ANSWER KEY FI-120 Mid-Term Exam (Spring 2011)

ANSWER KEY FI-120 Mid-Term Exam (Spring 2011) - FI 120...

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FI 120 Mid-Term Exam - Answer Key 1. The purchase of a futures contract gives the buyer _________. A. the right to buy an item at a specified price B. the right to sell an item at a specified price C. the obligation to buy an item at a specified price D. the obligation to sell an item at a specified price Bodie - Chapter 02 #49 Difficulty: Easy 2. An investor's degree of risk aversion will determine his or her ______. A. optimal risky portfolio B. risk-free rate C. optimal mix of the risk-free asset and risky asset D. capital allocation line Bodie - Chapter 06 #7 Difficulty: Medium 3. You sold short 300 shares of common stock at $30 per share. The initial margin is 50%. You must put up _________. A. $4,500 B. $6,000 C. $9,000 D. $10,000 Investment = 300(30)(.50) = 4500 Bodie - Chapter 03 #53 Difficulty: Medium
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4. Which of the following mortgage scenarios will benefit the homeowner the most? A. Adjustable rate mortgage when interest rate increases. B. Fixed rate mortgage when interest rates falls. C. Fixed rare mortgage when interest rate rises. D. None of the above, as banker's interest will always be protected. Bodie - Chapter 02 #85 Difficulty: Medium 5. __________ portfolio construction starts with asset allocation. A. Bottom-up B. Top-down C. Upside-down D. Side-to-side Bodie - Chapter 01 #35 Difficulty: Easy 6. You purchased XYZ stock at $50 per share. The stock is currently selling at $65. Your gains could be protected by placing a _________. A. limit-buy order B. limit-sell order C. market order D. stop-loss order Bodie - Chapter 03 #47 Difficulty: Medium
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7. A security with normally distributed returns has an annual expected return of 18% and standard deviation of 23%. The probability of getting a return between -28% and 64% in any one year is A. 68.26% B. 95.44% C. 99.74% D. 100.00% Bodie - Chapter 05 #68 Difficulty: Medium 8. The geometric average of -12%, 20% and 25% is _________. A. 8.42% B. 11.00% C. 9.70% D. 18.88% Bodie - Chapter 05 #14 Difficulty: Medium 9. Active trading in markets and competition among securities analysts helps ensure that __________. I. security prices approach informational efficiency II. riskier securities are priced to offer higher potential returns III. investors are unlikely to be able to consistently find under- or overvalued securities A. I only B. I and II only C. II and III only D. I, II and III Bodie - Chapter 01 #8 Difficulty: Hard
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10. You put up $50 at the beginning of the year for an investment. The value of the investment grows 4% and you earn a dividend of $3.50. Your HPR was ____. A. 4.00% B. 3.50% C. 7.00% D. 11.00% Bodie - Chapter 05 #1 Difficulty: Medium 11. The efficient markets hypothesis suggests that _______. A.
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This note was uploaded on 05/18/2011 for the course FI 120 taught by Professor Topez during the Spring '11 term at Golden Gate.

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ANSWER KEY FI-120 Mid-Term Exam (Spring 2011) - FI 120...

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