2015 mid-term paper and ans.docx

2015 mid-term paper and ans.docx

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1. Based on the period 1926.2009, the risk premium for U.S. Treasury bill was a. 0.0% b. 1.2% c. 2.0% d. 2.4% e. 2.7% 2. Over the past ten years, large-company stocks have returned an average of 11.8 percent annually, long-term corporate bonds have earned 6.4 percent, and U.S. Treasury bills have 3.7 percent, How much additional risk premium would you have earned if you had invested in large-company stocks rather than long-term corporate bonds over those ten years a. 1.7% b. 3.7% c. 5.4% d. 5.6% e. 8.1% 3. An asset has an average historical rate of return of 13.2 percent and a variance of .00972196. What range of returns would you expect to see approximately two-thirds of the time? a. -2.28 to +24.48 percent b. -6.52 to +32.92 percent c. -9.58 to +38.8 percent d. +3.34 to +23.06 percent e. +13.1 to + 13.3 percent 4. You invested $5,000 eight years ago. The arithmetic average return on your investment is 10.6 percent and the geometric average return os 10.23 percent. What is the value of your portfolio today? a. $9,092 b. $10,623 c. $10,899 d. $10,947 e. $11,195 1
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5. A stock had year-end prices of $24, $27, $32, and $26 over the past four years, respectively. What is geometric average return? a. 2.02 percent b. 2.18 percent c. 2.55 percent d. 2.70 percent [(26/24) 1/3 -1 = 0.027 e. 2.81 percent 6. Jesse is researching chemical companies in an effort to determine which company’s stock he should purchase. This process is known as: a. Market timing b. Purchase shorting c. Marketing research d. Asset allocation e. Security selection 7. Which one of the following decisions falls under the category of asset allocation? a. Purchasing Ford stock rather than General Motors stock. b. Determining that thirty percent of a portfolio should be invested in bonds c. Adopting a passive investment strategy d. Deciding to actively analyze individual securities e. Deciding to use an online broker 8. Taylor industries stock is selling for $32 per share. You would like to purchase as many shares of this stocks as you can. You margin account currently has available cash of $6,200 and the initial margin requirement is 60 percent. What is the maximum number of shares you can buy?
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