郭美新金融学原理期中考试题2014B卷

Midterm for Principles of Finance, Spring 2014

March 29, 2:15-4:15; Xi Jie. Instructor: Meixin Guo

Part I Multiple Choice Questions (total 40 points)

1. Financial intermediaries exist because small investors cannot efficiently _________. A. diversify their portfolios; B. gather information C. monitor their portfolios; D. all of the answers provide reasons why

2. An example of a financial asset is _________. I. a college education; II. customer goodwill; III. a patent A. I only; B. II only; C. I, II and III only; D. None

3. The _________ price is the price at which a dealer is willing to sell a security. A. bid; B. ask; C. clearing; D. settlement

4. The Dow Jones Industrial Average is _________. A. a price weighted average; B. a value weight and average C. an equally weighted average; D. an unweighted average

5. Which one of the following is not an example of a brokered market?

A. Residential real estate market; B. Market for large block security transactions C. Primary market for securities; D. NASDAQ

6. On a given day a stock dealer maintains a bid price of $1000.50 for a bond and an ask price of $1001.50. The dealer made 10 trades which totaled 500 bonds traded that day. What was the dealer's gross trading profit for this security? A. $1,375; B. $500; C. $275; D. $1,450

7. You short-sell 200 shares of Rock Creek Fly Fishing Co. with IMM 50%, now selling for $43.75 per share. If you wish to limit your loss to $2,500, you should place a stop-buy order at ____. A. $37.50; B. $62.50; C. $56.25; D. $59.75

8. You put up $100 at the beginning of the year for an investment. The value of the investment grows 4% and you earn a dividend of $3.50. Your HPR was ____. A. 4.00%; B. 3.50%; C. 7.50%; D. 11.00%

9. Rank the following from highest average historical return to lowest average historical return from 1926-2008. I. Small stocks; II. Long term bonds; III. Large stocks; IV. T-bills A. I, II, III, IV; B. III, IV, II, I; C. I, III, II, IV; D. III, I, II, IV

10. You have calculated the historical dollar weighted return, annual geometric average return and annual arithmetic average return. If you desire to forecast performance for next year, the best forecast will be given by the ________.

A. holding period index return; B. geometric average return; C. dollar weighted return; D. arithmetic average return

11. An investment earns 10% the first year, 15% the second year and loses 10% the third year. Your total compound return over the three years was ______. A. 41.68%; B. 11.32%; C. 3.64%; D. 13.85%

12. During the 1985 to 2008 period the return rate was least for which of the following asset classes? A. Small U.S. stocks; B. Large Canadian stocks; C. Long-Term U.S. Treasury Bonds; D. Equity world portfolio in U.S. dollars

13. Among the factors explaining the return on a stock, _______ factors are generally most important while _______ factors are generally least important.

A. domestic; industrial; B. domestic; currency; C. world; industrial; D. currency; domestic

14. Consider the single factor APT. Portfolio M has a beta of 0.2 and an expected return of 13%.

Portfolio N has a beta of 0.3 and an expected return of 15%. The risk-free rate of return is 10%. If you wanted to take advantage of an arbitrage opportunity, you should take a short position in portfolio __________ and a long position in portfolio _________. A. M, M; B. M, N; C. N, M; D. M,M

15. Fama and French claim that after controlling for firm size and the ratio of firm's book value to market value, beta on the market portfolio is ______________.

I. highly significant in predicting future stock returns; II. a bad predictor of firm's specific risk. III. relatively useless in predicting future stock returns A. I only; B. II only; C. III only; D. II and III only; E. I and II only

16. A U.S. insurance firm must pay

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