Investments Exam 1

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Investments
Fall 2012
Exam 1
Name: ______________________________
There are 30 questions in this exam. Each question is equally weighted. Make sure you read all questions and instructions carefully! You have the entire class period to complete this exam, so take your time. If you have any questions during the exam, please raise your hand. Good luck! 1. Real assets in the economy include all but which one of the following?  A. Land

B. Buildings
C. Consumer durables
D. Common stock
2. Security selection refers to the ________. 
A. allocation of the investment portfolio across broad asset classes B. analysis of the value of securities
C. choice of specific securities within each asset class
D. top down method of investing
3. The process of polling potential investors regarding their interest in a forthcoming initial public offering (IPO) is called ________.  A. interest building
B. book building
C. market analysis
D. customer identification
4. Money Market securities are characterized by ________. I. maturity less than one year
II. safety of the principal investment
III. low rates of return 
A. I only
B. I and II only
C. I and III only
D. I, II and III

5. An example of a derivative security is _________. 
A. a common share of General Motors
B. a call option on Intel stock
C. a Ford bond
D. a U.S. Treasury bond
6. Which of the following indices are market-value weighted? I. The NYSE Composite
II. The S&P 500
III. The Wilshire 5000 
A. I and II only
B. II and III only
C. I and III only
D. I, II and III
7. Preferred stock is like long-term debt in that ___________.  A. it gives the holder voting power regarding the firm's management B. it might promise to pay to its holder a fixed stream of income each year C. the preferred dividend is a tax-deductible expense for the firm D. in the event of bankruptcy preferred stock has equal status with debt 8. A stock quote indicates a stock price of $60 and a dividend annual yield of 3%. The firm pays quarterly dividends in a year. The latest quarterly dividend received by stock investors must have been ______ per share.  A. $0.55

B. $1.80
C. $0.45
D. $1.25

9. The Chompers Index is a price weighted stock index based on the 3 largest fast food chains. The stock prices for the three stocks are $54, $23, and $44. What is the price weighted index value of the Chompers Index?  A. 23.43

B. 35.36
C. 40.33
D. 49.58

10. Eurodollars are _________. 
A. dollar denominated deposits at any foreign bank or foreign branch of an American bank B. dollar denominated bonds issued by firms outside their home market C. currency issued by Euro Disney and traded in France

D. dollars that wind up in banks as a result of money laundering activities 11. A tax free municipal bond provides a yield of 3.2%. What is the equivalent taxable yield on the bond given a 35% tax bracket?  A. 3.20%

B. 3.68%
C. 4.92%
D. 5.00%

12. You purchased a share of stock for $29. One year later you received $2.25 as dividend and sold the share for $28. Your holding-period return was _________.  A. -3.57%
B. - 3.45%
C. 4.31%
D. 8.03%

13. Suppose your tax bracket is 15%. Would you prefer to earn A. a 6% taxable return
B. a 5% tax-free yield

Answer: A
14. Historically, September usually has low stock returns in a year. However, in an efficient market, an investor’s investment decision ______ be affected by the historical data, if he believes the stock market is efficient. A. should

B. should not

15. If an investor places a _________ order, the stock will be sold if its price falls to the stipulated level. If an investor places a __________ order, the stock will be bought if its price rises above the stipulated level.  A. stop-buy; stop-loss

B. market; limit
C. stop-loss; stop-buy
D. limit; market
16. The difference between the price at which a dealer is willing to buy, and the price at which a dealer is...
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