Solutions to Quiz 2 are after the questions. Please note that the order of questions on your
quiz may have been different so youll need to identify the questions.
1. A 1% decline in yield will have the least effect on the price of the bond with a
_.
A) 10

Chapter 11 - Managing Bond Portfolios
Chapter 11
Managing Bond Portfolios
Multiple Choice Questions
1. All other things equal, which of the following has the longest duration?
A. A 30 year bond with a 10% coupon
B. A 20 year bond with a 9% coupon
C. A 20

Chapter 7
1
Capital asset pricing and arbitrage
pricing theory
InvestmentManagement
CAPM&APT
asset pricing models
2
Capital asset pricing model (CAPM): Model that relates
equilibrium expected return of a security to its risk measured
by beta.
CAPM generat

Chapter 8
1
The efficient Market Hypothesis
EMH
Question?
2
Suppose ABC Corp. is trading for $100 a share
Suppose you knew with certainty that in 3 days the stock
would be worth $110. What would you do?
What would other investors who knew your informat

Chapter 15
1
Options Markets
InvestmentManagement
OptionsMarkets
option contracts
2
Derivative:
Security whose payoff is contingent on the
price of another security
Call
Option: the right to buy a stock at a specified
time in the future (Expiration date

Formula Sheet for Exam 1
Investments
Jared Smith
Here are many formulas, you may or may not need to use all of these on the test:
HPR =
Ending Price Beginning Price + Interim Cash Flows
Beginning Price
Margin = (Equity in account) / (Market Value of Stock

Name _
BUSFIN 1321
Instructor: Leming Lin
Exam 2 (Version A)
Note: This is a closed book exam. For the multiple choice questions choose the best answer
among those listed. For written questions, credit will be given for partial work. Use extra sheets
if n

Name _
BUSFIN 1321
Instructor: Leming Lin
Exam 1 (Version B)
Note: This is a closed book exam. For the multiple choice questions choose the best answer
among those listed. For written questions, credit will be given for partial work. Use extra sheets
if n

Name _
BUSFIN 1321
Instructor: Leming Lin
Exam 1 (Version A)
Note: This is a closed book exam. For the multiple choice questions choose the best answer
among those listed. For written questions, credit will be given for partial work. Use extra sheets
if n

Homework 1 (due: Jan 27 (Wed) at the beginning of class)
BUSFIN 1321-Spring 2016 Instructor: Leming Lin
1. On Dec 31, 2014, the shares of Google, IBM, and Walmart closed at $538, $160, and $87
respectively. The closing prices of the three stocks on Jan 16

Homework 2 (due: Feb 16 (Mon) at the beginning of class)
BUSFIN 1321-Spring 2015 Instructor: Leming Lin
1. A pension fund manager is considering three mutual funds. The first is a stock fund, the
second is a long-term government and corporate bond fund, a

Name _
BUSFIN 1321
Instructor: Leming Lin
Exam 2 (Version B)
Note: This is a closed book exam. For the multiple choice questions choose the best answer
among those listed. For written questions, credit will be given for partial work. Use extra sheets
if n

1. What must be the beta of a portfolio with = 20%, if = 5% and ( ) = 15%?
According to CAPM, () = + ( ) ), we have
20% = 5% + (15% 5%)
= 1.5
2. Suppose the yield on short-term government securities (perceived to be risk-free) is about
4%. Suppose also t

Suppose that you are risk averse. Suppose that the expected return on the market is 10% in
2015. The standard deviations of the market, Walmart, and Google stock return are, 12%,
8%, and 15%, respectively. The beta of Walmart is 0.4 and the beta of Google

Chapter 5
1
Risk and return:
past and prologue
InvestmentManagement
RiskandReturn:Pastand
single-period rate of return
2
Holding-period return (HPR): Rate of growth over an
investment period, i.e. dollars earned per dollar invested
Annual percentage rate