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13. The risk-free rate is currently 2.8%. In one year the price of a given share of stock that curren

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13

The risk-free rate is currently 2.8%. In one year the price of a given share of stock that currently trades at $40 per share is expected to either increase by 8% or decrease by 2%. What is the current value of a call on this stock with exercise price of $40?

 

A:$0.00

B:$1.09

C:$1.24

D:$1.49

E:$1.62

 

 

 

15

Advantages of investing in tax-exempt bond funds include all of the following EXCEPT:

 

A:Diversification

B:Provides additional benefits to tax-deferred retirement plans

C:Automatic reinvesting

D:Fund maintains individual investor’s tax reports and records

E:Low initial deposit

 

 

 

20

Duration

 

A: Increases with maturity

B:Measures the linear relationship between bond prices and bond yields

C:Is always greater than the maturity

D:All of the above are true

E:A and B are true, but C is false

 

 

24

The financial planning process include all of the following EXCEPT

 

A:assessing the current status of the financial markets.

B:analyzing the client’s financial status.

C:monitoring the portfolio.

D:developing a policy statement.

E:establishing a client-advisor relationship.

 

25

Techniques to actively select securities include:

 

A:Bottom-up approach

B:Top-down approach

C:Indexing approach

D:All of the above are acceptable approaches

E:A and B are active approaches, but C is not

 

 

26

What is the correlation with the greatest potential for diversification?

 

A:-1.0

B:-0.5

C:0.0

D:+1.0

E:+2.0

 

 

31

In the accumulation phase of the investor life cycle

 

A:investors with long-term time horizons should accept only low risk.

B:investors have high net worth.

C:investors are saving for retirement only.

D:investors may seek to accumulate wealth through higher risk investments.

E:none of these choices apply.

 

 

 

37

The semi-strong form of the efficient market hypothesis states:

 

A:Security prices reflect all information, public and private

B:Security prices reflect all public information

C:Security prices reflect all market information

D:Security prices reflect all accounting information

E:Security prices reflect all economic information

 

 

39

High price multiples:

 

A:May indicate the firm is overvalued

B:May indicate high expected future growth

C:May indicate high levels of earnings or book value

D:All of the above are true

E:A and B are true, but C is not true

 

40

Three years ago, an ETF was initiated with 1 million shares in 10 stocks each with a market value of $10. The total market value of the ETF was then $100 million (1 million shares * 10 stocks * $10). The ETF issued 20 million shares which originally sold for $5 a share. Last year, Nancy purchased 100,000 shares for $7 a share. The price has now increased to $12 a share, and Nancy is considering redeeming her shares. Assume none of the original shares have been sold or redeemed. If Nancy redeems her shares, her cost basis when she sells the shares is

 

A:$   200,000

B:$   500,000

C:$   700,000

D:$1,000,000

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