Question 109 of 120.
| Which of the following is/are true in a plain vanilla currency swap? I. No money changes hands up front. |
| A. I only |
| B. II only |
| C. II & III |
| D. I & II |
Question 110 of 120.
| A call writer with an exercise price of 45 and a premium of 2.50 breaks even when the stock price |
| A. rises to 47.50. |
| B. falls to 42.50. |
| C. remains at 45. |
| D. drops to 0. |
Question 111 of 120.
| A cap is a series of options known as caplets. From the perspective of the borrower, for a floating rate bond, the caplet on each reset date is a |
| A. short position on a put option written on the reference rate. |
| B. long position on a call option written on the cap rate. |
| C. short position on a call option written on the reference rate. |
| D. long position on a put option written on the cap rate. |
Question 112 of 120.
| A futures contract suffers from all of the following risks to certain extent, EXCEPT I. market risk. |
| A. I and II. |
| B. III and IV. |
| C. II and III. |
| D. II only. |
Question 113 of 120.
| According to the January effect, which statement is MOST justifiable? Investors can earn abnormal returns by: |
| A. buying any stock in December and selling it at a profit n a January rally. |
| B. by investing in growth stocks in December as they appreciate in the following January. |
| C. shorting small company stocks in December and by buying them back in January. |
| D. investing in value stocks in December that are likely to appreciate in January. |
Question 114 of 120.
| The current P-E ratio for an index, based on expected earnings is 15.5. The current EPS is 300.20, the projected EPS is 326.55, and the projected payout ratio is 55%. If the projected value of the index after one year is 5,190.30, what is the expected return on the index over the next year? |
| A. 15.40% |
| B. 6.09% |
| C. 14.70% |
| D. 5.45% |
Question 115 of 120.
| Which source of risk is the uncertainty introduced from possible unstable income flows? |
| A. financial risk |
| B. business risk |
| C. political risk |
| D. liquidity risk |
Question 116 of 120.
| The asset allocation for a country within a ________ portfolio will be affected by its economic outlook; countries approaching a recession will be ________. |
| A. local; overweighted |
| B. global; underweighted |
| C. local; underweighted |
| D. global; overweighted |
Question 117 of 120.
| The risk-free rate prevailing in Nirvania is about 6.5%. Nirvania's market risk premium has been estimated at 8.9%. If the market's excess return per unit of risk is 0.77, the risk-to-reward ratio of an efficient portfolio, P, which consists of 35% invested in the risk-less asset equals ______. |
| A. 1.33 |
| B. 0.44 |
| C. 0.61 |
| D. 0.75 |
Question 118 of 120.
| Given that the risk-free rate of return is 5.4%, return on the market portfolio is 13%, the standard deviation for returns for the market portfolio is 14, the covariance of a stock with the market portfolio is 214, and the expected rate of return for the stock is 14.1%, is the stock overvalued, undervalued, or correctly valued? |
| A. Overvalued |
| B. Correctly valued |
| C. Not enough information |
| D. Undervalued |
Question 119 of 120.
| The CML |
| A. is the line running through the risk-free rate of return to a point on the Smith-Katz standard market curve. Different investors have different CMLs running through different parts of the standard market curve. The difference lies in their preferred investment time horizons. |
| B. is the line running from the risk-free rate of return to a point on the Markowitz efficient frontier. Different investors have different CMLs running through different parts of the efficient frontier. The difference lies in their level of risk aversion. |
| C. is the line running from the risk-free rate of return to a point tangent to the Markowitz efficient frontier. That point of tangency is the market portfolio. It and the CML are the same for all investors. |
| D. is the line running from the market portfolio to a point tangent to the Markowitz efficient frontier. All investors have identical CML lines. |
Question 120 of 120.
| An increase in the systematic risk of a security |
| A. would move the security lower on the security market line. |
| B. would leave the security unchanged on the security market line. |
| C. would move the security higher along the security market line. |
| D. would increase the slope of the security market line |