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Study Resources (Business Management)

  51. Which of the following are used by technical analysts to determine proper stock prices? I) trendlinesII) earningsIII) dividend prospectsIV) expectations of future interest ratesV) resistance levels A. I and VB. I, II, and IIIC. II, III, and IVD. II, IV, and VE. I and II 52. According to proponents of the efficient market hypothesis, the best strategy for.
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  Short Answer Questions  82. Discuss duration. Include in your discussion what duration measures, how duration relates to maturity, what variables affect duration, and how duration is used as a portfolio management tool (include some of the problems associated with the use of duration as a portfolio management tool).          83. Discuss rate anticipation swaps as.
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Multiple Choice Questions  1. The current yield on a bond is equal to ________. A. annual interest payment divided by the current market priceB. the yield to maturityC. annual interest divided by the par valueD. the internal rate of returnE. None of these is correct.   2. If a 7% coupon bond is trading for $975.00, it has a current yield.
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    41. A coupon bond that pays interest semi-annually has a par value of $1,000, matures in 5 years, and has a yield to maturity of 10%. The intrinsic value of the bond today will be __________ if the coupon rate is 8%. A. $922.78B. $924.16C. $1,075.80D. $1,077.20E. None of these is correct.   42. A coupon bond that pays interest.
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  41. DeBondt and Thaler (1990) argue that the P/E effect can be explained by __________. A. forecasting errorsB. earnings expectations that are too extremeC. earnings expectations that are not extreme enoughD. regret avoidanceE. both forecasting errors and earnings expectations that are too extreme 42. Barber and Odean (2001) report that men trade __________ frequently than women and the frequent.
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  Short Answer Questions  66. Discuss the various forms of market efficiency. Include in your discussion the information sets involved in each form and the relationships across information sets and across forms of market efficiency. Also discuss the implications for the various forms of market efficiency for the various types of securities' analysts.  67. What.
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    41. Which one of the following is a correct statement concerning duration? A. The higher the yield to maturity, the greater the durationB. The higher the coupon, the shorter the duration.C. The difference in duration can be large between two bonds with different coupons each maturing in more than 15 years.D. The duration is the same.
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    61. A 12% coupon bond, semiannual payments, is callable in 5 years. The call price is $1,120; if the bond is selling today for $1,110, what is the yield to call? A. 12.03%.B. 10.86%.C. 10.95%.D. 9.14%.E. None of these is correct.   62. A 10% coupon, annual payments, bond maturing in 10 years, is expected to make all coupon payments,.
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  128. Why are many bonds callable? What is the disadvantage to the investor of a callable bond? What does the investor receive in exchange for a bond being callable? How are bond valuation calculations affected if bonds are callable?          129. You purchased a zero-coupon bond that has a face value of $1,000, five.
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  51. Barber and Odean (2001) report that men __________ than women. A. earn higher returnsB. earn lower returnsC. earn about the same returnsD. generate lower trading costsE. None of these is correct. 52. Barber and Odean (2001) report that women __________ than men. A. earn higher returnsB. earn lower returnsC. earn about the same returnsD. generate higher trading costsE. None of these is correct. 53. __________ effects.
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    11. An inverted yield curve implies that: A. Long-term interest rates are lower than short-term interest rates.B. Long-term interest rates are higher than short-term interest rates.C. Long-term interest rates are the same as short-term interest rates.D. Intermediate term interest rates are higher than either short- or long-term interest rates.E. None of these is correct.   12. An upward sloping yield.
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  65. Although the expectations of increases in future interest rates can result in an upward sloping yield curve; an upward sloping yield curve does not in and of itself imply the expectations of higher future interest rates. Explain.              66. Explain what the following terms mean: spot rate, short rate, and forward rate. Which.
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Multiple Choice Questions  1. The term structure of interest rates is: A. The relationship between the rates of interest on all securities.B. The relationship between the interest rate on a security and its time to maturity.C. The relationship between the yield on a bond and its default rate.D. All of these are correct.E. None of these is correct.   2. Treasury.
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  41. Which of the following must be done to test the multifactor CAPM or the APT? I) Specify the risk factorsII) Identify portfolios that hedge the risk factorsIII) Test the explanatory power of hedge portfoliosIV) Test the risk premiums of hedge portfolios A. I and IIB. II, and IVC. II, and IIID. I, II, and IVE. I,.
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  31. The put/call ratio is computed as ____________ and higher values are considered ____________ signals. A. the number of outstanding put options divided by outstanding call options; bullish or bearishB. the number of outstanding put options divided by outstanding call options; bullishC. the number of outstanding put options divided by outstanding call options; bearishD. the number.
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    21. The duration of a perpetuity with a yield of 8% is A. 13.50 years.B. 12.11 years.C. 6.66 years.D. cannot be determined.E. None of these is correct.   22. A seven-year par value bond has a coupon rate of 9% and a modified duration of A. 7 years.B. 5.49 years.C. 5.03 years.D. 4.87 years.E. None of these is correct.   23. Par value bond XYZ has a modified duration.
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Multiple Choice Questions  1. Conventional theories presume that investors ____________ and behavioral finance presumes that they ____________. A. are irrational; are irrationalB. are rational; may not be rationalC. are rational; are rationalD. may not be rational; may not be rationalE. may not be rational; are rational 2. The premise of behavioral finance is that A. conventional financial theory ignores how real people.
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    41. If you have just purchased a 4-year zero coupon bond, what would be the expected rate of return on your investment in the first year if the implied forward rates stay the same? (Par value of the bond = $1,000) A. 5%B. 3%C. 9%D. 10%E. None of these is correct.   42. What is the price of a 2-year.
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    61. Which of the following two bonds is more price sensitive to changes in interest rates? 1) A par value bond, A, with a 12-year-to-maturity and a 12% coupon rate.2) A zero-coupon bond, B, with a 12-year-to-maturity and a 12% yield-to-maturity. A. Bond A because of the higher yield to maturity.B. Bond A because.
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    21. What is the yield to maturity on a 3-year zero coupon bond? A. 6.37%B. 9.00%C. 7.33%D. 10.00%E. None of these is correct.   22. What is the price of a 4-year maturity bond with a 12% coupon rate paid annually? (Par value = $1,000) A. $742.09B. $1,222.09C. $1,000.00D. $1,141.92E. None of these is correct.   23. An upward sloping yield curve A. may be an indication that interest rates are.
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    51. Calculate the price at the beginning of year 1 of an 8% annual coupon bond with face value $1,000 and 5 years to maturity. A. $1,105.47B. $1,131.91C. $1,084.25D. $1,150.01E. $719.75   52. Given the yield on a 3 year zero-coupon bond is 7% and forward rates of 6% in year 1 and 6.5% in year 2, what must be.
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  Short Answer Questions  63. Discuss the theories of the term structure of interest rates. Include in your discussion the differences in the theories, and the advantages/disadvantages of each.          64. Term structure of interest rates is the relationship between what variables? What is assumed about other variables? How is term structure of interest rates depicted.
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Multiple Choice Questions  1. The expected return/beta relationship is used ___________. A. by regulatory commissions in determining the costs of capital for regulated firmsB. in court rulings to determine discount rates to evaluate claims of lost future incomesC. to advise clients as to the composition of their portfoliosD. All of these are correct.E. None of these are correct. 2. The.
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  11. ________ bias means that investors are too slow in updating their beliefs in response to evidence. A. FramingB. Regret avoidanceC. OverconfidenceD. ConservatismE. None of these is correct. 12. Psychologists have found that people who make decisions that turn out badly blame themselves more when that decision was unconventional. The name for this phenomenon is A. regret avoidanceB. framingC. mental accountingD. overconfidenceE. obnoxicity 13. An example of.
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  31. Which of the following would be required for tests of the multifactor CAPM and APT? A. Specification of risk factors.B. Identification of portfolios that hedge these fundamental risk factors.C. Tests of the explanatory power and risk premiums of the hedge portfolios.D. All of these are correct.E. None of these is correct. 32. Tests of multifactor models indicate A. the single-factor.
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  68. Discuss the small firm effect, the neglected firm effect, and the January effect, the tax effect and how the four effects may be related.  69. Why might the degree of market efficiency differ across various markets? State three reasons why this might occur and explain each reason briefly.      .
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    71. The yield to maturity of a 20-year zero coupon bond that is selling for $372.50 with a value at maturity of $1,000 is ________. A. 5.1%B. 8.8%C. 10.8%D. 13.4%E. None of these is correct.   72. Which one of the following statements about convertibles is true? A. The longer the call protection on a convertible, the less the security is worth.B. The.
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    51. An analyst who selects a particular holding period and predicts the yield curve at the end of that holding period is engaging in A. a rate anticipation swap.B. immunization.C. horizon analysis.D. an intermarket spread swap.E. None of these is correct.   52. Interest-rate risk is important to A. active bond portfolio managers.B. passive bond portfolio managers.C. both active and passive bond portfolio managers.D. neither.
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  11. In the 1972 empirical study by Black, Jensen, and Scholes, they found that the estimated slope of the security market line was _______ what the CAPM would predict. A. flatter thanB. equal toC. steeper thanD. one-half as much asE. None of these is correct. 12. If a professionally managed portfolio consistently outperforms the market proxy on a risk-adjusted.
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    21. A coupon bond is reported as having an ask price of 108% of the $1,000 par value in the Wall Street Journal. If the last interest payment was made one month ago and the coupon rate is 9%, the invoice price of the bond will be ____________. A. $1,087.50B. $1,110.10C. $1,150.00D. $1,160.25E. None of these is.
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    71. Which of the following bonds has the longest duration? A. A 15-year maturity, 0% coupon bond.B. A 15-year maturity, 9% coupon bond.C. A 20-year maturity, 9% coupon bond.D. A 20-year maturity, 0% coupon bond.E. Cannot tell from the information given.   72. Which of the following bonds has the longest duration? A. A 12-year maturity, 0% coupon bond.B. A 12-year maturity, 8%.
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  59. Behavioral finance posits that investors possess behavioral biases. Discuss the importance of behavioral biases then list and explain the four behavioral biases discussed in the text.  60. Discuss what technical analysis is, what technical analysts do, and the relationship between technical analysis, fundamental analysis, and behavioral finance.      .
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  Short Answer Questions  126. If you are buying a coupon bond between interest paying dates, is the amount you would pay to your broker for the bond more or less than the amount quoted in the financial quotation pages? Discuss the differences and how these differences arise.          127. Discuss the taxation ramifications of zero.
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    51. A Treasury bill with a par value of $100,000 due two months from now is selling today for $98,039, with an effective annual yield of _________. A. 12.40%B. 12.55%C. 12.62%D. 12.68%E. None of these is correct.   52. A Treasury bill with a par value of $100,000 due three months from now is selling today for $97,087, with an.
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    81. Altman's Z scores are assigned based on a firm's financial characteristics and are used to predict A. required coupon rates for new bond issues.B. bankruptcy risk.C. the likelihood of a firm becoming a takeover target.D. the probability of a bond issue being called.E. None of these is correct.   82. When a bond indenture includes a sinking fund provision A. firms.
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    11. The "modified duration" used by practitioners is equal to ______ divided by (one plus the bond's yield to maturity). A. current yieldB. the Macaulay durationC. yield to callD. yield to maturityE. None of these is correct.   12. Given the time to maturity, the duration of a zero-coupon bond is higher when the discount rate is A. higher.B. lower.C. equal to the risk.
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  57. Compare and contrast the efficient market hypothesis with the school of thought termed behavioral finance.  58. Behavioral finance posits that investors possess information processing errors. Discuss the importance of information processing errors then list and explain the four information processing errors discussed in the text.      .
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    111. If a 7.5% coupon bond that pays interest every 182 days paid interest 62 days ago, the accrued interest would be A. 11.67B. 12.35C. 12.77D. 11.98E. 12.15   112. If a 9% coupon bond that pays interest every 182 days paid interest 112 days ago, the accrued interest would be A. 27.69B. 27.35C. 26.77D. 27.98E. 28.15   113. A 7% coupon bond with an ask price of 100:00.
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Multiple Choice Questions  1. The duration of a bond is a function of the bond's A. coupon rate.B. yield to maturity.C. time to maturity.D. All of these are correct.E. None of these is correct.   2. Ceteris paribus, the duration of a bond is positively correlated with the bond's A. time to maturity.B. coupon rate.C. yield to maturity.D. All of these are correct.E. None of these is.
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    11. A coupon bond pays annual interest, has a par value of $1,000, matures in 12 years, has a coupon rate of 11%, and has a yield to maturity of 12%. The current yield on this bond is ___________. A. 10.39%B. 10.43%C. 10.58%D. 10.66%E. None of these is correct.   12. A coupon bond pays annual interest, has a par.
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    31. What should the purchase price of a 2-year zero coupon bond be if it is purchased at the beginning of year 2 and has face value of $1,000? A. $877.54B. $888.33C. $883.32D. $893.36E. $871.80   32. What would the yield to maturity be on a four-year zero coupon bond purchased today? A. 5.80%B. 7.30%C. 6.65%D. 7.25%E. None of these is correct.   33. Calculate the price at the.
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  21. A daily fluctuation of little importance is called ____________. A. a minor trendB. a primary trendC. an intermediate trendD. a market trendE. None of these is correct. 22. Price movements that are caused by short-term deviations of prices from the underlying trend line are called A. primary trends.B. secondary trends.C. tertiary trends.D. Dow trends.E. contrary trends. 23. The Dow theory posits that the three forces that.
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