An investor purchases 100 shares of stock at a price of $40 per share.

The investor holds the stock for exactly one year and then sells the 100 shares at a price of $41.50 per share. On the date of sale, the investor receives dividends totaling $200. The holding period return on the investment is closestto:

Choice 1 Choice 2 Choice 3

3

3.75 % 8.43 % 8.75 %

Which of the following statements is most accurate?

Choice Treasury stock is non-voting and receives no dividends 1 Choice 2 Choice 3 Minority interest on the balance sheet represents a position the company owns in other companies A classified balance sheet arises when in an auditors opinion the financial statements materially depart from accounting standards and are not presented fairly

1
The primary monetary policy goal of most major central banks is best characterized as:

Choice containing inflation 1

Choice stimulating economic growth 2 Choice maintaining low interest rates 3

1
An industry experiencing intense competitive rivalry among incumbent companies is bestcharacterized by:

Choice differentiated products and low exit barriers 1 Choice a small number of competitors and low fixed costs 2 Choice customers basing purchase decisions largely on price 3

3
Assume the U.S. Federal Reserve system (the Fed) has decided to lower interest rates in the economy. To carry out this policy, the Fed will most likely:

Choice sell securities 1 Choice buy securities 2 Choice increase required reserve ratios 3 2

Which of the following industries is most likely characterized by low barriers to entry, fierce competition, fragmented structure, and weak pricing power?

Choice Restaurants 1 Choice Proprietary drugs 2 Choice Credit card processing 3

1 In general, which of the following institutions will most likely have a high need for liquidity and a short investment time horizon?

Choice Banks 1 Choice Endowments 2 Choice Defined benefit pension plans 3

1
An analyst observes that the historic geometric returns are 9% for equities, 3% for treasury bills, and 2% for inflation. The real rate of return and risk premium for equities are closest to:

Choice 5.8% and 3.7% 1 Choice 6.9% and 3.8%

2 Choice 6.9% and 5.8% 3

One advantage of exchange traded funds relative to open-end mutual funds is:

Choice they trade throughout the day 1 Choice they offer greater diversification 2 Choice they have smaller bid-ask spreads 3

3
Two parties agree to a forward contract on a non-dividend paying stock at a price of $103.00. At contract expiration the stock trades at $105.00. In a cash-settled forward contract, the:

Choice short pays the long $2.00 1 Choice short pays the long $103.00 2 Choice long pays the short $105.00 3

1
Holding all other characteristics the same, the bond exposed to the greatest level of reinvestment

risk is most likely the one selling at:

Choice par 1 Choice discount 2 Choice premium 3

A companys $100 par value preferred stock with a dividend rate of 9.5% per year is currently priced at $103.26 per share. The company's earnings are expected to grow at an annual rate of 5% for the foreseeable future. The cost of the companys preferred stock is closest to:

Choice 9.2 % 1 Choice 9.5 % 2 Choice 9.7 % 3

1
Which of the following statements best describes a trial balance? A trial balance is a document or computer file that:

Choice shows all business transactions by account

1 Choice lists account balances at a particular point in time 2 Choice contains business transactions recorded in the order in which they occur 3

2
In a sales-driven pro forma analysis, retained earnings is most accurately forecasted as:

Choice a percentage of forecasted sales 1 Choice previous retained earnings plus forecasted financing surplus or deficiency 2 Choice previous retained earnings plus forecasted net income less forecasted dividends 3

2
Which of the following is least likely to be a warning sign of low quality earnings?

Choice Greater use of operating leases than peer companies 1 Choice Use of a higher discount rate in pension plan assumptions 2 Choice A ratio of operating cash flow to net income greater than 1.0 3

A bond has a 10-year maturity, a $1,000 face value, and a 7% coupon rate. If the market requires a yield of 8% on the bond, it will most likely trade at a:

Choice discount 1 Choice premium 2 Choice discount or premium, depending on its duration 3

A company currently has sales of 1,200 thousand and it makes the following forecasts for the next year:

Sales growth next year: Cost of goods sold as a proportion of sales: Salary, general, and administrative expenses as a proportion of sales:

10% 75%

10%

The expected gross profit for next year (in thousands) is closest to:

Choice 198 1 Choice 300 2 Choice 330

1
A portfolio with equal parts invested in a risk-free asset and a risky portfolio will most likely lie on:

Choice the efficient frontier 1 Choice the security market line 2 Choice a capital allocation line 3

3
Which statement best describes option price sensitivities? The value of a:

Choice call option increases as interest rates rise 1 Choice put option increases as volatility decreases 2 Choice put option decreases as interest rates decline 3

An inventory system that reduces average inventory without affecting sales will most likely reduce the:

Choice quick ratio

1 Choice inventory turnover 2 Choice cash conversion cycle 3

1
Assume that a monopoly is charging a price higher than the price that would exist in pure competition. If the monopoly decides to increase the price even more, the deadweight loss to society will most likely:

Choice increase 1 Choice decrease 2 Choice remain the same 3

1
The following ten observations are a sample drawn from a normal population: 25, 20, 18, -5, 35, 21, -11, 8, 20, and 9. The fourth quintile (80th percentile) of the sample is closest to:

Choice 8.0 1 Choice 21.0 2 Choice 24.2

A company has issued only one class of common shares and it does not pay dividends on them. It has also issued two types of preference shares one that is putable and the other callable and both have a non-cumulative feature. Which of these securities will most likely offer the lowest expected return to the investor?

Choice Common shares 1 Choice Putable preference shares 2 Choice Callable preference shares 3

3
Capital provided for companies beginning operation but before commercial manufacturing and sales have occurred best describes which stage in venture capital investing?

Choice Seed-stage 1 Choice Early-stage 2 Choice Later-stage 3

An investor who has a 42% marginal tax rate is analyzing a tax-exempt bond that offers a yield of 3.74%. The taxable-equivalent yield of the bond is closest to:

Choice 5.31 % 1 Choice 6.45 % 2 Choice 8.90 % 3

Using a discount rate of 5%, compounded monthly, the present value of $5,000 to be received three years from today is closest to:

Choice $4,250 1 Choice $4,305 2 Choice $4,320 3

2
If the stated annual interest rate is 9% and the frequency of compounding is daily, the effective annual rate is closest to:

Choice 9.00 % 1 Choice 9.42 %

2 Choice 9.88 % 3

2
If the volatility of returns of an underlying security increases, then:

Choice both call and put option prices increase 1 Choice both call and put option prices decrease 2 Choice call prices increase and put prices decrease 3

3
Which of the following statements is most accurate regarding cash flow ratios?

Choice Interest coverage ratio is calculated as operating cash flow over interest payments 1 Choice Debt payment ratio measures the firms ability to pay debts with operating cash flows 2 Choice Reinvestment ratio measures the firms ability to acquire assets with investing cash flows 3

1
Which of the following is most likely a sign of a good corporate governance structure?

Choice Independent board members comprise a minority proportion on the companys board 1 Choice 2 Choice 3 The separation of the chief executive position from the chair position on the companys board Independent board members are allowed to meet shareholders only in the presence of the entire board

3 not sure