Name: _________________________________
Student Number: ____________________
Day of your lecture (Monday, Tuesday, or Thursday):
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AP/ADMS 3531, Winter 2011
Professors Domian and Pestano
Midterm Exam
This exam consists of 30 multiple choice questions. Show your responses on the Scantron sheet.
The first 15 questions are attached. The remaining questions will be handed out later in the exam
period.
If there is no disruption during the exam period, you can keep working on the first 15 questions
after the second module (questions 16 to 30) is handed out. If there is a disruption, each module
will be deemed completed after 40 minutes.
You are allowed to have one page of notes (8½ by 11 inches, one sheet of paper written on the
front side only, 10 point minimum font size or equivalent if handwritten) which must be turned
in with your exam. You can also use a handheld calculator.
1.
The value that is equal to the ending price of a security minus the beginning price is called
the
a.
arithmetic average return.
b.
geometric average return.
c.
capital gain or loss.
d.
percentage return.
e.
risk premium.
Ch 1:
p. 3
2.
A portfolio’s __________ is a simple weighted combination of the __________ of the assets
in the portfolio.
Ch 2: Portfolio expected returns
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3.
A portfolio had a value of $100,000 ten years ago. The annual arithmetic average return was
8.6 percent during the past ten years, and the portfolio had a negative return in two of the ten
years. The ending value of the portfolio
Ch 2: We need to know the geometric average (see pages 2022) to determine the ending value,
and it must be less than the arithmetic average because not all of the annual returns are the
same. So the ending value must be less than $100,000 x 1.086
10
= $228,191. A return of 100%
in any one year would result in a zero ending value.
4.
Which of the following is true about brokercustomer relations?
Ch 3: pp 7374
The next two questions are based on the following situation. Joe Investor bought 400 shares of
Bank Corp at the beginning of the year, when its stock price was $35 per share. The margin
requirement was 30%, and Joe decided to deposit a 40% margin. The brokerage firm charges 1
percentage point above the prime rate for margin loans; the prime rate was 5%. Bank Corp paid a
cash dividend of $1 per share at the end of the year. Joe sold his stock for $40 per share just after
receiving the dividend
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 Summer '10
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