acquiring a common stock that you would like to hold for one year.You expect to receive both $0.75 in dividends and $16 from the sale of the stock at the end of the year. The maximum price you would pay for the stock today is _____ if you wanted to earn a 12% return.A) $23.91B) $14.96C) $26.52D) $27.50E) none of the aboveAnswer: B Difficulty: ModerateRationale: .12 = (16 - P + 0.75) / P; .12P = 16 - P + 0.75; 1.12P = 16.75; P = 14.96. 35. You are considering acquiring a common stock that you would like to hold for one year.You expect to receive both $2.50 in dividends and $28 from the sale of the stock at the end of the year. The maximum price you would pay for the stock today is _____ if you wanted to earn a 15% return.A) $23.91B) $24.11C) $26.52D) $27.50E) none of the aboveAnswer: C Difficulty: ModerateRationale: .15 = (28 - P + 2.50) / P; .15P = 28 - P + 2.50; 1.15P = 30.50; P = 26.52.36. You are considering acquiring a common stock that you would like to hold for one year.You expect to receive both $3.50 in dividends and $42 from the sale of the stock at theend of the year. The maximum price you would pay for the stock today is _____ if youwanted to earn a 10% return.A) $23.91B) $24.11C) $26.52D) $27.50E) none of the aboveAnswer: E Difficulty: ModerateRationale: .10 = (42 - P + 3.50) / P; .10P = 42 - P + 3.50; 1.1P = 45.50; P = 41.36.Use the following to answer questions 37-40:Paper Express Company has a balance sheet which lists $85 million in assets, $40 million in liabilities and $45 million in common shareholders' equity. It has 1,400,000 common shares outstanding. The replacement cost of the assets is $115 million. The market share price is $90.37. What is Paper Express's book value per share?A) $1.68B) $2.60C) $32.14D) $60.71E) none of the aboveAnswer: C Difficulty: ModerateRationale: $45M/1.4M = $32.14.38. What is Paper Express's market value per share?A) $1.68B) $2.60C) $32.14D) $60.71E) none of the aboveAnswer: E Difficulty: Easy39. What is Paper Express's replacement cost per share?A) $1.68B) $2.60C) $53.57D) $60.71E) none of the aboveAnswer: C Difficulty: ModerateRationale: $115M - 40M/1.4M = $53.57.40. What is Paper Express's Tobin's q?A) 1.68B) 2.60C) 53.57D) 60.71E) none of the aboveAnswer: A Difficulty: ModerateRationale: $90/ 53.57 = 1.6841. One of the problems with attempting to forecast stock market values is thatA) there are no variables that seem to predict market return.B) the earnings multiplier approach can only be used at the firm level.C) the level of uncertainty surrounding the forecast will always be quite high.D) dividend payout ratios are highly variable.E) none of the above.Answer: C Difficulty: EasyRationale: Although some variables such as market dividend yield appear to be strongly related to market return, the market has great variability and so the level of uncertainty in any forecast will be high.42. The most popular approach to forecasting the overall stock market is to useA) the dividend multiplier.B) the aggregate return on assets.C) the historical ratio of book value to market value.D) the aggregate earnings multiplier.E) Tobin's Q.Answer: D Difficulty: EasyRationale: The earnings multiplier approach is the most popular approach to forecasting the overall stock market.Use the following to answer questions 43-44:Sure Tool Company is expected to pay a dividend of $2 in the upcoming year. The risk-free rate of return is 4% and the expected return on the market portfolio is 14%. Analysts expect the price of Sure Tool Company shares to be $22 a year from now. The beta of Sure Tool Company's stock is 1.25.43. The market's required rate of return on Sure's stock is _____.A) 14.0%B) 17.5%C) 16.5%D) 15.25%E) none of the aboveAnswer: C Difficulty: ModerateRationale: 4% + 1.25(14% - 4%) = 16.5%.44. What is the intrinsic value of Sure's stock today?A) $20.60B) $20.00C) $12.12D) $22.00E) none of the aboveAnswer: A Difficulty: DifficultRationale: k = .04 + 1.25 (.14 - .04); k = .165; .165 = (22 - P + 2) / P; .165P = 24 - P;1.165P = 24 ; P = 20.60.45. If Sure's intrinsic value is $21.00 today, what must be its growth rate?A) 0.0%B) 10%C) 4%D) 6%E) 7%Answer: E Difficulty: DifficultRationale: k = .04 + 1.25 (.14 - .04); k = .165; .165 = 2/21 + g; g = .07Use the following to answer questions 46-47:Torque Corporation is expected to pay a dividend of $1.00 in the upcoming year. Dividends are expected to grow at the rate of 6% per year. The risk-free rate of return is 5% and the expected return on the market portfolio is 13%. The stock of Torque Corporation has a beta of 1.2.46. What is the return you should require on Torque's stock?A) 12.0%B) 14.6%C) 15.6%D) 20%E) none of the aboveAnswer: B Difficulty: ModerateRationale: 5% + 1.2(13% - 5%) = 14.6%.47. What is the intrinsic value of Torque's stock?A) $14.29B) $14.60C) $12.33D) $11.62E) none of the aboveAnswer: D Difficulty: DifficultRationale: k = 5% + 1.2(13% - 5%) = 14.6%; P = 1 / (.146 - .06) = $11.62.48. Midwest Airline is expected to pay a dividend of $7 in the coming year. Dividends areexpected to grow at the rate of 15% per year. The risk-free rate of return is 6% and the expected return on the market portfolio is 14%. The stock of Midwest Airline has a beta of 3.00. The return you should require on the stock is ________.A) 10%B) 18%C) 30%D) 42%E) none of the aboveAnswer: C Difficulty: ModerateRationale: 6% + 3(14% - 6%) = 30%.49. Fools Gold Mining Company is expected to pay a dividend of $8 in the upcoming year.Dividends are expected to decline at the rate of 2% per year. The risk-free rate of return is 6% and the expected return on the market portfolio is 14%. The stock of Fools Gold Mining Company has a beta of -0.25. The return you should require on the stock is________.A) 2%B) 4%C) 6%D) 8%E) none of the aboveAnswer: B Difficulty: ModerateRationale: 6% + [-0.25(14% - 6%)] = 4%.50. High Tech Chip Company is expected to have EPS in the coming year of $2.50. Theexpected ROE is 12.5%. An appropriate required return on the stock is 11%. If the firm has a plowback ratio of 70%, the growth rate of dividends should beA) 5.00%B) 6.25%C) 6.60%D) 7.50%E) 8.75%Answer: E Difficulty: EasyRationale: 12.5% X 0.7 = 8.75%.51. A company paid a dividend last year of $1.75. The expected ROE for next year is14.5%. An appropriate required return on the stock is 10%. If the firm has a plowbackratio of 75%, the dividend in the coming year should beA) $1.80B) $2.12C) $1.77D) $1.94E) none of the aboveAnswer: D Difficulty: ModerateRationale: g = .155 X .75 = 10.875%; $1.75(1.10875) = $1.9452. High Tech Chip Company paid a dividend last year of $2.50. The expected ROE fornext year is 12.5%. An appropriate required return on the stock is 11%. If the firm hasa plowback ratio of 60%, the dividend in the coming year should beA) $1.00B) $2.50C) $2.69D) $2.81E) none of the aboveAnswer: C Difficulty: ModerateRationale: g = .125 X .6 = 7.5%; $2.50(1.075) = $2.6953. Suppose that the average P/E multiple in the oil industry is 20. Dominion Oil isexpected to have an EPS of $3.00 in the coming year. The intrinsic value of Dominion Oil stock should be _____.A) $28.12B) $35.55C) $60.00D) $72.00E) none of the aboveAnswer: C Difficulty: EasyRationale: 20 X $3.00 = $60.00.54. Suppose that the average P/E multiple in the oil industry is 22. Exxon Oil is expected tohave an EPS of $1.50 in the coming year. The intrinsic value of Exxon Oil stock should be _____.A) $33.00B) $35.55C) $63.00D) $72.00E) none of the aboveAnswer: A Difficulty: EasyRationale: 22 X $1.50 = $33.00.55. Suppose that the average P/E multiple in the oil industry is 16. Mobil Oil is expected tohave an EPS of $4.50 in the coming year. The intrinsic value of Mobil Oil stock should be _____.A) $28.12B) $35.55C) $63.00D) $72.00E) none of the aboveAnswer: D Difficulty: EasyRationale: 16 X $4.50 = $72.00.56. Suppose that the average P/E multiple in the gas industry is 17. KMP is expected tohave an EPS of $5.50 in the coming year. The intrinsic value of KMP stock should be _____.A) $28.12B) $93.50C) $63.00D) $72.00E) none of the aboveAnswer: B Difficulty: EasyRationale: 17 X $5.50 = $93.50.57. An analyst has determined that the intrinsic value of HPQ stock is $20 per share usingthe capitalized earnings model. If the typical P/E ratio in the computer industry is 25, then it would be reasonable to assume the expected EPS of HPQ in the coming year is ______.A) $3.63B) $4.44C) $0.80D) $22.50E) none of the aboveAnswer: C Difficulty: EasyRationale: $20(1/25) = $0.80.58. An analyst has determined that the intrinsic value of Dell stock is $34 per share usingthe capitalized earnings model. If the typical P/E ratio in the computer industry is 27, then it would be reasonable to assume the expected EPS of Dell in the coming year is ______.A) $3.63B) $4.44C) $14.40D) $1.26E) none of the aboveAnswer: D Difficulty: EasyRationale: $34(1/27) = $1.26.59. An analyst has determined that the intrinsic value of IBM stock is $80 per share usingthe capitalized earnings model. If the typical P/E ratio in the computer industry is 22, then it would be reasonable to assume the expected EPS of IBM in the coming year is ______.A) $3.64B) $4.44C) $14.40D) $22.50E) none of the aboveAnswer: A Difficulty: EasyRationale: $80(1/22) = $3.64.60. Old Quartz Gold Mining Company is expected to pay a dividend of $8 in the comingyear. Dividends are expected to decline at the rate of 2% per year. The risk-free rate of return is 6% and the expected return on the market portfolio is 14%. The stock of Old Quartz Gold Mining Company has a beta of -0.25. The intrinsic value of the stock is ______.A) $80.00B) 133.33C) $200.00D) $400.00E) none of the aboveAnswer: B Difficulty: DifficultRationale: k = 6% + [-0.25(14% - 6%)] = 4%; P = 8 / [.04 - (-.02)] = $133.33.61. Low Fly Airline is expected to pay a dividend of $7 in the coming year. Dividends areexpected to grow at the rate of 15% per year. The risk-free rate of return is 6% and the expected return on the market portfolio is 14%. The stock of low Fly Airline has a beta of 3.00. The intrinsic value of the stock is ______.A) $46.67B) $50.00C) $56.00D) $62.50E) none of the aboveAnswer: A Difficulty: ModerateRationale: 6% + 3(14% - 6%) = 30%; P = 7 / (.30 - .15) = $46.67.62. Sunshine Corporation is expected to pay a dividend of $1.50 in the upcoming year.Dividends are expected to grow at the rate of 6% per year. The risk-free rate of return is 6% and the expected return on the market portfolio is 14%. The stock of SunshineCorporation has a beta of 0.75. The intrinsic value of the stock is _______.A) $10.71B) $15.00C) $17.75D) $25.00E) none of the aboveAnswer: D Difficulty: ModerateRationale: 6% + 0.75(14% - 6%) = 12%; P = 1.50 / (.12 - .06) = $25.63. Low Tech Chip Company is expected to have EPS in the coming year of $2.50. Theexpected ROE is 14%. An appropriate required return on the stock is 11%. If the firmhas a dividend payout ratio of 40%, the intrinsic value of the stock should beA) $22.73B) $27.50C) $28.57D) $38.46E) none of the aboveAnswer: D Difficulty: DifficultRationale: g = 14% X 0.6 = 8.4%; Expected DPS = $2.50(0.4) = $1.00; P = 1 / (.11- .084) = $38.46.Use the following to answer questions 64-65:Risk Metrics Company is expected to pay a dividend of $3.50 in the coming year. Dividends are expected to grow at a rate of 10% per year. The risk-free rate of return is 5% and the expected return on the market portfolio is 13%. The stock is trading in the market today at a price of $90.00.64. What is the market capitalization rate for Risk Metrics?A) 13.6%B) 13.9%C) 15.6%D) 16.9%E) none of the aboveAnswer: B Difficulty: ModerateRationale: k = 3.50 / 90 + .10; k = 13.9%65. What is the approximate beta of Risk Metrics's stock?A) 0.8B) 1.0C) 1.1D) 1.4E) none of the aboveAnswer: C Difficulty: DifficultRationale: k = 13.9% from 18.64; 13.9 = 5% + b(13% - 5%) = 1.11.66. The market capitalization rate on the stock of Flexsteel Company is 12%. The expectedROE is 13% and the expected EPS are $3.60. If the firm's plowback ratio is 50%, theP/E ratio will be _________.。
投资学第7版Test Bank答案15
Multiple Choice Questions1. The term structure of interest rates is:A) The relationship between the rates of interest on all securities.B) The relationship between the interest rate on a security and its time to maturity.C) The relationship between the yield on a bond and its default rate.D) All of the above.E) None of the above.Answer: B Difficulty: EasyRationale: The term structure of interest rates is the relationship between two variables, years and yield to maturity (holding all else constant).2. The yield curve shows at any point in time:A) The relationship between the yield on a bond and the duration of the bond.B) The relationship between the coupon rate on a bond and time to maturity of thebond.C) The relationship between yield on a bond and the time to maturity on the bond.D) All of the above.E) None of the above.Answer: C Difficulty: Easy3. An inverted yield curve implies that:A) Long-term interest rates are lower than short-term interest rates.B) Long-term interest rates are higher than short-term interest rates.C) Long-term interest rates are the same as short-term interest rates.D) Intermediate term interest rates are higher than either short- or long-term interestrates.E) none of the above.Answer: A Difficulty: EasyRationale: The inverted, or downward sloping, yield curve is one in which short-term rates are higher than long-term rates. The inverted yield curve has been observedfrequently, although not as frequently as the upward sloping, or normal, yield curve.4. An upward sloping yield curve is a(n) _______ yield curve.A) normal.B) humped.C) inverted.D) flat.E) none of the above.Answer: A Difficulty: EasyRationale: The upward sloping yield curve is referred to as the normal yield curve, probably because, historically, the upward sloping yield curve is the shape that has been observed most frequently.5. According to the expectations hypothesis, a normal yield curve implies thatA) interest rates are expected to remain stable in the future.B) interest rates are expected to decline in the future.C) interest rates are expected to increase in the future.D) interest rates are expected to decline first, then increase.E) interest rates are expected to increase first, then decrease.Answer: C Difficulty: EasyRationale: An upward sloping yield curve is based on the expectation that short-term interest rates will increase.6. Which of the following is not proposed as an explanation for the term structure ofinterest rates?A) The expectations theory.B) The liquidity preference theory.C) The market segmentation theory.D) Modern portfolio theory.E) A, B, and C.Answer: D Difficulty: EasyRationale: A, B, and C are all theories that have been proposed to explain the term structure.7. The expectations theory of the term structure of interest rates states thatA) forward rates are determined by investors' expectations of future interest rates.B) forward rates exceed the expected future interest rates.C) yields on long- and short-maturity bonds are determined by the supply and demandfor the securities.D) all of the above.E) none of the above.Answer: A Difficulty: EasyRationale: The forward rate equals the market consensus expectation of future short interest rates.8. Which of the following theories state that the shape of the yield curve is essentiallydetermined by the supply and demands for long-and short-maturity bonds?A) Liquidity preference theory.B) Expectations theory.C) Market segmentation theory.D) All of the above.E) None of the above.Answer: C Difficulty: EasyRationale: Market segmentation theory states that the markets for different maturities are separate markets, and that interest rates at the different maturities are determined by the intersection of the respective supply and demand curves.9. According to the "liquidity preference" theory of the term structure of interest rates, theyield curve usually should be:A) inverted.B) normal.C) upward slopingD) A and B.E) B and C.Answer: E Difficulty: EasyRationale: According to the liquidity preference theory, investors would prefer to be liquid rather than illiquid. In order to accept a more illiquid investment, investors require a liquidity premium and the normal, or upward sloping, yield curve results.Use the following to answer questions 10-13:Suppose that all investors expect that interest rates for the 4 years will be as follows:10. What is the price of 3-year zero coupon bond with a par value of $1,000?A) $B) $C) $D) $E) none of the aboveAnswer: B Difficulty: ModerateRationale: $1,000 / = $11. If you have just purchased a 4-year zero coupon bond, what would be the expected rateof return on your investment in the first year if the implied forward rates stay the same?(Par value of the bond = $1,000)A) 5%B) 7%C) 9%D) 10%E) none of the aboveAnswer: A Difficulty: ModerateRationale: The forward interest rate given for the first year of the investment is given as 5% (see table above).12. What is the price of a 2-year maturity bond with a 10% coupon rate paid annually? (Parvalue = $1,000)A) $1,092B) $1,054C) $1,000D) $1,073E) none of the aboveAnswer: D Difficulty: ModerateRationale: []1/2 - 1 = 6%; FV = 1000, n = 2, PMT = 100, i = 6, PV = $1,13. What is the yield to maturity of a 3-year zero coupon bond?A) %B) %C) %D) %E) none of the aboveAnswer: C Difficulty: ModerateRationale: []1/3 - 1 = .Use the following to answer questions 14-16:The following is a list of prices for zero coupon bonds with different maturities and par value of $1,000.14. What is, according to the expectations theory, the expected forward rate in the thirdyear?A) %B) %C) %D) %E) none of the aboveAnswer: C Difficulty: ModerateRationale: / - 1 = 9%15. What is the yield to maturity on a 3-year zero coupon bond?A) %B) %C) %D) %E) none of the aboveAnswer: C Difficulty: ModerateRationale: (1000 / 1/3 -1 = %16. What is the price of a 4-year maturity bond with a 12% coupon rate paid annually? (Parvalue = $1,000)A) $B) $1,C) $1,D) $1,E) none of the aboveAnswer: D Difficulty: DifficultRationale: (1000 / 1/4 -1 = %; FV = 1000, PMT = 120, n = 4, i = , PV = $1,17. The market segmentation theory of the term structure of interest ratesA) theoretically can explain all shapes of yield curves.B) definitely holds in the "real world".C) assumes that markets for different maturities are separate markets.D) A and B.E) A and C.Answer: E Difficulty: EasyRationale: Although this theory is quite tidy theoretically, both investors and borrows will depart from their "preferred maturity habitats" if yields on alternative maturities are attractive enough.18. An upward sloping yield curveA) may be an indication that interest rates are expected to increase.B) may incorporate a liquidity premium.C) may reflect the confounding of the liquidity premium with interest rateexpectations.D) all of the above.E) none of the above.Answer: D Difficulty: EasyRationale: One of the problems of the most commonly used explanation of termstructure, the expectations hypothesis, is that it is difficult to separate out the liquidity premium from interest rate expectations.19. The "break-even" interest rate for year n that equates the return on an n-periodzero-coupon bond to that of an n-1-period zero-coupon bond rolled over into a one-year bond in year n is defined asA) the forward rate.B) the short rate.C) the yield to maturity.D) the discount rate.E) None of the above.Answer: A Difficulty: EasyRationale: The forward rate for year n, fn, is the "break-even" interest rate for year n that equates the return on an n-period zero- coupon bond to that of an n-1-periodzero-coupon bond rolled over into a one-year bond in year n.20. When computing yield to maturity, the implicit reinvestment assumption is that theinterest payments are reinvested at the:A) Coupon rate.B) Current yield.C) Yield to maturity at the time of the investment.D) Prevailing yield to maturity at the time interest payments are received.E) The average yield to maturity throughout the investment period.Answer: C Difficulty: ModerateRationale: In order to earn the yield to maturity quoted at the time of the investment, coupons must be reinvested at that rate.21. Which one of the following statements is true?A) The expectations hypothesis indicates a flat yield curve if anticipated futureshort-term rates exceed the current short-term rate.B) The basic conclusion of the expectations hypothesis is that the long-term rate isequal to the anticipated long-term rate.C) The liquidity preference hypothesis indicates that, all other things being equal,longer maturities will have lower yields.D) The segmentation hypothesis contends that borrows and lenders are constrained toparticular segments of the yield curve.E) None of the above.Answer: D Difficulty: ModerateRationale: A flat yield curve indicates expectations of existing rates. Expectations hypothesis states that the forward rate equals the market consensus of expectations of future short interest rates. The reverse of C is true.22. The concepts of spot and forward rates are most closely associated with which one ofthe following explanations of the term structure of interest rates.A) Segmented Market theoryB) Expectations HypothesisC) Preferred Habitat HypothesisD) Liquidity Premium theoryE) None of the aboveAnswer: B Difficulty: ModerateRationale: Only the expectations hypothesis is based on spot and forward rates. A andC assume separate markets for different maturities; liquidity premium assumes higheryields for longer maturities.Use the following to answer question 23:23. Given the bond described above, if interest were paid semi-annually (rather thanannually), and the bond continued to be priced at $850, the resulting effective annual yield to maturity would be:A) Less than 12%B) More than 12%C) 12%D) Cannot be determinedE) None of the aboveAnswer: B Difficulty: ModerateRationale: FV = 1000, PV = -850, PMT = 50, n = 40, i = (semi-annual); 2 - 1 = %.24. Interest rates might declineA) because real interest rates are expected to decline.B) because the inflation rate is expected to decline.C) because nominal interest rates are expected to increase.D) A and B.E) B and C.Answer: D Difficulty: EasyRationale: The nominal rate is comprised of the real interest rate plus the expectedinflation rate.25. Forward rates ____________ future short rates because ____________.A) are equal to; they are both extracted from yields to maturity.B) are equal to; they are perfect forecasts.C) differ from; they are imperfect forecasts.D) differ from; forward rates are estimated from dealer quotes while future short ratesare extracted from yields to maturity.E) are equal to; although they are estimated from different sources they both are usedby traders to make purchase decisions.Answer: C Difficulty: EasyRationale: Forward rates are the estimates of future short rates extracted from yields to maturity but they are not perfect forecasts because the future cannot be predicted with certainty; therefore they will usually differ.26. The pure yield curve can be estimatedA) by using zero-coupon bonds.B) by using coupon bonds if each coupon is treated as a separate "zero."C) by using corporate bonds with different risk ratings.D) by estimating liquidity premiums for different maturities.E) A and B.Answer: E Difficulty: ModerateRationale: The pure yield curve is calculated using zero coupon bonds, but coupon bonds may be used if each coupon is treated as a separate "zero."27. The on the run yield curve isA) a plot of yield as a function of maturity for zero-coupon bonds.B) a plot of yield as a function of maturity for recently issued coupon bonds trading ator near par.C) a plot of yield as a function of maturity for corporate bonds with different riskratings.D) a plot of liquidity premiums for different maturities.E) A and B.Answer: B Difficulty: Moderate28. The market segmentation and preferred habitat theories of term structureA) are identical.B) vary in that market segmentation is rarely accepted today.C) vary in that market segmentation maintains that borrowers and lenders will notdepart from their preferred maturities and preferred habitat maintains that marketparticipants will depart from preferred maturities if yields on other maturities areattractive enough.D) A and B.E) B and C.Answer: E Difficulty: ModerateRationale: Borrowers and lenders will depart from their preferred maturity habitats if yields are attractive enough; thus, the market segmentation hypothesis is no longerreadily accepted.29. The yield curveA) is a graphical depiction of term structure of interest rates.B) is usually depicted for U. S. Treasuries in order to hold risk constant acrossmaturities and yields.C) is usually depicted for corporate bonds of different ratings.D) A and B.E) A and C.Answer: D Difficulty: EasyRationale: The yield curve (yields vs. maturities, all else equal) is depicted for U. S.Treasuries more frequently than for corporate bonds, as the risk is constant acrossmaturities for Treasuries.Use the following to answer questions 30-32:30. What should the purchase price of a 2-year zero coupon bond be if it is purchased at thebeginning of year 2 and has face value of $1,000?A) $B) $C) $D) $E) $Answer: A Difficulty: DifficultRationale: $1,000 / [] = $31. What would the yield to maturity be on a four-year zero coupon bond purchased today?A) %B) %C) %D) %E) none of the above.Answer: C Difficulty: ModerateRationale: [ ]1/4 - 1 = %32. Calculate the price at the beginning of year 1 of a 10% annual coupon bond with facevalue $1,000 and 5 years to maturity.A) $1,105B) $1,132C) $1,179D) $1,150E) $1,119Answer: B Difficulty: DifficultRationale: i = [ ]1/5 - 1 = %; FV = 1000, PMT = 100, n = 5, i = , PV = $1,33. Given the yield on a 3 year zero-coupon bond is % and forward rates of % in year 1and % in year 2, what must be the forward rate in year 3?A) %B) %C) %D) %E) none of the above.Answer: B Difficulty: ModerateRationale: f3 = 3 / [ ] - 1 = %34. An inverted yield curve is oneA) with a hump in the middle.B) constructed by using convertible bonds.C) that is relatively flat.D) that plots the inverse relationship between bond prices and bond yields.E) that slopes downward.Answer: E Difficulty: EasyRationale: An inverted yield curve occurs when short-term rates are higher thanlong-term rates.35. Investors can use publicly available financial date to determine which of the following?I)the shape of the yield curveII)future short-term ratesIII)the direction the Dow indexes are headingIV)the actions to be taken by the Federal ReserveA) I and IIB) I and IIIC) I, II, and IIID) I, III, and IVE) I, II, III, and IVAnswer: A Difficulty: ModerateRationale: Only the shape of the yield curve and future inferred rates can be determined.The movement of the Dow Indexes and Federal Reserve policy are influenced by term structure but are determined by many other variables also.36. Which of the following combinations will result in a sharply increasing yield curve?A) increasing expected short rates and increasing liquidity premiumsB) decreasing expected short rates and increasing liquidity premiumsC) increasing expected short rates and decreasing liquidity premiumsD) increasing expected short rates and constant liquidity premiumsE) constant expected short rates and increasing liquidity premiumsAnswer: A Difficulty: ModerateRationale: Both of the forces will act to increase the slope of the yield curve.37. The yield curve is a component ofA) the Dow Jones Industrial Average.B) the consumer price index.C) the index of leading economic indicators.D) the producer price index.E) the inflation index.Answer: C Difficulty: EasyRationale: Since the yield curve is often used to forecast the business cycle, it is used as one of the leading economic indicators.38. The most recently issued Treasury securities are calledA) on the run.B) off the run.C) on the market.D) off the market.E) none of the above.Answer: A Difficulty: EasyUse the following to answer questions 39-42:Suppose that all investors expect that interest rates for the 4 years will be as follows:39. What is the price of 3-year zero coupon bond with a par value of $1,000?A) $B) $C) $D) $E) none of the aboveAnswer: A Difficulty: ModerateRationale: $1,000 / = $40. If you have just purchased a 4-year zero coupon bond, what would be the expected rateof return on your investment in the first year if the implied forward rates stay the same?(Par value of the bond = $1,000)A) 5%B) 3%C) 9%D) 10%E) none of the aboveAnswer: B Difficulty: ModerateRationale: The forward interest rate given for the first year of the investment is given as 3% (see table above).41. What is the price of a 2-year maturity bond with a 5% coupon rate paid annually? (Parvalue = $1,000)A) $1,B) $1,C) $1,D) $1,E) none of the aboveAnswer: C Difficulty: ModerateRationale: []1/2 - 1 = %; FV = 1000, n = 2, PMT = 50, i = , PV = $1,42. What is the yield to maturity of a 3-year zero coupon bond?A) %B) %C) %D) 4%E) none of the aboveAnswer: D Difficulty: ModerateRationale: []1/3 - 1 = 4%.Use the following to answer questions 43-46:The following is a list of prices for zero coupon bonds with different maturities and par value of $1,000.43. What is, according to the expectations theory, the expected forward rate in the thirdyear?A)B) %C) %D) %E) none of the aboveAnswer: B Difficulty: ModerateRationale: / - 1 = %44. What is the yield to maturity on a 3-year zero coupon bond?A) %B) %C) %D) %E) none of the aboveAnswer: D Difficulty: ModerateRationale: (1000 / 1/3 -1 = %45. What is the price of a 4-year maturity bond with a 10% coupon rate paid annually? (Parvalue = $1,000)A) $B) $1,C) $1,D) $1,E) none of the aboveAnswer: C Difficulty: DifficultRationale: (1000 / 1/4 -1 = %; FV = 1000, PMT = 100, n = 4, i = , PV = $1,46. You have purchased a 4-year maturity bond with a 9% coupon rate paid annually. Thebond has a par value of $1,000. What would the price of the bond be one year from now if the implied forward rates stay the same?A) $B) $1,C) $1,D) $1,E) none of the aboveAnswer: A Difficulty: DifficultRationale: / ]1/3 - = %; FV = 1000, PMT = 90, n = 3, i = , PV = $Use the following to answer question 47:47. Given the bond described above, if interest were paid semi-annually (rather thanannually), and the bond continued to be priced at $, the resulting effective annual yield to maturity would be:A) Less than 10%B) More than 10%C) 10%D) Cannot be determinedE) None of the aboveAnswer: B Difficulty: ModerateRationale: FV = 1000, PV = , PMT = 45, n = 36, i = (semi-annual); 2 - 1 = %.Use the following to answer questions 48-50:48. What should the purchase price of a 2-year zero coupon bond be if it is purchased at thebeginning of year 2 and has face value of $1,000?A) $B) $C) $D) $E) $Answer: D Difficulty: DifficultRationale: $1,000 / [] = $49. What would the yield to maturity be on a four-year zero coupon bond purchased today?A) %B) %C) %D) %E) none of the above.Answer: A Difficulty: ModerateRationale: [ ]1/4 - 1 = %50. Calculate the price at the beginning of year 1 of an 8% annual coupon bond with facevalue $1,000 and 5 years to maturity.A) $1,B) $1,C) $1,D) $1,E) $Answer: C Difficulty: DifficultRationale: i = [ ]1/5 - 1 = 6%; FV = 1000, PMT = 80, n = 5, i = 6, PV = $51. Given the yield on a 3 year zero-coupon bond is 7% and forward rates of 6% in year 1and % in year 2, what must be the forward rate in year 3?A) %B) %C) %D) %E) none of the above.Answer: C Difficulty: ModerateRationale: f3 = 3 / [ ] - 1 = %Use the following to answer questions 52-61:52. What should the purchase price of a 1-year zero coupon bond be if it is purchased todayand has face value of $1,000?A) $B) $C) $D) $E) $Answer: D Difficulty: DifficultRationale: $1,000 / = $53. What should the purchase price of a 2-year zero coupon bond be if it is purchased todayand has face value of $1,000?A) $B) $C) $D) $E) $Answer: B Difficulty: DifficultRationale: $1,000 / [] = $54. What should the purchase price of a 3-year zero coupon bond be if it is purchased todayand has face value of $1,000?A) $B) $C) $D) $E) $Answer: E Difficulty: DifficultRationale: $1,000 / [] = $55. What should the purchase price of a 4-year zero coupon bond be if it is purchased todayand has face value of $1,000?A) $B) $C) $D) $E) $Answer: B Difficulty: DifficultRationale: $1,000 / [] = $56. What should the purchase price of a 5-year zero coupon bond be if it is purchased todayand has face value of $1,000?A) $B) $C) $D) $E) $Answer: A Difficulty: DifficultRationale: $1,000 / [] = $57. What is the yield to maturity of a 1-year bond?A) %B) %C) %D) %E) %Answer: A Difficulty: ModerateRationale: % (given in table)58. What is the yield to maturity of a 5-year bond?A) %B) %C) %D) %E) %Answer: C Difficulty: ModerateRationale: []1/5 -1 = %59. What is the yield to maturity of a 4-year bond?A) %B) %C) %D) %E) %Answer: C Difficulty: ModerateRationale: []1/4 -1 = %60. What is the yield to maturity of a 3-year bond?A) %B) %C) %D) %E) %Answer: B Difficulty: ModerateRationale: []1/3 -1 = %61. What is the yield to maturity of a 2-year bond?A) %B) %C) %D) %E) %Answer: D Difficulty: ModerateRationale: []1/2 -1 = %Essay Questions62. Discuss the three theories of the term structure of interest rates. Include in yourdiscussion the differences in the theories, and the advantages/disadvantages of each.Difficulty: ModerateAnswer:The expectations hypothesis is the most commonly accepted theory of term structure.The theory states that the forward rate equals the market consensus expectation of future short-term rates. Thus, yield to maturity is determined solely by current and expected future one-period interest rates. An upward sloping, or normal, yield curve wouldindicate that investors anticipate an increase in interest rates. An inverted, or downward sloping, yield curve would indicate an expectation of decreased interest rates. Ahorizontal yield curve would indicate an expectation of no interest rate changes.The liquidity preference theory of term structure maintains that short-term investorsdominate the market; thus, in general, the forward rate exceeds the expected short-term rate. In other words, investors prefer to be liquid to illiquid, all else equal, and willdemand a liquidity premium in order to go long term. Thus, liquidity preference readily explains the upward sloping, or normal, yield curve. However, liquidity preferencedoes not readily explain other yield curve shapes.Market segmentation and preferred habitat theories indicate that the markets fordifferent maturity debt instruments are segmented. Market segmentation maintains that the rates for the different maturities are determined by the intersection of the supply and demand curves for the different maturity instruments. Market segmentation readilyexplains all shapes of yield curves. However, market segmentation is not observed in the real world. Investors and issuers will leave their preferred maturity habitats if yields are attractive enough on other maturities.The purpose of this question is to ascertain that students understand the variousexplanations (and deficiencies of these explanations) of term structure.63. Term structure of interest rates is the relationship between what variables? What isassumed about other variables? How is term structure of interest rates depictedgraphically?Difficulty: ModerateAnswer:Term structure of interest rates is the relationship between yield to maturity and term to maturity, all else equal. The "all else equal" refers to risk class. Term structure ofinterest rates is depicted graphically by the yield curve, which is usually a graph of .governments of different yields and different terms to maturity. The use of .governments allows one to examine the relationship between yield and maturity,holding risk constant. The yield curve depicts this relationship at one point in time only.This question is designed to ascertain that students understand the relationshipsinvolved in term structure, the restrictions on the relationships, and how therelationships are depicted graphically.64. Although the expectations of increases in future interest rates can result in an upwardsloping yield curve; an upward sloping yield curve does not in and of itself imply the expectations of higher future interest rates. Explain.Difficulty: ModerateAnswer:The effects of possible liquidity premiums confound any simple attempt to extractexpectation from the term structure. That is, the upward sloping yield curve may be due to expectations of interest rate increases, or due to the requirement of a liquiditypremium, or both. The liquidity premium could more than offset expectations ofdecreased interest rates, and an upward sloping yield would result.The purpose of this question is to assure that the student understands the confounding of the liquidity premium with the expectations hypothesis, and that the interpretations of term structure are not clear-cut.65. Explain what the following terms mean: spot rate, short rate, and forward rate. Whichof these is (are) observable today?Difficulty: ModerateAnswer:From the answer to Concept Check 2, on page 516: “The n-period spot rate is the yield to maturity on a zero-coupon bond with a maturity of n periods. The short rate forperiod n is the one-period interest rate that will prevail in period n. The forward rate for period n is the short rate th at would satisfy a “break-even condition” equating the total returns on two n-period investment strategies. The first strategy is an investment in an n-period zero-coupon bond. The second is an investment in an n-1 period zero-coupon bond “rolled over” i nto an investment in a one-period zero. Spot rates and forward rates are observable today, but because interest rates evolve with uncertainty, future short rates are not. In the special case in which there is no uncertainty in future interest rates, the forward rate calculated from the yield curve would equal the short rate that will prevail in that period.”This question checks whether the student understands the difference between each kind of rate.66. Answer the following questions that relate to bonds.• A 2-year zero-coupon bond is selling for $. What is the yield to maturity of this bond?•The price of a 1-year zero coupon bond is $. What is the yield to maturity of this bond?•Calculate the forward rate for the second year.•How can you construct a synthetic one-year forward loan (you are agreeing now to loan in one year)? State the strategy and show the corresponding cash flows.Assume that you can purchase and sell fractional portions of bonds. Show allcalculations and discuss the meaning of the transactions.Difficulty: Difficult。
（完整word版）投资学第7版TestBank答案09
（完整word版）投资学第7版TestBank答案09Multiple Choice Questions1. In the context of the Capital Asset Pricing Model (CAPM) the relevant measure of riskisA) unique risk.B) beta.C) standard deviation of returns.D) variance of returns.E) none of the above.Answer: B Difficulty: EasyRationale: Once, a portfolio is diversified, the only risk remaining is systematic risk,which is measured by beta.2. According to the Capital Asset Pricing Model (CAPM) a well diversified portfolio's rateof return is a function ofA) market riskB) unsystematic riskC) unique risk.D) reinvestment risk.E) none of the above.Answer: A Difficulty: EasyRationale: With a diversified portfolio, the only risk remaining is market, or systematic, risk. This is the only risk that influences return according to the CAPM.3. The market portfolio has a beta ofA) 0.B) 1.C) -1.D) 0.5.E) none of the aboveAnswer: B Difficulty: EasyRationale: By definition, the beta of the market portfolio is 1.4. The risk-free rate and the expected market rate of return are 0.06 and 0.12, respectively.According to the capital asset pricing model (CAPM), the expected rate of return on security X with a beta of 1.2 is equal toA) 0.06.B) 0.144.C) 0.12.D) 0.132E) 0.18Answer: D Difficulty: EasyRationale: E(R) = 6% + 1.2(12 - 6) = 13.2%.5. The risk-free rate and the expected market rate of return are 0.056 and 0.125,respectively. According to the capital asset pricing model (CAPM), the expected rate of return on a security with a beta of1.25 is equal toA) 0.1225B) 0.144.C) 0.153.D) 0.134E) 0.117Answer: A Difficulty: EasyRationale: E(R) = 5.6% + 1.25(12.5 - 5.6) = 14.225%.6. Which statement is not true regarding the market portfolio?A) It includes all publicly traded financial assets.B) It lies on the efficient frontier.C) All securities in the market portfolio are held in proportion to their market values.D) It is the tangency point between the capital market line and the indifference curve.E) All of the above are true.Answer: D Difficulty: ModerateRationale: The tangency point between the capital market line and the indifference curve is the optimal portfolio for a particular investor.7. Which statement is not true regarding the Capital Market Line (CML)?A) The CML is the line from the risk-free rate through the market portfolio.B) The CML is the best attainable capital allocation line.C) The CML is also called the security market line.D) The CML always has a positive slope.E) The risk measure for the CML is standard deviation.Answer: C Difficulty: ModerateRationale: Both the Capital Market Line and the Security Market Line depict risk/return relationships. However, the risk measure for the CML is standard deviation and the risk measure for the SML is beta (thus C is not true; the other statements are true).8. The market risk, beta, of a security is equal toA) the covariance between the security's return and the market return divided by thevariance of the market's returns.B) the covariance between the security and market returns divided by the standarddeviation of the market's returns.C) the variance of the security's returns divided by the covariance between the securityand market returns.D) the variance of the security's returns divided by the variance of the market's returns.E) none of the above.Answer: A Difficulty: ModerateRationale: Beta is a measure of how a security's return covaries with the market returns, normalized by the market variance.9. According to the Capital Asset Pricing Model (CAPM), the expected rate of return onany security is equal toA) R f+ β [E(R M)].B) R f + β [E(R M) - R f].C) β [E(R M) - R f].D) E(R M) + R f.E) none of the above.Answer: B Difficulty: ModerateRationale: The expected rate of return on any security is equal to the risk free rate plus the systematic risk of the security (beta) times the market risk premium, E(R M - R f).10. The Security Market Line (SML) isA) the line that describes the expected return-beta relationship for well-diversifiedportfolios only.B) also called the Capital Allocation Line.C) the line that is tangent to the efficient frontier of all risky assets.D) the line that represents the expected return-beta relationship.E) the line that represents the relationship between an individual security's return andthe market's return.Answer: D Difficulty: ModerateRationale: The SML is a measure of expected return per unit of risk, where risk isdefined as beta (systematic risk).11. According to the Capital Asset Pricing Model (CAPM), fairly priced securitiesA) have positive betas.B) have zero alphas.C) have negative betas.D) have positive alphas.E) none of the above.Answer: B Difficulty: ModerateRationale: A zero alpha results when the security is in equilibrium (fairly priced for the level of risk).12. According to the Capital Asset Pricing Model (CAPM), under priced securitiesA) have positive betas.B) have zero alphas.C) have negative betas.D) have positive alphas.E) none of the above.Answer: D Difficulty: Moderate13. According to the Capital Asset Pricing Model (CAPM), over priced securitiesA) have positive betas.B) have zero alphas.C) have negative betas.D) have positive alphas.E) none of the above.Answer: C Difficulty: ModerateRationale: A zero alpha results when the security is in equilibrium (fairly priced for the level of risk).14. According to the Capital Asset Pricing Model (CAPM),A) a security with a positive alpha is considered overpriced.B) a security with a zero alpha is considered to be a good buy.C) a security with a negative alpha is considered to be a good buy.D) a security with a positive alpha is considered to be underpriced.E) none of the above.Answer: D Difficulty: ModerateRationale: A security with a positive alpha is one that is expected to yield an abnormal positive rate of return, based on the perceived risk of the security, and thus isunderpriced.15. According to the Capital Asset Pricing Model (CAPM), which one of the followingstatements is false?A) The expected rate of return on a security decreases in direct proportion to a decreasein the risk-free rate.B) The expected rate of return on a security increases as its beta increases.C) A fairly priced security has an alpha of zero.D) In equilibrium, all securities lie on the security market line.E) All of the above statements are true.Answer: A Difficulty: ModerateRationale: Statements B, C, and D are true, but statement A is false.16. In a well diversified portfolioA) market risk is negligible.B) systematic risk is negligible.C) unsystematic risk is negligible.D) nondiversifiable risk is negligible.E) none of the above.Answer: C Difficulty: ModerateRationale: Market, or systematic, or nondiversifiable, risk is present in a diversified portfolio; the unsystematic risk has been eliminated.17. Empirical results regarding betas estimated from historical data indicate thatA) betas are constant over time.B) betas of all securities are always greater than one.C) betas are always near zero.D) betas appear to regress toward one over time.E) betas are always positive.Answer: D Difficulty: ModerateRationale: Betas vary over time, betas may be negative or less than one, betas are not always near zero; however, betas do appear to regress toward one over time.18. Your personal opinion is that a security has an expected rate of return of 0.11. It has abeta of 1.5. The risk-free rate is 0.05 and the market expected rate of return is 0.09.According to the Capital Asset Pricing Model, this security isA) underpriced.B) overpriced.C) fairly priced.D) cannot be determined from data provided.E) none of the above.Answer: C Difficulty: ModerateRationale: 11% = 5% + 1.5(9% - 5%) = 11.0%; therefore, the security is fairly priced.19. The risk-free rate is 7 percent. The expected market rate of return is 15 percent. If youexpect a stock with a beta of 1.3 to offer a rate of return of 12 percent, you shouldA) buy the stock because it is overpriced.B) sell short the stock because it is overpriced.C) sell the stock short because it is underpriced.D) buy the stock because it is underpriced.E) none of the above, as the stock is fairly priced.Answer: B Difficulty: ModerateRationale: 12% < 7% + 1.3(15% - 7%) = 17.40%; therefore, stock is overpriced and should be shorted.20. You invest $600 in a security with a beta of 1.2 and $400 in another security with a betaof 0.90. The beta of the resulting portfolio isA) 1.40B) 1.00C) 0.36D) 1.08E) 0.80Answer: D Difficulty: ModerateRationale: 0.6(1.2) + 0.4(0.90) = 1.08.21. A security has an expected rate of return of 0.10 and a beta of 1.1. The market expectedrate of return is 0.08 and the risk-free rate is 0.05. The alpha of the stock isA) 1.7%.B) -1.7%.C) 8.3%.D) 5.5%.E) none of the above.Answer: A Difficulty: ModerateRationale: 10% - [5% +1.1(8% - 5%)] = 1.7%.22. Your opinion is that CSCO has an expected rate of return of 0.13. It has a beta of 1.3.The risk-free rate is 0.04 and the market expected rate of return is 0.115. According to the Capital Asset Pricing Model, this security isA) underpriced.B) overpriced.C) fairly priced.D) cannot be determined from data provided.E) none of the above.Answer: B Difficulty: ModerateRationale: 11.5% - 4% + 1.3(11.5% - 4%) = -2.25%; therefore, the security isoverpriced.23. Your opinion is that CSCO has an expected rate of return of 0.1375. It has a beta of 1.3.The risk-free rate is 0.04 and the market expected rate of return is 0.115. According to the Capital Asset Pricing Model, this security isA) underpriced.B) overpriced.C) fairly priced.D) cannot be determined from data provided.E) none of the above.Answer: C Difficulty: ModerateRationale: 13.75% - 4% + 1.3(11.5% - 4%) = 0.0%; therefore, the security is fairlypriced.24. Your opinion is that CSCO has an expected rate of return of 0.15. It has a beta of 1.3.The risk-free rate is 0.04 and the market expected rate of return is 0.115. According to the Capital Asset Pricing Model, this security isA) underpriced.B) overpriced.C) fairly priced.D) cannot be determined from data provided.E) none of the above.Answer: A Difficulty: ModerateRationale: 15% - 4% + 1.3(11.5% - 4%) = 1.25%; therefore, the security is under priced.25. Your opinion is that Boeing has an expected rate of return of 0.112. It has a beta of 0.92.The risk-free rate is 0.04 and the market expected rate of return is 0.10. According to the Capital Asset Pricing Model, this security isA) underpriced.B) overpriced.C) fairly priced.D) cannot be determined from data provided.E) none of the above.Answer: A Difficulty: ModerateRationale: 11.2% - 4% + 0.92(10% - 4%) = 1.68%; therefore, the security is underpriced.26. Your opinion is that Boeing has an expected rate of return of 0.0952. It has a beta of0.92. The risk-free rate is 0.04 and the market expected rate of return is 0.10.According to the Capital Asset Pricing Model, this security isA) underpriced.B) overpriced.C) fairly priced.D) cannot be determined from data provided.E) none of the above.Answer: C Difficulty: ModerateRationale: 9.52% - 4% + 0.92(10% - 4%) = 0.0%; therefore, the security is fairly priced.27. Your opinion is that Boeing has an expected rate of return of 0.08. It has a beta of 0.92.The risk-free rate is 0.04 and the market expected rate of return is 0.10. According to the Capital Asset Pricing Model, this security isA) underpriced.B) overpriced.C) fairly priced.D) cannot be determined from data provided.E) none of the above.Answer: C Difficulty: ModerateRationale: 8.0% - 4% + 0.92(10% - 4%) = -1.52%; therefore, the security is overpriced.28. The risk-free rate is 4 percent. The expected market rate of return is 11 percent. If youexpect CAT with a beta of 1.0 to offer a rate of return of 10 percent, you shouldA) buy stock X because it is overpriced.B) sell short stock X because it is overpriced.C) sell stock short X because it is underpriced.D) buy stock X because it is underpriced.E) none of the above, as the stock is fairly priced.Answer: B Difficulty: ModerateRationale: 10% < 4% + 1.0(11% - 4%) = 11.0%; therefore, stock is overpriced andshould be shorted.29. The risk-free rate is 4 percent. The expected market rate of return is 11 percent. If youexpect CAT with a beta of 1.0 to offer a rate of return of 11 percent, you shouldA) buy stock X because it is overpriced.B) sell short stock X because it is overpriced.C) sell stock short X because it is underpriced.D) buy stock X because it is underpriced.E) none of the above, as the stock is fairly priced.Answer: E Difficulty: ModerateRationale: 11% = 4% + 1.0(11% - 4%) = 11.0%; therefore, stock is fairly priced. 30. The risk-free rate is 4 percent. The expected market rate of return is 11 percent. If youexpect CAT with a beta of 1.0 to offer a rate of return of 13 percent, you shouldA) buy stock X because it is overpriced.B) sell short stock X because it is overpriced.C) sell stock short X because it is underpriced.D) buy stock X because it is underpriced.E) none of the above, as the stock is fairly priced.Answer: D Difficulty: ModerateRationale: 13% > 4% + 1.0(11% - 4%) = 11.0%; therefore, stock is under priced. 31. You invest 55% of your money in security A with a beta of 1.4 and the rest of yourmoney in security B with a beta of 0.9. The beta of the resulting portfolio isA) 1.466B) 1.157C) 0.968D) 1.082E) 1.175Answer: E Difficulty: ModerateRationale: 0.55(1.4) + 0.45(0.90) = 1.175.32. Given the following two stocks A and BIf the expected market rate of return is 0.09 and the risk-free rate is 0.05, which security would be considered the better buy and why?A) A because it offers an expected excess return of 1.2%.B) B because it offers an expected excess return of 1.8%.C) A because it offers an expected excess return of 2.2%.D) B because it offers an expected return of 14%.E) B because it has a higher beta.Answer: C Difficulty: ModerateRationale: A's excess return is expected to be 12% - [5% + 1.2(9% - 5%)] = 2.2%. B's excess return is expected to be 14% -[5% + 1.8(9% - 5%)] = 1.8%.33. Capital Asset Pricing Theory asserts that portfolio returns are best explained by:A) economic factors.B) specific risk.C) systematic risk.D) diversification.E) none of the above.Answer: C Difficulty: EasyRationale: The risk remaining in diversified portfolios is systematic risk; thus, portfolio returns are commensurate with systematic risk.34. According to the CAPM, the risk premium an investor expects to receive on any stockor portfolio increases:A) directly with alpha.B) inversely with alpha.C) directly with beta.D) inversely with beta.E) in proportion to its standard deviation.Answer: C Difficulty: EasyRationale: The market rewards systematic risk, which is measured by beta, and thus, the risk premium on a stock or portfolio varies directly with beta.35. What is the expected return of a zero-beta security?A) The market rate of return.B) Zero rate of return.C) A negative rate of return.D) The risk-free rate.E) None of the above.Answer: D Difficulty: ModerateRationale: E(R S) = r f + 0(R M - r f) = r f.36. Standard deviation and beta both measure risk, but they are different in thatA) beta measures both systematic and unsystematic risk.B) beta measures only systematic risk while standard deviation is a measure of totalrisk.C) beta measures only unsystematic risk while standard deviation is a measure of totalrisk.D) beta measures both systematic and unsystematic risk while standard deviationmeasures only systematic risk.E) beta measures total risk while standard deviation measures only nonsystematic risk.Answer: B Difficulty: EasyRationale: B is the only true statement.37. The expected return-beta relationshipA) is the most familiar expression of the CAPM to practitioners.B) refers to the way in which the covariance between the returns on a stock and returnson the market measures the contribution of the stock to the variance of the marketportfolio, which is beta.C) assumes that investors hold well-diversified portfolios.D) all of the above are true.E) none of the above is true.Answer: D Difficulty: ModerateRationale: Statements A, B and C all describe the expected return-beta relationship.38. The security market line (SML)A) can be portrayed graphically as the expected return-beta relationship.B) can be portrayed graphically as the expected return-standard deviation of marketreturns relationship.C) provides a benchmark for evaluation of investment performance.D) A and C.E) B and C.Answer: D Difficulty: ModerateRationale: The SML is a measure of expected return-beta (the CML is a measure of expected return-standard deviation of market returns). The SML provides the expected return-beta relationship for "fairly priced" securities; thus if a portfolio manager selects securities that are underpriced and produces a portfolio with a positive alpha, thisportfolio manager would receive a positive evaluation.39. Research by Jeremy Stein of MIT resolves the dispute over whether beta is a sufficientpricing factor by suggesting that managers should use beta to estimateA) long-term returns but not short-term returns.B) short-term returns but not long-term returns.C) both long- and short-term returns.D) book-to-market ratios.E) None of the above was suggested by Stein.Answer: A Difficulty: Difficult40. Studies of liquidity spreads in security markets have shown thatA) liquid stocks earn higher returns than illiquid stocks.B) illiquid stocks earn higher returns than liquid stocks.C) both liquid and illiquid stocks earn the same returns.D) illiquid stocks are good investments for frequent, short-term traders.E) None of the above is true.Answer: B Difficulty: Difficult41. An underpriced security will plotA) on the Security Market Line.B) below the Security Market Line.C) above the Security Market Line.D) either above or below the Security Market Line depending on its covariance withthe market.E) either above or below the Security Market Line depending on its standard deviation.Answer: C Difficulty: EasyRationale: An underpriced security will have a higher expected return than the SML would predict; therefore it will plot above the SML.42. The risk premium on the market portfolio will be proportional toA) the average degree of risk aversion of the investor population.B) the risk of the market portfolio as measured by its variance.C) the risk of the market portfolio as measured by its beta.D) both A and B are true.E) both A and C are true.Answer: D Difficulty: ModerateRationale: The risk premium on the market portfolio is proportional to the averagedegree of risk aversion of the investor population and the risk of the market portfolio measured by its variance.43. In equilibrium, the marginal price of risk for a risky security must beA) equal to the marginal price of risk for the market portfolio.B) greater than the marginal price of risk for the market portfolio.C) less than the marginal price of risk for the market portfolio.D) adjusted by its degree of nonsystematic risk.E) none of the above is true.Answer: A Difficulty: ModerateRationale: In equilibrium, the marginal price of risk for a risky security must be equal to the marginal price of risk for the market. If not, investors will buy or sell the security until they are equal.44. The capital asset pricing model assumesA) all investors are price takers.B) all investors have the same holding period.C) investors pay taxes on capital gains.D) both A and B are true.E) A, B and C are all true.Answer: D Difficulty: EasyRationale: The CAPM assumes that investors are price-takers with the same single holding period and that there are no taxes or transaction costs.45. If investors do not know their investment horizons for certainA) the CAPM is no longer valid.B) the CAPM underlying assumptions are not violated.C) the implications of the CAPM are not violated as long as investors' liquidity needsare not priced.D) the implications of the CAPM are no longer useful.E) none of the above is true.Answer: C Difficulty: ModerateRationale: This is discussed in the chapter's section about extensions to the CAPM. It examines what the consequences are when the assumptions are removed.46. The value of the market portfolio equalsA) the sum of the values of all equity securities.B) the sum of the values of all equity and fixed income securities.C) the sum the values of all equity, fixed income, and derivative securities.D) the sum of the values of all equity, fixed income, and derivative securities plus thevalue of all mutual funds.E) the entire wealth of the economy.Answer: E Difficulty: ModerateRationale: The market portfolio includes all assets in existence.47. The amount that an investor allocates to the market portfolio is negatively related toI)the expected return on the market portfolio.II)the investor's risk aversion coefficient.III)the risk-free rate of return.IV)the variance of the market portfolioA) I and IIB) II and IIIC) II and IVD) II, III, and IVE) I, III, and IVAnswer: D Difficulty: ModerateRationale: The optimal proportion is given by y = (E(R M)-r f)/(.01xAσ2M). This amount will decrease as r f, A, and σ2M decrease.48. One of the assumptions of the CAPM is that investors exhibit myopic behavior. Whatdoes this mean?A) They plan for one identical holding period.B) They are price-takers who can't affect market prices through their trades.C) They are mean-variance optimizers.D) They have the same economic view of the world.E) They pay no taxes or transactions costs.Answer: A Difficulty: ModerateRationale: Myopic behavior is shortsighted, with no concern for medium-term orlong-term implications.49. The CAPM applies toA) portfolios of securities only.B) individual securities only.C) efficient portfolios of securities only.D) efficient portfolios and efficient individual securities only.E) all portfolios and individual securities.Answer: E Difficulty: ModerateRationale: The CAPM is an equilibrium model for all assets. Each asset's risk premium is a function of its beta coefficient and the risk premium on the market portfolio.50. Which of the following statements about the mutual fund theorem is true?I)It is similar to the separation property.II)It implies that a passive investment strategy can be efficient.III)It implies that efficient portfolios can be formed only through active strategies.IV)It means that professional managers have superior security selection strategies.A) I and IVB) I, II, and IVC) I and IID) III and IVE) II and IVAnswer: C Difficulty: ModerateRationale: The mutual fund theorem is similar to the separation property. The technical task of creating mutual funds can be delegated to professional managers; thenindividuals combine the mutual funds with risk-free assets according to theirpreferences. The passive strategy of investing in a market index fund is efficient.51. The expected return -- beta relationship of the CAPM is graphically represented byA) the security market line.B) the capital market line.C) the capital allocation line.D) the efficient frontier with a risk-free asset.E) the efficient frontier without a risk-free asset.Answer: A Difficulty: EasyRationale: The security market line shows expected return on the vertical axis and beta on the horizontal axis. It has an intercept of r f and a slope of E(R M) - r f.52. A “fairly priced” asset liesA) above the security market line.B) on the security market line.C) on the capital market line.D) above the capital market line.E) below the security market line.Answer: B Difficulty: EasyRationale: Securities that lie on the SML earn exactly the expected return generated by the CAPM. Their prices are proportional to their beta coefficients and they have alphas equal to zero.53. For the CAPM that examines illiquidity premiums, if there is correlation among assetsdue to common systematic risk factors, the illiquidity premium on asset i is a function ofA) the market's volatility.B) asset i's volatility.C) the trading costs of security i.D) the risk-free rate.E) the money supply.Answer: C Difficulty: ModerateRationale: The formula for this extension to the CAPM relaxes the assumption that trading is costless.54. Your opinion is that security A has an expected rate of return of 0.145. It has a beta of 1.5. The risk-free rate is 0.04 and the market expected rate of return is 0.11. Accordingto the Capital Asset Pricing Model, this security isA) underpriced.B) overpriced.C) fairly priced.D) cannot be determined from data provided.E) none of the above.Answer: C Difficulty: ModerateRationale: 14.5% = 4% + 1.5(11% - 4%) = 14.5%; therefore, the security is fairly priced.55. Your opinion is that security C has an expected rate of return of 0.106. It has a beta of 1.1. The risk-free rate is 0.04 and the market expected rate of return is 0.10. Accordingto the Capital Asset Pricing Model, this security isA) underpriced.B) overpriced.C) fairly priced.D) cannot be determined from data provided.E) none of the above.Answer: A Difficulty: ModerateRationale: 4% + 1.1(10% - 4%) = 10.6%; therefore, the security is fairly priced.56. The risk-free rate is 4 percent. The expected market rate of return is 12 percent. If you expect stock X with a beta of 1.0 to offer a rate of return of 10 percent, you shouldA) buy stock X because it is overpriced.B) sell short stock X because it is overpriced.C) sell stock short X because it is underpriced.D) buy stock X because it is underpriced.E) none of the above, as the stock is fairly priced.Answer: B Difficulty: ModerateRationale: 10% < 4% + 1.0(12% - 4%) = 12.0%; therefore, stock is overpriced and should be shorted.57. The risk-free rate is 5 percent. The expected market rate of return is 11 percent. If youexpect stock X with a beta of 2.1 to offer a rate of return of 15 percent, you shouldA) buy stock X because it is overpriced.B) sell short stock X because it is overpriced.C) sell stock short X because it is underpriced.D) buy stock X because it is underpriced.E) none of the above, as the stock is fairly priced.Answer: B Difficulty: ModerateRationale: 15% < 5% + 2.1(11% - 5%) = 17.6%; therefore, stock is overpriced and should be shorted.58. You invest 50% of your money in security A with a beta of 1.6 and the rest of yourmoney in security B with a beta of 0.7. The beta of the resulting portfolio isA) 1.40B) 1.15C) 0.36D) 1.08E) 0.80Answer: B Difficulty: ModerateRationale: 0.5(1.6) + 0.5(0.70) = 1.15.。
投资学第7版TestBank答案14
投资学第7版TestBank答案14Multiple Choice Questions1. The current yield on a bond is equal to ________.A) annual interest divided by the current market priceB) the yield to maturityC) annual interest divided by the par valueD) the internal rate of returnE) none of the aboveAnswer: A Difficulty: EasyRationale: A is current yield and is quoted as such in the financial press.2. If a 7% coupon bond is trading for $975.00, it has a current yield of____________ percent.A) 7.00B) 6.53C) 7.24D) 8.53E) 7.18Answer: E Difficulty: EasyRationale: 70/975 = 7.18.3. If a 6% coupon bond is trading for $950.00, it has a current yield of____________ percent.A) 6.5B) 6.3C) 6.1D) 6.0E) 6.6Answer: B Difficulty: EasyRationale: 60/950 = 6.3.4. If an 8% coupon bond is trading for $1025.00, it has a current yield of____________ percent.A) 7.8B) 8.7C) 7.6D) 7.9E) 8.1Answer: A Difficulty: EasyRationale: 80/1025 = 7.8.5. If a 7.5% coupon bond is trading for $1050.00, it has a current yield of____________ percent.A) 7.0B) 7.4C) 7.1D) 6.9E) 6.7Answer: C Difficulty: EasyRationale: 75/1050 = 7.1.6. A coupon bond pays annual interest, has a par value of $1,000, maturesin 4 years, has a coupon rate of 10%, and has a yield to maturity of 12%.The current yield on this bond is ___________.A) 10.65%B) 10.45%C) 10.95%D) 10.52%E) none of the aboveAnswer: A Difficulty: ModerateRationale: FV = 1000, n = 4, PMT = 100, i = 12, PV= 939.25; $100 / $939.25 = 10.65%.7. A coupon bond pays annual interest, has a par value of $1,000, maturesin 12 years, has a coupon rate of 11%, and has a yield to maturity of 12%.The current yield on this bond is ___________.A) 10.39%B) 10.43%C) 10.58%D) 10.66%E) none of the aboveAnswer: D Difficulty: ModerateRationale: FV = 1000, n = 12, PMT = 110, i = 12, PV= 938.06; $100 / $938.06 = 10.66%.8. Of the following four investments, ________ is considered the safest.A) commercial paperB) corporate bondsC) U. S. Agency issuesD) Treasury bondsE) Treasury billsAnswer: E Difficulty: EasyRationale: Only Treasury issues are insured by the U. S. government; the shorter-term the instrument, the safer the instrument.9. To earn a high rating from the bond rating agencies, a firmshould haveA) a low times interest earned ratioB) a low debt to equity ratioC) a high quick ratioD) B and CE) A and CAnswer: D Difficulty: EasyRationale: High values for the times interest and quick ratios and a low debt to equity ratio are desirable indicators of safety.10. At issue, coupon bonds typically sell ________.A) above par valueB) below parC) at or near par valueD) at a value unrelated to parE) none of the aboveAnswer: C Difficulty: EasyRationale: If the investment banker has appraised the market and the quality of the bond correctly, the bond will sell at or near par (unless interest rates have changed very dramatically and very quickly around the time of issuance).11. Accrued interestA) is quoted in the bond price in the financial press.B) must be paid by the buyer of the bond and remitted to the seller ofthe bond.C) must be paid to the broker for the inconvenience of selling bondsbetween maturity dates.D) A and B.E) A and C.Answer: B Difficulty: ModerateRationale: Accrued interest must be paid by the buyer, but is not included in the quotations page price.12. The invoice price of a bond that a buyer would pay is equal toA) the asked price plus accrued interest.B) the asked price less accrued interest.C) the bid price plus accrued interest.D) the bid price less accrued interest.E) the bid price.Answer: A Difficulty: EasyRationale: The buyer of a bond will buy at the asked price and will also be invoiced for any accrued interest due to the seller.13. An 8% coupon U. S. Treasury note pays interest on May 30 and November 30and is traded for settlement on August 15. The accrued interest on the $100,000 face value of this note is _________.A) $491.80B) $800.00C) $983.61D) $1,661.20E) none of the aboveAnswer: D Difficulty: ModerateRationale: 76/183($4,000) = $1,661.20.Approximation: .08/12*100,000=666.67 per month. 666.67/month * 2.5months = 1.666.67.14. A coupon bond is reported as having an ask price of 113% of the $1,000par value in the Wall Street Journal. If the last interestpayment was made two months ago and the coupon rate is 12%, the invoice price of the bond will be ____________.A) $1,100B) $1,110C) $1,150D) $1,160E) none of the aboveAnswer: C Difficulty: ModerateRationale: $1,130 + $20 (accrued interest) = $1,150.15. The bonds of Ford Motor Company have received a rating of "D" by Moody's.The "D" rating indicatesA) the bonds are insuredB) the bonds are junk bondsC) the bonds are referred to as "high yield" bondsD) A and BE) B and CAnswer: E Difficulty: EasyRationale: D ratings are risky bonds, often called junk bonds (or high yield bonds by those marketing such bonds).16. The bond marketA) can be quite "thin".B) primarily consists of a network of bond dealers in the over the countermarket.C) consists of many investors on any given day.D) A and B.E) B and C.Answer: D Difficulty: EasyRationale: The bond market, unlike the stock market, can bea very thinly traded market. In addition, most bonds are traded by dealers.17. Ceteris paribus, the price and yield on a bond areA) positively related.B) negatively related.C) sometimes positively and sometimes negatively related.E) not related.E) indefinitely related.Answer: B Difficulty: EasyRationale: Bond prices and yields are inversely related.18. The ______ is a measure of the average rate of return an investor willearn if the investor buys the bond now and holds until maturity.A) current yieldB) dividend yieldC) P/E ratioD) yield to maturityE) discount yieldAnswer: D Difficulty: EasyRationale: The current yield is the annual interest as a percent of current market price; the other choices do not apply to bonds.。
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投资学练习作业题
（1）画出基金A和基金B的可行集(5个点)。
（2）找出最优风险投资组合P及其期望收益与标准差。
（3）找出由短期国库券与投资组合P支持的资本配置线的斜率。
（4）当一个投资者的风险厌恶程度A=5时，应在股票基金A、B和短期国库券中各投资多少？
2假定一个风险证券投资组合中包含大量的股票，它们有相同的分布，
ρ
60
E，相关系数5.0
%
=σ
r
(=
15
)
%,
=
（1）含有25种股票的等权重投资组合期望收益和标准差是多少？
（2）构造一个标准差小于或等于43%的有效投资组合所需要最少的股票数量为多少？（3）这一投资组合的系统风险为多少？
（4）如果国库券的收益率为10%，资本配置的斜率为多少？
3短期国库券的收益现在是4.90%，你已经建立了一个最优风险资产投资组合，投资组合P，即你把23%的资金投资到共同基金A，把77%的资金投资到共同基金B。
前者的收益率是8%，后者的收益率是19%。
（1）投资组合P的预期收益率是多少？
（2）假定你设计了一个投资组合C，其中34%的资金投资到无风险资产，其余的投资到组合P中，那么这个新的投资组合的预期收益是多少？
（3）如果投资组合P的标准差是21%，这个新组合的标准差是多少？确定在新的投资组合中无风险资产、共同基金A和共同基金B的权重。
（1）市场指数投资组合的平均超额收益率为多少？
（2）股票A与股票B之间的协方差为多大？
（3）股票B与指数之间的协方差为多大？
（4）将股票B的方差分解为市场和公司特有两部分。
5对股票A和股票B分析估计的指数模型结果如下：
A M A e R R ++=6.012.0
B M B e R R ++=4.104.0
26.0=M σ 20.0)(=A e σ 10.0)(=B e σ
（1） 股票A 和股票B 收益之间的协方差是多少？ （2） 每只股票的方差是多少？
（3） 将每只股票的方差分类到系统风险和公司特有风险中 （4） 每只股票和市场指数的协方差是多少？ （5） 两只股票的相关系数是多少？
6预计无风险利率是6.1%，市场投资组合的预期收益是14.6%。
（1） 利用CAPM ，根据下表所提供的数据，计算股票4的预期收益 （2） 画出证券市场线
（3） 在证券市场线上，找出每样资产对应的点
（4） 确定每样资产是被低估、被高估还是定价准确，计算其α
7假定一个多元投资组合Z 的定价基础是两个因素。
第一个因素的β是1.10，第二个因素的
β是0.45，第一个因素的预期收益是11%，第二个因素的预期收益是17%，无风险利率是
5.2%。
利用套利定价理论回答以下问题： （1） 第一种因素的风险溢价是多少？ （2） 第二种因素的风险溢价是多少？
（3） 根据和第一种因素的关系，投资组合Z 的风险溢价是多少？ （4） 根据和第二种因素的关系，投资组合Z 的风险溢价是多少？ （5） 投资组合Z 的整体风险溢价是多少？
（6） 投资组合Z 的整体整体预期收益是多少？
8一年期债券的到期利率是6.3%，2年期零息债券的到期利率是7.9%。
（1）第2年的远期利率是多少？
（2）根据期望假设，明年的1年期利率的期望值是多少？
（3）根据流动性偏好理论，明年期的1年期利率的期望值比（2）得到的值高还是低？
9你管理着价值100万美元的资产组合，目标久期为10年，可以从两种债券中选择：5年期零息债券和永久债券，当前收益率均为5%。
（1） 你愿意持有两种债券的份额各为多少？
（2） 如果现在的目标久期为10年，则明年的持有比例会如何变化？。