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Unformatted text preview: a priceweighted index.
Difficulty: Moderate
21. The Dow Jones Industrial Average (DJIA) is computed by:
A . adding the prices of 30 large "bluechip" stocks and dividing by 30.
B. calculating the total market value of the 30 firms in the index and dividing by 30.
C. adding the prices of the 30 stocks in the index and dividing by a divisor.
D. adding the prices of the 500 stocks in the index and dividing by a divisor.
E. adding the prices of the 30 stocks in the index and dividing by the value of these stocks as of some base date period.
When the DJIA became a 30stock index, response A was true; however, as stocks on the index have split and been replaced, the divisor has been adjusted. In 2007 the divisor was 0.123.
Difficulty: Easy
Consider the following three stocks: 22. The priceweighted index constructed with the three stocks is
A . 30
B. 40
C. 50
D. 60
E. 70
($40 + $70 + $10)/3 = $40.
Difficulty: Easy
23. The valueweighted index constructed with the three stocks using a divisor of 100 is
A . 1.2
B. 1200
C. 490
D. 4900
E. 49
T he sum of the value of the three stocks divided by 100 is 490: [($40 x 200) + ($70 x 500) + ($10 x 600)] /100 = 490. Difficulty: Moderate
24. Assume at these prices the valueweighted index constructed with the three stocks is 490. What would the index be if stock B is split 2 for 1 and stock C 4 for 1?
A . 265
B. 430
C. 355
D. 490
E. 1000
Valueweighted indexes are not affected by stock splits.
Difficulty: Moderate
25. The price quotations of Treasury bonds in the Wall Street Journal show an ask price of 104:08 and a bid price of 104:04. As a buyer of the bond what is the dollar price you expect to pay?
A . $1,048.00
B. $1,042.50
C. $1,044.00
D. $1,041.25
E. $1040.40
You pay the asking price of the dealer, 104 8/32, or 104.25% of $1,000, or $1042.50.
Difficulty: Moderate
26. The price quotations of Treasury bonds in the Wall Street Journal show an ask price of 104:08 and a bid price of 104:04. As a seller of the bond what is the dollar price you expect to pay?
A . $1,048.00
B. $1,042.50
C. $1,041.25
D. $1,045.25
E. $1,040.40
You receive the bid price of the dealer, 104 4/32, or 104.125% of $1,000, or $1,041.25.
Difficulty: Moderate 29. If a Treasury note has a bid price of $975, the quoted bid price in the Wall Street Journal would be
A . 97:50.
B. 97:16.
C. 97:80.
D. 94:24.
E. 97:75.
T reasuries are quoted as a percent of $1,000 and in 1/32s.
Difficulty: Easy
35. If the market prices of each of the 30 stocks in the Dow Jones Industrial Average (DJIA) all change by the same percentage amount during a given day, which stock will have the greatest impact on the DJIA?
A . The stock trading at the highest dollar price per share.
B. The stock with total equity has the higher market value.
C. The stock having the greatest amount of equity in its capital structure.
D. The stock having the lowest volatility.
E. None of the above.
Higher priced stocks affect the DJIA more than lower priced stocks; other choices are not relevant.
Difficulty: Moderate
38. Brokers' calls
A . are funds used by individuals who wish to buy stocks on margin.
B. are funds borrowed by the broker from the bank, with the agreement to repay the bank immediately if requested to do so.
C. carry a rate that is usually about one percentage point lower than the rate on U.S. Tbills.
D. A and B.
E. A and C.
Brokers' calls are funds borrowed from banks by brokers and loaned to investors in margin accounts.
Difficulty: Easy 41. The yield to maturity reported in the financial pages for Treasury securities
A . is calculated by compounding the semiannual yield.
B. is calculated by doubling the semiannual yield.
C. is also called the bond equivalent yield.
D. is calculated as the yieldtocall for premium bonds.
E. Both B and C are true.
T he yield to maturity sho...
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This document was uploaded on 02/06/2014.
 Spring '14

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