Financial Markets: Stock Performance, Indices, and Bond Yields, Exams of Investment Management and Portfolio Theory

Download Financial Markets: Stock Performance, Indices, and Bond Yields and more Exams Investment Management and Portfolio Theory in PDF only on Docsity! INVESTMENT THEORY MULTIPLE CHOICE QUESTIONS (100 pts, 1 pt ea) 1. On March 3, 1999, MSFT was up 1 1/16 to 149 5/8. At that time, MSFT comprised roughly 3% of the market value of stocks included in the S&P 500 Index. The rise in MSFT caused a rise in the S&P 500 of: > A. 0.02%. B. 0.71%. C. 1.0625%. D. 3%. 2. The S&P 500 is a: A. price-weighted index. B. equally-weighted index. C. share-weighted index. > D. value-weighted index. 3. The arithmetic mean return for a stock with a three-year performance history of +50%, -50%, +30% is: A. 30%. > B. 10%. C. -1%. D. -10%. 4. The geometric mean return for a stock with a three-year performance history of +100%, -50%, +95% is: A. 48.3%. B. 30%. > C. 25%. D. -1%. 5. Organized trading of outstanding securities on exchanges and over-the-counter markets is called the: A. primary market. B. IPO market. C. bond market. > D. secondary market. 6. Federal government issues with a two to ten year maturity are called: A. Treasury bills. B. Treasury bonds. C. Treasury repos. > D. Treasury notes. 7. An IPO is an: A. investment participation obligation. B. investment placement organization. C. investment partnership opportunity. > D. initial public offering. 8. How many issues are listed for trading on the NYSE? A. roughly 900. > B. roughly 3,700. C. roughly 6,000. D. more than 25,000. 9. Regional exchanges generate what percentage of total NYSE composite volume? A. roughly 80%. > B. roughly 10%. C. roughly 5%. D. none. docsity.com 10. NYSE composite volume does not include trading on: A. the floor of the NYSE. B. regional exchanges. C. the NASD system. > D. the ASE. 11. The NYSE is: A. dealer-only market. B. broker-only market. C. negotiated market. > D. an auction market. 12. The DJIA is a: A. value-weighted index. B. equally-weighted index. > C. price-weighted index. D. share-weighted index. 13. The Russell 3000 is a: A. price-weighted index. B. equally-weighted index. C. share-weighted index. > D. value-weighted index. 14. On March 3, 1999, the Wilshire (5000) Index value of 11,217.95 signified: A. an increase of 11217.95% from the index base of 10 in 1956-58. B. an increase of 1121.78% from the index base of 100 in 1956-58. > C. a total market capitalization for U.S. stocks of $11.2 trillion. D. a total market capitalization for U.S. stocks of $11.2 billion. 15. On March 3, 1999, the DJIA reflected a divisor of 0.23, and closed down 21.73 points at 9275.88. At that time, a round lot of all 30 component stocks cost: A. $30,920. > B. $213,345. C. $927,588. D. $403,299. 16. On March 3, 1999, the DJIA reflected a divisor of 0.23, and closed down 21.73 points at 9275.88. At that time, the average price of a DJIA stock was: A. $44.81. > B. $71.12. C. $92.75. D. $309.20. 17. On March 3, 1999, the DJIA reflected a divisor of 0.23, and closed down 21.73 points at 9275.88. This change reflects an average decrease in the price of each component stocks of:: A. 21.74 B. 234 > C. 16.74 D. 3.14 18. On March 3, 1999, the DJIA reflected a divisor of 0.23, and closed down 21.73 points at 9275.88. The effect on the DJIA of Allied Signal=s 2 point gain on that day was: A. 0.5 points. > B. 2.17 points. C. 3.45 points. D. none of the above. 19. The largest 1000 stocks comprise roughly what percentage of the value of the Russell 3000? > A. 90%. B. 50%. docsity.com 5 C. the same. D. none of these. 39. According to the ARule of 72": A. 8% interest doubles the value of an investment in only 8 years. B. simply multiply the number 72 by any interest rate percentage, and the resulting number is the number of years it will take to double your investment. C. simply multiply the number 7.2 by the number of years it will take to double your investment, and the resulting number is your interest rate percentage. > D. simply divide the number 72 by the number of years it will take to double your investment, and the resulting number is your interest rate percentage. 40. According to the Rule of 72, money growing at a 6% real rate of return: A. doubles in 24 years. B. doubles in 36 years. C. doubles twice in 36 years. > D. doubles three times in 36 years. 41. Since World War II, the annual rate of return earned on broadly diversified portfolios of stock market investments is roughly: A. 18%. > B. 12%. C. 6%. D. 4%. 42. A broadly diversified portfolio of high grade bonds could be expected to yield investors a rate of interest on the order of: A. 4%. > B. 6%. C. 10%. D. 12%. 43. The market capitalization of all 30 DJIA stocks combined is what share of the total market capitalization of U.S. equities? A. 10%. > B. 20%. C. 30%. D. 50%. 44. The 500 stocks in the S&P 500: A. include 400 industrials, 40 utilities, 40 financial, and 20 transportation stocks. B. are the 500 largest companies according to market capitalization.. C. are the 500 largest listed companies according to market capitalization.. > D. are chosen based upon industry representation, liquidity, and stability. 45. The Russell 2000 Index measures the performance of: A. the 2,000 largest US companies based on total capitalization. B. approximately 98% of the market value of US equity market. C. the 2,000 largest listed US companies based on total capitalization. > D. a subcomponent of the Russell 3000, after eliminating the largest 1,000 stocks. 46. The Nasdaq Composite Index: A. represents all common stocks listed on The Nasdaq Stock Market, and includes over 7,500 companies. B. represents all common stocks listed on The Nasdaq Stock Market, and includes over 25,000 companies. C. measures the geometric rate of return on domestic and non-U.S. based common stocks listed on The Nasdaq Stock Market. > D. is market-value weighted. 47. The emerging markets universe includes the country of: > A. India. B. Germany. C. Japan. D. Australia. docsity.com 6 48. Electronic trading on Instinet, NASD, and other systems accounts for: A. more than 100 million shares per day of trading in NYSE-listed securities. > B. 5-10% of composite trading in NYSE-listed securities. C. 50% of composite trading in NYSE-listed securities. D. more than 800 million shares per day of trading in NYSE-listed securities. 49. At the NYSE, the auction process for each listed stock is assigned to a: A. broker. B. dealer. C. member. > D. specialist. 50. The New York Stock Exchange maintains an orderly market in roughly: A. 500 issues. > B. 3,700 issues. C. 7,400 issues. D. 25,000 issues. 51. The CBOE: A. was formed in 1848 by 82 merchants. B. has a founding purpose to promote commerce in the city of Chicago by providing a place where buyers and sellers could meet to exchange commodities. > C. revolutionized options trading by creating standardized, listed stock options. D. developed financial futures following World War II. 52. Nasdaq is: > A. a negotiated market. B. an auction market. C. an agent auction market. D. the largest stock exchange in the U.S. 53. Which one of the following is not a self-regulatory organization: > A. the Security and Exchange Commission. B. the National Association of Securities Dealers. C. the New York Stock Exchange. D. the Municipal Securities Rulemaking Board. 54. Before they can take effect, all Self Regulatory Organization rules and regulations must be approved by the: A. National Association of Securities Dealers. B. state regulatory bodies. C. U.S. Congress. > D. Securities and Exchange Commission. 55. Securities professionals must qualify through examinations administered by the: > A. NASD. B. SEC. C. NYSE. D. Nasdaq. 56. The highest quoted price an investor is willing to pay to buy a security is called the: A. ask. B. market. > C. bid. D. none of these. 57. Bid size is: A. the number of shared represented on the buy side of the market. docsity.com 7 B. the number of round lots represented on the sell side of the market. > C. the number of round lots represented on the buy side of the market. D. the number of shares represented on the sell side of the market. 58. A trading order that is canceled unless executed within a designated time period is called a: A. stop-loss order.. B. limit order. C. market order. > D. none of these. 59. Dollar-cost averaging is a simple investment strategy: A. that insures the average price per share is always lower than the average cost per share. B. for buying a fixed number of shares in a particular investment at regular intervals. C. involving a changing dollar amount of investment at regular time intervals. > D. none of these. 60. Defined benefit plans are: A. the most common types of pension plans offered by employers. B. pension plans where the employer is responsible only for making specified contributions into the plan on behalf of qualifying participants. C. typically funded by regular employee contributions. > D. none of these. 61. Stocks can be purchased for a combination of cash and borrowed funds in a: A. cash account. > B. margin account. C. IRA account. D. none of these. 62. Initial and maintenance margin requirements are set by the: A. NYSE. B. NASD. C. SEC. > D. Federal Reserve System. 63. Stock purchases with 50% initial margin trigger a 30% maintenance margin call following a: A. 15.3% rise in price. B. 20% decline in price. > C. 28.6% decline in price. D. 30% decline in price. 64. Short sales with 50% initial margin trigger a 30% maintenance margin call following only a: > A. 15.3% rise in price. B. 30% rise in price. C. 20% rise in price. D. 50% rise in price. 65. Current yield is the: A. internal rate of return that equates the prevailing market price with future interest and principal payments. B. approximate yield to call for premium bonds. > C. coupon rate expressed as a percent of the prevailing market price. D. coupon interest divided by the average of market and call prices. 66. If the y-axis is the percentage change is bond price, and the x-axis is the yield to maturity, a line that represents the price response to a given change in yield is: A. concave to (bends away from) the origin. B. concave to (bends toward) the origin. > C. convex to (bends away from) the origin. D. convex to (bends toward) the origin. docsity.com 10 85. Correlation is: A. an absolute measure of comovement that varies between -1 and +1. B. an absolute measure of comovement that varies between -4 and +4. > C. a relative measure of comovement that varies between -1 and +1. D. a relative measure of comovement that varies between -4 and +4. 86. An efficient market does not require that: A. stock prices incorporate all company operating information. B. all past price information be reflected in current prices. > C. each price adjustment be perfect. D. price adjustments occur very quickly. 87. Which of the following is a test of strong-form efficiency? A. stock splits. B. accounting changes. C. dividend announcements. > D. insider transactions. 88. In which form of the efficient market hypothesis do security prices reflect past stock price and return information? A. weak form. B. semistrong form. C. strong form. > D. all of the above. 89. "Filter rules" do not tend to be profitable because: > A. of transaction costs. B. of market volatility. C. trends do not exist in stock prices. D. no rules outperform a buy-and-hold strategy, even for short periods. 90. A well-known market anomaly is found between: > A. P/E ratios and subsequent stock returns. B. money supply growth and stock prices. C. P/E ratios and earnings momentum. D. stock prices and auditor changes. 91. To profit from time-related market anomalies, one might sell: A. large-cap stocks prior to the turn-of-the year. > B. small-cap stocks on the day after Labor Day. C. small-cap stocks at the open on Monday. D. large-cap stocks one-half hour prior to the close. 92. According to the Markowitz model, investors base investment decisions on: A. expected return. > B. expected return and risk. C. expected return, risk and the diminishing marginal utility of money. D. expected return, risk and the increasing marginal utility of money. 93. Using the Markowitz model, the efficient frontier is: A. a downward sloping curved line. B. an upward sloping straight line. C. a downward sloping straight line. > D. an upward sloping curved line. 94. The SCL is: A. an upward sloping curved line. B. a downward sloping curved line. > C. an upward sloping straight line. docsity.com 11 D. a downward sloping straight line. 95. Portfolio risk is reduced by combining securities with: A. perfect correlation. B. high standard deviations. > C. less than perfect correlation. D. low standard deviations. 96. Weak form market efficiency: > A. involves only price and volume information. B. is identical to the random walk hypothesis. C. incorporates semi-strong form efficiency. D. is compatible with technical analysis. 97. Which of the following is not a market anomaly? > A. stock spin-offs. B. earnings announcements. C. size effect. D. seasonal effect. 98. Which of the following is not a test of semi-strong form efficiency? > A. insider transactions. B. stock splits. C. accounting changes. D. dividend announcements. 99. The highest level of market efficiency is: > A. strong form efficiency. B. weak form efficiency. C. semi-strong form efficiency. D. random walk efficiency. 100. Alpha measures: > A. excess return. B. systematic risk. C. market return. D. the risk-free rate. docsity.com