Project #14927 - Finance

Economic and Industry Analysis

1. Which of the following is not a goal of the federal government economic policy as established by the Employment Act of 1946. 
A. Low inflation
B. High levels of employment
C. Balance federal budgets
D. Economic growth

2. What is the difference between real GDP and inflation-adjusted GDP? 
A. Real GDP is stated in current dollars
B. Inflation-adjusted, or nominal GDP reflects output in physical terms
C. There is no difference between the two
D. None of the above

3. According to the traditional definitions, a recession is two or more quarters of 
A. Negative nominal Gross Domestic Product (GDP) growth
B. Negative real GDP growth
C. A rate of inflation which exceeds real GDP growth
D. Declining growth in real past GDP

4. Which of the following industries is most sensitive to changes in the business cycle? 
A. The tobacco and alcohol industries
B. The automobile and durable goods industries
C. The food and pharmaceutical industries
D. All of the above are equally sensitive to changes in the business cycle

5. Which of the following industries will in general do better than other industries during a recession? 
A. The movie industry
B. Television and radio
C. Housing and construction
D. More than one of the above

6. The primary tools used to stimulate economic activity are: 
A. International banking policies
B. Monetary and fiscal policy
C. Tax policy and interest rates
D. Imports and exports.

7. Fiscal policy concerns the implementation of the government's 
A. Spending and taxing plans
B. Money supply and interest rate strategy
C. Foreign trade policy
D. Attitude towards business investment

8. Which of the following stages does not belong in the industry life cycle? 
A. Growth
B. Stagnation
C. Decline
D. Maturity

9. The ________ does not represent continuing operations in any way, but is simply a snapshot of the total worth of a firm at a given point in time. 
A. The income statement
B. The balance sheet
C. The statement of cash flows
D. None of the above

Market Efficiency

 

10.  The “efficiency” referred to in the efficient market hypothesis is_______ efficiency.

A. Operational

B. Informational

C. Risk/return

D. Trading mechanism

 

11. The weak form of the efficient market hypothesis states that _____ are of no use in predicting future stock prices.

A. Stock price and volume charts

B. Balance sheet

C. Non-public material information

D. Insider information

 

12. The ____ form of the efficient market hypothesis states that security prices fully reflect all relevant publicly available information.

A. Weak

B. Semi-strong

C. Strong

D. All of above

 

13. Insider trading would not be profitable, if the market is

A. Weakly efficient

B. Semi-strongly efficient

C. Strongly efficient

D. All of above

 

14. The small firm effects states that after the risk adjustment,

A. Stocks with small capitalization outperform large capitalization stocks

B. Stocks with large capitalization outperform small capitalization stocks

C. growth stocks outperform value stocks

D. Stocks with high P/E ratio outperform stocks with low P/E ratio

 

15. If you believe that the market is semi-strongly efficient, which of the following is the proper action that you will take?

A. Financial statement analysis

B. Industry analysis

C. Technical analysis

D. Market indexing analysis

 

16. Which of the following is a correct statement?

A. The most efficient capital market will benefit all investors

B. U.S. stock markets’ efficiency is the highest one in the world

C. Generally, large cap equity market is more efficient than small cap equity market

D. If technical analysis is useful in futures market, then futures market is weakly efficient

 

 

Bond Analysis

 

17. What is the price of 10-year bond with 6% coupon rate, $1,000 par value? The interest rate is 7%. Coupons are paid annually.

A. $ 926.56

B. $ 928.94

C. $ 929.76

D. $ 1,000

 

18. What is the price of 10-year bond with 6% coupon rate, $1,000 par value? The interest rate is 7%. Coupons are paid semi-annually.

A. $ 926.56

B. $ 928.94

C. $ 929.76

D. $ 1,000

 

19.  An 8% coupon rate, 30-year bond is currently sold at $1275. The coupon is paid annually. What are the current yield and yield to maturity?

A.   6.275% and 6.0018%

B.   6.275% and 6.10%

C.   6.373% and 6.0018%

D.   6.373% and 6.10%

 

 

 

 

20. Which of the following is correct?

A. If the market interest rate is higher than the coupon rate, the bond will be issued at discount

B. If the yield to maturity is lower than the coupon rate, the bond will be issued at discount

C. If the market interest rate is lower than the coupon rate, the bond will be issued at discount

D. If the market interest rate is same as the coupon rate, the bond will be issued at premium

 

21. The spot rates for 1st, 2nd, 3rd, and 4thyear are 5%, 5.5%, 6%, and 6.5%, what is the one-year forward rate between 2nd and 3rd year?

A.6%

B.6.5%

C.7.01 %

D.7.5%

 

22. The spot rates for 1st, 2nd, 3rd, and 4th year are 5%, 6%, 7%, 8%, consider A 4-year bond with 6% coupon rate, $1,000 par value. The coupon is paid annually. What is the price of this bond?

A. $ 938.65

B. $ 958.33

C. $ 985.57

D. $ 1,032.21

 

23. The forward rates for 1,2,3,4 year are 5%, 6%, 7%, 8%, consider A 4-year bond with 6% coupon rate, $1,000 par value. The coupon is paid annually. What is the price of this bond?

A. $ 936.65

B. $ 958.33

C. $ 985.57

D. $ 1,032.21

 

24. A 5-year zero coupon bond pays $1,000 at maturity is priced at $500. A 4-year zero coupon bond pays $ 1,000 at maturity is priced at $ 520. What is the one-year forward rate between the 4th and the 5th year?

A. 4%

B. 6.66%

C. 8.5%

D. 20%

 

 

 

 

25. U.S. Treasury coupon bonds are generally considered as risk free assets. Which of the following are correct?

A. This bond is subject to no risk.

B. This bond is subject to default risk, reinvestment risk, and bond price risk.

C. This bond is only subject to both reinvestment risk and bond price risk.

D. This bond is only subject to bond price risk

 

 

26. Which of the following is NOT correct?

A. As interest rate increases, the bond investors are concerned with the reinvestment risk

B. As interest rate decreases, the bond investors are concerned with the reinvestment risk

C. As interest rate increases, the bond investors are concerned with the bond price risk

D. As interest rate decreases, the mortgage bond investors are concerned with the prepayment risk

 

27. Which of the following are NOT correct?

A. The smaller the coupon rate, higher the bond price risk

B. The higher the initial yield, the greater the bond price volatility

C. Longer term bonds have higher price risk than shorter term bonds do.

D. The higher the interest rate, the lower the bond price.

 

28. A 20 year coupon bond has 8% coupon rate, the YTM is 6%. The coupon is paid semiannually. The par value is $1,000. What is the closest value for effective duration?

A.9

B.10

C.11

D.12

 

29. What is the closest value for the effective convexity of this bond?

A.70

B.85

C.142

D.169

 

30. What is the bond price percentage change for a 2% interest rate increase?

A.-18.6%

B.-21.8%

C.-25.4%

D.-56 %

 

31. A $1000 par value bond with 10% coupon rate paid annually has 3 year maturity. The YTM is 5%, what is the Macaulay duration and the modified duration?

A.2.86 and 2.70

B.2.74 and 2.61

C.2.70 and 2.86

D.2.61 and 2.74

 

32. Which of the following interest rate term structure theory implies that the yield curve could have any shape?

A. Expectation theory

B. Liquidity theory

C. Preferred habitat theory

D. Market segmentation theory

E. Both C and D

 

33. Which of the following is a correct statement?

A. Raising the interest rate by the Federal Reserve is a good news for bondholders, because higher interest rates would boost bond prices.

B. Cutting the interest rate by the Federal Reserve is a bad news for bondholder, because lower interest rates would depress bond prices.

C. Raising the interest rate by the Federal Reserve is a bad news for bondholder, because higher interest rates would depress bond prices.

D. Cutting the interest rate by the Federal Reserve is a good news for bondholder, because lower interest rates would boost bond prices.

E. Both C and D

Subject Business
Due By (Pacific Time) 10/22/2013 09:00 am
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