FIN 331 Exam 2 VERSION K - FIN 331 Exam 2 1 The riskless rate is 5.00 and the return on the market is 20 If you form a portfolio with a beta of 0.8 what

FIN 331 Exam 2 VERSION K - FIN 331 Exam 2 1 The riskless...

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FIN 331 Exam 2 1 The riskless rate is 5.00 % and the return on the market is 20 %. If you form a portfolio with a beta of 0.8 what should be your rate of return according to CAPM – 9.00 % 2 Interest income from Treasure securities is _________ - Subject to federal income taxes but is exempt from state and local taxes 3 Assume that the market things the real rate is 2.00% the inflation premium is 2.70 % the bonds default risk justifies a premium of 2.10 % the maturity premium is 0.50 % and the liquidity premium is 1.10%. Since the cash flows are denominated in euros, the foreign exchange rate premium is 1.50%. What is the discount Rate? – 9.90% 4 The type of information contained in the registration statement includes________ - 1) the nature of the business of the issuer and the background of management. 2) the nature of the investment risks associated with the security and the background of management. 3) The nature of the business of the issuer and key provisions or features of the security. All of these 5 A U.S. Treasury security with a maturity date in five years at the time of issue would be called a? – Note 6 A revenue bond is issued for either project or enterprise financings where the bond issuer pledges the revenues generated by the project that is financed to the bondholders – True 7 Bond dealers primarily make money by charging commissions on transactions – False. Bid ask spread 8 The price of an asset moves in the same direction of a change in its discount rate – False 9 ________ Postulates that a security’s expected return is influenced by multiple factors as opposed to the single market index. – The Arbitrage Pricing Theory Model
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10 If interest rates rise in the economy the market price of a bond with a fixed coupon will be ______ than it was before the rise – Lower 11 Effective august 24 th 2000 the minimum spread was reduced to _______ with trades on all stocks in decimals beginning august 9 th 2001. – One Cent 12 A red herring is________ - A Preliminary Prospectus 13 The highest-grade bonds are designated by Moody’s by the symbol ________ - Aaa. S&P is AAA 14 According to art, and illustrated by the AMYRIS IPO, the prospectus summary will often get you excited about an IPO but the __________ section will almost always dampen your enthusiasm – Risk Factors 15
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  • Fall '08
  • WILT
  • Interest, Portfolio Market Value

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