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Unformatted text preview: Fundamentals of Asset Valuation â…¡ Mid-term Examination Student: ___________________________________________________________________________ Part1. Multiple Choices (60*1â€™) 1. The Dow Jones Industrial Average is __________ A. A price weighted average B. A value weight and average C. An equally weighted average D. An unweighted average 2. A bond that has no collateral is called __________. A. A callable bond B. A debenture C. A junk bond D. A mortgage 3. You decide to purchase an equal number of shares of stocks of firms to create a portfolio. If you wished to construct an index to track your portfolio performance your best match for your portfolio would be to construct a/an A. Value weighted index B. Equal weighted index C. Price weighted index D. Bond price index 4. What are business firms most likely to use derivative securities for? A. Hedging B. Speculating C. Doing calculus problems D. Market making 5. The most actively traded money market security is A. Treasury bills B. Bankers' Acceptances C. Certificates of Deposit D. Common stock 6. Which one of the following types of markets requires the greatest level of trading activity to be cost effective? A. Broker market B. Dealer market C. Continuous auction market D. Direct search market 7. Underwriting is one of the services provided by ____. A. The SEC B. Investment bankers C. Publicly traded companies D. FDIC 8. Barnegat Light sold 200,000 shares in an initial public offering. The underwriter's explicit fees were $90,000. The offering price for the shares was $35, but immediately upon issue, the share price jumped to $43. What is the best estimate of the total cost to Barnegat Light of the equity issue? A. $90,000 B. $1,290,000 C. $2,390,000 D. $1,690,000 9. Which one of the following is not an example of a brokered market? A. Residential real estate market B. Market for large block security transactions C. Primary market for securities D. NASDAQ 10. You find that the bid and ask prices for a stock are $10.25 and $10.30 respectively. If you purchase or sell the stock you must pay a flat commission of $25. If you buy 100 shares of the stock and immediately sell them, what is your total implied and actual transaction cost in dollars? A. $50 B. $25 C. $30 D. $55 1 11. The CAL provided by combinations of one month T-bills and a broad index of common stocks is called the A. SML B. CAL* C. CML D. S&P500 12. The complete portfolio refers to the investment in __________. A. the risk-free asset B. the risky portfolio C. the risk-free asset and the risky portfolio combined D. the risky portfolio and the index 13. The holding period return on a stock is equal to __________. A. the capital gain yield over the period plus the inflation rate B. the capital gain yield over the period plus the dividend yield C. the current yield plus the dividend yield D. the dividend yield plus the risk premium Use the following to answer questions 14-15 You have the following rates of return for a risky portfolio for several recent years Assume that the stock pays no...
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This note was uploaded on 04/29/2011 for the course FMIS 3611 taught by Professor James during the Spring '11 term at University of Minnesota Duluth.
- Spring '11