Fall08-Solution-Exam1

Fall08-Solution-Exam1 - BUS 172A Investment Analysis Fall...

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BUS 172A – Investment Analysis Fall 2008 Exam 1 Last Name: __________________________First Name: _____________________ Class Time: _________________________ Instructions: There are 13 questions . Questions 1–5 are multiple-choice questions. Questions 6–11 are problems for which computations are necessary. Finally, questions 12-13 are open questions. Question 13 is a bonus question. For each question you need to report the correct final answer in the space provided . For questions 6–11, in addition to reporting the final answer, you must also report the complete and correct solution with clear computations. When reporting the solutions to the questions 6-11 you must label all the amounts you use in the computations. Your computations and solutions to the questions 6-11 must be clear and easy to understand. For questions 12-13 you must report a concise and clearly understandable answer. Grading: Each multiple-choice question is worth 5 points. No partial credit is granted for questions 1-5 . For the problems 6-11 you can only receive the maximum points allowed if you record the correct final answer along with the complete and correct solution for the problem. If you report the correct final answer, but you do not provide a complete and consistent solution for the problems, you will not receive any points. Partial credit is granted for questions 6–13 . 1
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Section I – Multiple Choice Questions: 5 points each question 1. Based on the annual returns history since 1926, which asset category, on average, has yielded the highest risk premium? a. U.S. Treasury bills. b. Corporate bonds. c. Large-company stocks. d. Small-company stocks. e. US Treasury bonds. ANSWER: ________ 2. Which of the following investment factors, strategies, or tactics is the least relevant to a passive investment policy? a. Market timing. b. Asset allocation. c. Liquidity needs. d. Tax status. e. Political environment. ANSWER: ________ 3. Which of the following mutual fund fees is assessed on an annual basis? a. Front-end loads. b. 12b-1 fees. c. Back-end load. d. Contingent deferred sales charge (CDSC). e. Redemption fees. ANSWER: ________ 4. Which of the following statements is the most correct about Hedge Funds: a. Hedge Funds provide liquidity to the same extent as Closed-End Funds. b. Hedge Funds and Mutual Funds have the same type of fee structure, where, in addition to a general management fee of 1 or 2 percent of fund assets, the manager is paid a special performance fee. This special performance fee is often in the range of 20 to 40 percent of profits realized by the fund’s investment strategy. c.
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Fall08-Solution-Exam1 - BUS 172A Investment Analysis Fall...

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