Investments Sample Final
FINN 3063 Investments  Sample Final Questions (second part)
2. Consider the multifactor APT with two factors. The risk premiums on the factor 1 and
factor 2 portfolios are respectively 5% and 3%. Stock A has a beta of 1.4 on factor 1,
and a beta of 0.5 on factor 2. The expected return on stock A is 14%. If no arbitrage
opportunities exist, the riskfree rate of return is __________.
B) 5.5%
10. Sinking funds are commonly viewed as protecting the _______ of the bond.
A) issuer
B) underwriter
C) holder
D) dealer
13. Consider the expectations theory of the term structure of interest rates. If the yield
curve is downward sloping, this indicates that investors expect shortterm interest rates
to __________ in the future.
A) increase
B) decrease
C) not change
D) change in an unpredictable manner
14. A coupon bond pays semiannual interest is reported as having an ask price of 117% of
its $1,000 par value in the Wall Street Journal. If the last interest payment was made 2
months ago and the coupon rate is 6%, the invoice price of the bond will be
__________.
A) $1,140
B) $1,170
C) $1,180
D) $1,200
15. A bond will sell at a premium when __________.
A) its coupon rate is greater than its current yield and its current yield is greater than its
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
This is the end of the preview.
Sign up
to
access the rest of the document.
 Spring '11
 Hearth
 Interest Rates, Interest, Pride and Prejudice

Click to edit the document details