FINA312 / FINA517 SEMESTER B 2010
TUTORIAL SESSION 01
1. Discuss the agency problem.
Managers are the agents of the shareholders, and should act on their behalf to maximize
shareholder wealth (the value of the stock). A conflict (the agency con
1. You purchase one IBM July 120 call contract for a premium of $5. You hold the option until the expiration date when IBM stock sells for $123 per share. You will realize a _ on the investment.
a. $200 profit
b. $200 loss
c. $300 profit
1. The _ is the result of applying a set of arbitrary accounting rules to spread the acquisition cost of assets over a specified number of years.
a. book value
b. market value
c. liquidation value
d. Tobin's q
2. In general, firms in the
1. If the Black-Scholes formula is solved to find the standard deviation consistent with the current market call premium, that standard deviation would be called the _.
c. implied volatility
Chapter 02 - Asset Classes and Financial Instruments
Asset Classes and Financial Instruments
Multiple Choice Questions
1. Which of the following is not a characteristic of a money market instrument?
C. long maturit
CHAPTER 25: INTERNATIONAL DIVERSIFICATION
Initial investment = 2,000 1.50 = $3,000
Final value = 2,400 1.75 = $4,200
Rate of return = 4200/3000 1 = .40 = 40%
a. 10,000/2 = 5,000
5,000/40 = 125 shares
b. To fill in the table, we use th
Bond Prices and Yields
1. Drexel Burnham Lambert filed for bankruptcy in 1990 due to _.
a. large losses in gold futures
b. an insider trading scandal
c. large underwriting losses
d. none of the above
2. Sinking funds are commonly viewed as protecting the
Behavioral Finance and Technical Analysis
1. _ would be an example of "global" consumption smoothing.
a. Borrowing to buy a car
b. Borrowing to buy a home
c. Saving to send children to college
d. Saving for retirement
2. Inflation has an adverse effect on
The Efficient Market Hypothesis
1. Which of the following beliefs would not preclude charting as a method of portfolio management.
a. The market is strong form efficient.
b. The market is semi-strong form efficient.
c. The market is weak form efficient.
CHAPTER 21: OPTION VALUATION
Put values also must increase as the volatility of the underlying stock increases. We
see this from the parity relation as follows:
P = C + PV(X) S0 + PV(Dividends).
Given a value of S and a risk-free interest rate, if C in
CHAPTER 22: FUTURES MARKETS
a. The closing price for the spot index was 1329.78. The dollar value of stocks is
thus $250 1329.78 = $332,445. The closing futures price for the March
contract was 1364.00, which has a dollar value of 1364.00 $250 = $341,0
CHAPTER 23: FUTURES MARKETS: A CLOSER LOOK
a. S0 (1 + rf) D = 1425 (1.06) 15 = 1495.50
b. S0 (1 + rf) D = 1425 (1.03) 15 = 1452.75
c. The futures price is too low. Buy futures, short the index, and invest the
proceeds of the short sale in T-bills.
Capital Asset Pricing and Arbitrage Pricing Theory
1. An adjusted beta will be _ than the unadjusted beta.
c. closer to 1
d. closer to 0
2. Fama and French claim that after controlling for firm size and the ratio of book value to market
1. Risk that can be eliminated through diversification is called _ risk.
d. all of the above
2. The _ decision should take precedence over the _ decision.
a. asset allocation, stock sel
Risk and Return: Past and Prologue
1. The holding period return is the rate at which the investor's funds have grown over the _.
a. last year
b. last quarter
c. last month
d. investment period
2. The _ average ignores compounding.
Mutual Funds and Other Investment Companies
1. A _ invests in a portfolio that is fixed for the life of the fund.
a. mutual fund
b. money market fund
c. managed investment company
d. unit investment trust
2. _ are partnerships of investors with portfolios
How Securities Are Traded
1. Underwriting is one of the services provided by _.
a. the SEC
b. investment bankers
c. publicly traded companies
2. Under firm commitment underwriting the _ assumes the full risk that the shares cannot be sold to the p
Global Financial Instruments
1. Which of the following is not a money market instrument?
a. treasury bill
b. commercial paper
c. preferred stock
d. banker's acceptance
2. Ninety-one-day T-bill auctions are conducted _.
Investments: Background and Issues
1. Net worth represents _ of the Liabilities and Net Worth of nonfinancial U.S. businesses.
a. about 50%
b. over 90%
c. under 10%
d. about 30%
2. _ are the least organized markets.
a. Brokered markets
b. Dealer markets
CHAPTER 27: THE THEORY OF ACTIVE PORTFOLIO MANAGEMENT
Define R = r rf. Note that we compute the estimates of standard deviation using 4
degrees of freedom (i.e., we divide the sum of the squared deviations from the mean by 4
despite the fact that we
CHAPTER 26: MANAGING CLIENT PORTFOLIOS
An appropriate investment policy statement for the endowment fund will be organized
around the following major, specific aspects of the situation:
The primacy of the current income requirement;
Managing Bond Portfolios
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 year bond with a 7% coupon
d. a 10 year zero coupon bond
2. All other thing
Macroeconomic and Industry Analysis
1. In 2001, the _ stock market had one of the worst performances among the emerging market countries.
b. South Africa
d. South Korean
2. In 2001, the _ stock market had one of the best performances
Financial Statement Analysis
1. Which of the following assets is most liquid?
a. cash equivalents
d. plant and equipment
2. Which of the following is the least liquid current asset?
a. cash equivalents
FINA312 / FINA517 15B
TUTORIAL SESSION 01
The basic trade-off in the investment process is
a. between the anticipated rate of return for a given investment instrument and its
degree of risk.
b. between understanding the nature of a particula
FINA312 / 517
PORTFOLIOS AND MARKETS
THE EFFICIENT MARKET
Chapter 11 Questions
What do we mean when we say that capital
markets are efficient?
Why should capital markets be efficient?
What factors contribute to an efficient
FINA312 / FINA517 12B
FUND MANAGEMENT SIMULATION PROJECT
Date: 15/08 2012
Yahoo Account [email protected]
For the passive fund, you are required to answer the followings:
FINA312 Final Examination Revision
Q1: investment setting
AAn investor buys 100 shares of PQR. Holding at $55 per share on margin with an
initial margin of 60 percentage and a maintenance margin of 35 percentage. In two
(2) months, the stock goes to $66.
Chapter 5 - Risk, Return and the Historical Record
1. Over the past year you earned a nominal rate of interest of
10 percent on your money. The inflation rate was 5 percent
over the same period. The exact actual growth rat