1. ABC Mutual Fund has an investment objective is to provide long-term growth of capital by investing primarily in common stocks of issuers located in the U.S. with a record of above-average long-term growth. ABC Mutual Fund would be considered:
a. An Emerging Markets Fund b. An Income Fund c. An S&P ETF d. A Growth Fund
2. Which of the following is not a true statement?
a. An issuer can expect to receive the full value of its offering in a firm commitment underwriting. b. An issuer can directly receive value from a rapid rise in its stock price in the secondary market following an offering. c. In a Dutch Auction offering, successful bidders buy their allotted shares at the lowest quoted price even if they first offered a higher price. d. A pension fund is one type of financial intermediary.
3. Which of the following is not considered a potential financial ethics problem area?
a. Brokering a building owned by a company in which you have a 50% ownership interest without disclosing that to the prospective purchaser. b. Giving prospective customers a list naming your top 5 accounts (without their permission) and how much money your firm manages for each. c. Telling prospective customers that if they give you $10,000 and refer 3 customers that will invest each $10,000, then you will let them invest in a currency arbitrage opportunity that will pay them a return of 10% per year regardless of market performance. d. Pricing an IPO so that demand for its shares will be at least equal to the amount of shares that will be issued.
4. A strategy of diversification would be most effectively used against which of the following risks?
a. Inflation b. Interest Rate Change c. Market Liquidity d. Corporate Bankruptcy
5. Preferred Stock generally has the following characteristics, except:
a. Fixed dividend payment b. An unconditional obligation to pay a dividend c. No voting rights d. Dividends are paid from earnings.
6. A beta coefficient for a risky stock is:
a. Less than 1.0, but greater than 0 b. Equal to 1.0 c. Greater than 1.0 d. Negative
7. An investor may reduce risk by
I. Selecting low beta stocks
II. Constructing a diversified portfolio
III. Writing a covered call
a. I and II b. I and III c. II and III d. Only III
8. A company’s performance is best measured by:
a. Liquidity ratios b. Leverage ratios c. Profitability ratios d. Turnover ratios
9. The cost of equity is generally:
I. Less than the cost of debt
II. Greater than the cost of debt
III. Depends on the perceived risk of the company
IV. Determined by the company’s current ratio
a. I and III b. I and IV c. II and III d. II and IV
10. The yield to maturity for a bond assumes:
a. The bond will be called b. The bond will not be called c. The coupon will increase if market interest rates go up d. The coupon will decrease if market interest rates go down
11. Which of the following is not a source of systematic risk?
a. A change in the inflation rate b. A change in the value of the British Pound c. A change in a firm’s financing strategy d. A change in the S&P 500 Index.