Problem Set #2
1. An index computed from a simple average of returns is a/an _.
A. equal weighted index
B. value weighted index
C. price weighted index
D. share weighted index
2. You decide to purchase an equal number of shares of stocks of firms to creat
Problem Set #4
1.
Solutions
Consider a no-load mutual fund with $200 million in assets and 10 million shares at the start of the year, and $250
million in assets and 11 million shares at the end of the year. During the year investors have received income
Problem Set #2
Solutions
1. An index computed from a simple average of returns is a/an _.
A. equal weighted index
B. value weighted index
C. price weighted index
D. share weighted index
2. You decide to purchase an equal number of shares of stocks of firm
Problem Set # 12
Solutions
1. A convertible bond has a par value of $1,000, but its current market price is $950. The current price
of the issuing company's stock is $19, and the conversion ratio is 40 shares. The bond's conversion
premium is _.
A. $50
B.
Problem Set #11
1. Consider two bonds, A and B. Both bonds presently are selling at their par value of $1,000. Each
pays interest of $120 annually. Bond A will mature in 5 years, while bond B will mature in 6 years. If
the yields to maturity on the two bo
Problem Set #10
1.
Using the index model, the alpha of a stock is 3.0%, the beta if 1.1 and the market return is 10%. What is the
residual given an actual return of 15%?
A.
B.
C.
D.
2.
0.0%
1.0%
2.0%
3.0%
The risk premium for exposure to exchange rates is
Problem Set #9
1.
The graph of the relationship between expected return and beta in the CAPM context is called the _.
A.
B.
C.
D.
2.
1.048
1.033
1.000
1.037
Consider the CAPM. The expected return on the market is 18%. The expected return on a stock with a
Problem Set #7
1.
Solutions
An investor can design a risky portfolio based on two stocks, A and B. The standard deviation of return on stock A
is 20% while the standard deviation on stock B is 15%. The expected return on stock A is 20% while on stock B it
Problem Set #13
1. All other things equal (YTM = 10%), 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. Compute the
Problem Set #13
Solutions
1. All other things equal (YTM = 10%), 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. Co
Problem Set # 12
1. A convertible bond has a par value of $1,000, but its current market price is $950. The current price
of the issuing company's stock is $19, and the conversion ratio is 40 shares. The bond's conversion
premium is _.
A. $50
B. $190
C. $
Problem Set #10
1.
Using the index model, the alpha of a stock is 3.0%, the beta if 1.1 and the market return is 10%. What is the
residual given an actual return of 15%?
A.
B.
C.
D.
2.
The risk premium for exposure to exchange rates is 5% and the firm has
Problem Set #9
1.
The graph of the relationship between expected return and beta in the CAPM context is called the _.
A.
B.
C.
D.
2.
According to the capital asset pricing model, a security with a _.
A.
B.
C.
D.
3.
2%
6%
8%
12%
When all investors analyze
Problem Set #11
Solutions
1. Consider two bonds, A and B. Both bonds presently are selling at their par value of $1,000. Each
pays interest of $120 annually. Bond A will mature in 5 years, while bond B will mature in 6 years. If
the yields to maturity on
Problem Set #1
1. Which of the following is not a money market instrument?
A. Treasury bill
B. Commercial paper
C. Preferred stock
D. Bankers' acceptance
2.
An investor purchases one municipal bond and one corporate bond that pay rates of return
of 5% and
Problem Set #3
1. You sold short 300 shares of common stock at $30 per share. The initial margin is 50%. You must put
up _.
A. $4,500
B. $6,000
C. $9,000
D. $10,000
2. You short-sell 200 shares of Tuckerton Trading Co., now selling for $50 per share. What
Problem Set #4
1.
Consider a no-load mutual fund with $200 million in assets and 10 million shares at the start of the year, and $250
million in assets and 11 million shares at the end of the year. During the year investors have received income
distributi
Problem Set #5
1.
Your investment has a 40% chance of earning a 15% rate of return, a 50% chance of earning a 10% rate of return
and a 10% chance of losing 3%. What is the standard deviation of this investment?
A.
B.
C.
D.
2.
Historically small firm stock
Problem Set #3
Solutions
1. You sold short 300 shares of common stock at $30 per share. The initial margin is 50%. You must put
up _.
A. $4,500
B. $6,000
C. $9,000
D. $10,000
You must put up 300($30)(50%) = $4,500
2. You short-sell 200 shares of Tuckerton
Problem Set #6
1. You put up $50 at the beginning of the year for an investment. The value of the investment grows 4% and you earn a
dividend of $3.50. Your HPR was _.
A. 4.00%
B. 3.50%
C. 7.00%
D. 11.00%
2. The holding period return on a stock is equal t
Problem Set #8
1. Semitool Corp has an expected excess return of 6% for next year. However for every unexpected 1% change
in the market, Semitool's return responds by a factor of 1.2. Suppose it turns out the economy and the stock
market do better than ex
Problem Set #8
Solutions
1. Semitool Corp has an expected excess return of 6% for next year. However for every unexpected 1% change
in the market, Semitool's return responds by a factor of 1.2. Suppose it turns out the economy and the stock
market do bett
Problem Set #6
Solutions
1. You put up $50 at the beginning of the year for an investment. The value of the investment grows 4% and you earn a
dividend of $3.50. Your HPR was _.
A. 4.00%
B. 3.50%
C. 7.00%
D. 11.00%
Dividend yield =
HPR = .04+.07 = .11
2.
Problem Set #7
1.
An investor can design a risky portfolio based on two stocks, A and B. The standard deviation of return on stock A
is 20% while the standard deviation on stock B is 15%. The expected return on stock A is 20% while on stock B it
is 10%. T
Problem Set #5
1.
Solutions
Your investment has a 40% chance of earning a 15% rate of return, a 50% chance of earning a 10% rate of return
and a 10% chance of losing 3%. What is the standard deviation of this investment?
A.
B.
C.
D.
5.14%
7.59%
9.29%
8.43