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Q: On Monday morning you sell one June T-bond futures contract at $97,843.75. The contract's face value is $100,000. The initial margin requirement is $2,700, and the maintenance margin requirement is $2,000 per contract. Use the following price data to answer the following questions. Day Settle Monday $ 97,406.25 Tuesday $ 98,000.00 Wednesday $ 100,000.00 The cumulative rate of return on your investment after Wednesday is a ________. A) 79.9% loss B) 2.6% loss C) 33% gain D) 53.9% loss

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Q: The current stock price of KMW is $27, the risk-free rate of return is 4%, and the standard deviation is 30%. What is the price of a 63-day call option with an exercise price of $25? A) $2.50 B) $2.65 C) $2.89 D) $3.12

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Q: ART has come out with a new and improved product. As a result, the firm projects an ROE of 25%, and it will maintain a plowback ratio of 0.20. Its earnings this year will be $3 per share. Investors expect a 12% rate of return on the stock. What price do you expect ART shares to sell for in 4 years? A) $53.96 B) $44.95 C) $41.68 D) $39.76

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Q: Assuming semiannual compounding, a 20-year zero coupon bond with a par value of $1,000 and a required return of 12% would be priced at ________. A) $97.22 B) $104.49 C) $364.08 D) $732.14

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Q: A coupon bond that pays interest semiannually has a par value of $1,000, matures in 8 years, and has a yield to maturity of 6%. If the coupon rate is 7%, the intrinsic value of the bond today will be ________. A) $1,000 B) $1,062.81 C) $1,081.82 D) $1,100.03

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Q: If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below is possible? Consider each situation independently, and assume the risk-free rate is 5%. A) Portfolio Expected Return Beta A 15% 1.2 Market 15% 1.0 B) Portfolio Expected Return Beta A 20% 12% Market 15% 20 C) Portfolio Expected Return Beta A 20% 1.2 Market 15% 1.0 D) Portfolio Expected Return Beta A 30% 2.5 Market 15% 1.0 A) Option A B) Option B C) Option C D) Option D

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Q: 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 correlation coefficient between the returns on A and B is 0%. The rate of return for stocks A and B is 20% and 10% respectively. The standard deviation of return on the minimum-variance portfolio is ________. A) 0% B) 6% C) 12% D) 17%

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Q: An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 21% and a standard deviation of return of 39%. Stock B has an expected return of 14% and a standard deviation of return of 20%. The correlation coefficient between the returns of A and B is .4. The risk-free rate of return is 5%. The standard deviation of returns on the optimal risky portfolio is ________. A) 25.5% B) 22.3% C) 21.4% D) 20.7%

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Q: Treasury bills are paying a 4% rate of return. A risk-averse investor with a risk aversion of A = 3 should invest entirely in a risky portfolio with a standard deviation of 24% only if the risky portfolio's expected return is at least ________. A) 8.67% B) 9.84% C) 21.28% D) 14.68%

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Q: If a Treasury note has a bid price of $996.25, the quoted bid price in the Wall Street Journal would be ________. A) 99:5/8 B) 99:6/10 C) 99.6250 D) none of the options

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Q: Consider a hedge fund with $250 million in assets at the start of the year. If the gross return on assets is 18% and the total expense ratio is 2.5% of the year-end value, what is the rate of return on the fund? A) 15.05% B) 15.5% C) 17.25% D) 18%

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Q: The current stock price of Howard & Howard is $64, and the stock does not pay dividends. The instantaneous risk-free rate of return is 5%. The instantaneous standard deviation of H&H's stock is 20%. You want to purchase a call option on this stock with an exercise price of $55 and an expiration date 73 days from now. Using the Black-Scholes OPM, the call option should be worth ________ today. A) $0.01 B) $0.08 C) $9.26 D) $9.62

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Q: The current stock price of Alcoco is $70, and the stock does not pay dividends. The instantaneous risk-free rate of return is 6%. The instantaneous standard deviation of Alcoco's stock is 40%. You want to purchase a put option on this stock with an exercise price of $75 and an expiration date 30 days from now. According to the Black-Scholes OPM, you should hold ________ shares of stock per 100 put options to hedge your risk. A) 30 B) 34 C) 69 D) 74

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Q: A 20-year maturity corporate bond has a 6.5% coupon rate (the coupons are paid annually). The bond currently sells for $925.50. A bond market analyst forecasts that in 5 years yields on such bonds will be at 7%. You believe that you will be able to reinvest the coupons earned over the next 5 years at a 6% rate of return. What is your expected annual compound rate of return if you plan on selling the bond in 5 years? A) 7.37% B) 7.56% C) 8.12% D) 8.54%

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Q: You buy a 10-year $1,000 par value zero-coupon bond priced to yield 6%. You do not sell the bond. If you are in a 28% tax bracket, you will owe taxes on this investment after the first year equal to ________. A) $0 B) $4.27 C) $9.38 D) $33.51

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Q: A coupon bond that pays interest of 4% annually has a par value of $1,000, matures in 5 years, and is selling today at $785. The actual yield to maturity on this bond is ________. A) 7.24% B) 8.82% C) 9.12% D) 9.62%

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Q: The current stock price of KMW is $27, the risk-free rate of return is 4%, and the standard deviation is 30%. What is the price of a 63-day call option with an exercise price of $25? A) $2.50 B) $2.65 C) $2.89 D) $3.12

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Q: Suppose that in 2018 the expected dividends of the stocks in a broad market index equaled $240 million when the discount rate was 8% and the expected growth rate of the dividends equaled 6%. Using the constant-growth formula for valuation, if interest rates increase to 9%, the value of the market will change by ________. A) -10% B) -20% C) -25% D) -33%

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Q: Firm B produces gadgets. The price of gadgets is $2 each. Firm B has total fixed costs of $300,000 and variable costs of $1.40 per gadget. The corporate tax rate is 40%. What is the breakeven number of gadgets B must sell to make a zero after-tax profit? A) 300,000 B) 400,000 C) 500,000 D) 600,000

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Q: You buy a 10-year $1,000 par value 4% annual-payment coupon bond priced to yield 6%. You do not sell the bond at year-end. If you are in a 15% tax bracket, at year-end you will owe taxes on this investment equal to ________. A) $9.10 B) $4.25 C) $7.68 D) $5.20

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Q: Assuming semiannual compounding, a 20-year zero coupon bond with a par value of $1,000 and a required return of 12% would be priced at ________. A) $97.22 B) $104.49 C) $364.08 D) $732.14

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Q: A coupon bond that pays interest annually has a par value of $1,000, matures in 5 years, and has a yield to maturity of 12%. If the coupon rate is 9%, the intrinsic value of the bond today will be ________. A) $856.04 B) $891.86 C) $926.47 D) $1,000

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Q: A callable bond pays annual interest of $60, has a par value of $1,000, matures in 20 years but is callable in 10 years at a price of $1,100, and has a value today of $1055.84. The yield to call on this bond is ________. A) 6% B) 6.58% C) 7.2% D) 8%

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Q: 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 correlation coefficient between the returns on A and B is 0%. The rate of return for stocks A and B is 20% and 10% respectively. The standard deviation of return on the minimum-variance portfolio is ________. A) 0% B) 6% C) 12% D) 17%

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Q: 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 correlation coefficient between the returns on A and B is 0%. The rate of return for stocks A and B is 20% and 10% respectively. The expected return on the minimum-variance portfolio is approximately ________. A) 10% B) 13.6% C) 15% D) 19.41%

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Q: Day 1 2 3 4 Advances 870 760 960 840 Declines 880 990 790 910 Volume advancing(m) 580 620 480 510 Volume declining(m) 670 580 720 520 Yield on top-rated corporate bonds 6.8 % 6.7 % 6.7 % 6.6 % Yield on intermediate-grade corporate bonds 7.4 % 7.4 % 7.5 % 7.6 % From day 1 to day 4, the TRIN has ________ and is ________. A) increased; bullish B) increased; bearish C) decreased; bullish D) decreased; bearish

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Q: Trend analysts who follow bonds are most likely to monitor the ________. A) confidence index B) odd-lot trading C) short interest D) TRIN statistic

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Q: The Elliott wave theory gives a buy signal when you can identify a primary bull trend by identifying ________. A) when the long-term direction of the market is positive B) when the long-term direction of the market is negative C) when the long-term direction of the market is stable D) good stocks without regard to the long-term direction of the market

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Q: Problems with behavioral finance include: I. The behavioralists tell us nothing about how to exploit any irrationality. II. The implications of behavioral patterns are inconsistent from case to case, sometimes suggesting overreaction, sometimes underreaction. III. As with technical trading rules, behavioralists can always find some pattern in past data that supports a behavioralist trait. A) I only B) II only C) I and III only D) I, II, and III

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Q: Technical traders view mutual fund investors as ________ market timers. A) excellent B) frequent C) neutral D) poor

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