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8/3/2019 An Investor Purchases 100 Shares of Stock at a Price Of
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An investor purchases 100 shares of stock at a price of $40 per share. The investorholds 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 closest to:
Choice
13.75 %
Choice
28.43 %
Choice
3 8.75 %
3
Which of the following statements is most accurate?
Choice
1Treasury stock is non-voting and receives no dividends
Choice
2
Minority interest on the balance sheet represents a position the company owns in other companies
Choice
3
A classified balance sheet arises when in an auditor’s opinion the financial statementsmaterially 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
1
containing inflation
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Choice
2
stimulating economic growth
Choice
3maintaining low interest rates
1
An industry experiencing intense competitive rivalry among incumbent companies
is best characterized by:
Choice
1differentiated products and low exit barriers
Choice
2
a small number of competitors and low fixed costs
Choice
3
customers basing purchase decisions largely on price
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
1
sell securities
Choice
2
buy securities
Choice
3
increase required reserve ratios
2
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Which of the following industries is most likely characterized by low barriers to entry, fierce
competition, fragmented structure, and weak pricing power?
Choice
1Restaurants
Choice
2
Proprietary drugs
Choice
3
Credit card processing
1
In general, which of the following institutions will most likely have a high need for liquidity and a
short investment time horizon?
Choice
1
Banks
Choice
2Endowments
Choice
3
Defined benefit pension plans
1
An analyst observes that the historic geometric returns are 9% for equities, 3% for treasury bills, an
2% for inflation. The real rate of return and risk premium for equities are closest to:
Choice
1
5.8% and 3.7%
Choice 6.9% and 3.8%
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2
Choice
3
6.9% and 5.8%
One advantage of exchange traded funds relative to open-end mutual funds is:
Choice
1
they trade throughout the day
Choice
2
they offer greater diversification
Choice
3
they have smaller bid-ask spreads
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
1
short pays the long $2.00
Choice
2
short pays the long $103.00
Choice
3
long pays the short $105.00
1
Holding all other characteristics the same, the bond exposed to the greatest level of reinvestment
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risk is most likely the one selling at:
Choice
1
par
Choice
2
discount
Choice
3
premium
3
A company’s $100 par value preferred stock with a dividend rate of 9.5% per year is currently price
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 company’s preferred stock is closest to:
Choice
19.2 %
Choice
2
9.5 %
Choice
3
9.7 %
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
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1
Choice
2
lists account balances at a particular point in time
Choice
3
contains business transactions recorded in the order in which they occur
2
In a sales-driven pro forma analysis, retained earnings is most accurately forecasted as:
Choice
1
a percentage of forecasted sales
Choice
2
previous retained earnings plus forecasted financing surplus or deficiency
Choice
3
previous retained earnings plus forecasted net income less forecasted dividends
2
Which of the following is least likely to be a warning sign of low quality earnings?
Choice
1
Greater use of operating leases than peer companies
Choice
2Use of a higher discount rate in pension plan assumptions
Choice
3
A ratio of operating cash flow to net income greater than 1.0
3
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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
1discount
Choice
2
premium
Choice
3
discount or premium, depending on its duration
A company currently has sales of €1,200 thousand and it makes the following forecasts for the nex
year:
Sales growth next year: 10%
Cost of goods sold as a proportion of
sales:
75%
Salary, general, and administrativeexpenses as a proportion of sales:
10%
The expected gross profit for next year (in thousands) is closest to:
Choice
1
€198
Choice
2
€300
Choice €330
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3
1
A portfolio with equal parts invested in a risk-free asset and a risky portfolio will most likely lie on:
Choice
1
the efficient frontier
Choice
2
the security market line
Choice
3
a capital allocation line
3
Which statement best describes option price sensitivities? The value of a:
Choice
1
call option increases as interest rates rise
Choice
2
put option increases as volatility decreases
Choice
3
put option decreases as interest rates decline
An inventory system that reduces average inventory without affecting sales will most likely reduce
the:
Choice quick ratio
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1
Choice
2
inventory turnover
Choice
3
cash conversion cycle
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 socie
will most likely:
Choice
1
increase
Choice
2
decrease
Choice
3
remain the same
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
1
8.0
Choice
2
21.0
Choice 24.2
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3
3
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
1
Common shares
Choice
2
Putable preference shares
Choice
3
Callable preference shares
3
Capital provided for companies beginning operation but before commercial manufacturing and sale
have occurred best describes which stage in venture capital investing?
Choice
1
Seed-stage
Choice
2 Early-stage
Choice
3
Later-stage
2
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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
15.31 %
Choice
2
6.45 %
Choice
3
8.90 %
2
Using a discount rate of 5%, compounded monthly, the present value of $5,000 to be received thre
years from today is closest to:
Choice
1
$4,250
Choice
2$4,305
Choice
3
$4,320
2
If the stated annual interest rate is 9% and the frequency of compounding is daily, the effective
annual rate is closest to:
Choice
1
9.00 %
Choice 9.42 %
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2
Choice
3
9.88 %
2
If the volatility of returns of an underlying security increases, then:
Choice
1
both call and put option prices increase
Choice
2
both call and put option prices decrease
Choice
3
call prices increase and put prices decrease
3
Which of the following statements is most accurate regarding cash flow ratios?
Choice
1
Interest coverage ratio is calculated as operating cash flow over interest payments
Choice
2
Debt payment ratio measures the firm’s ability to pay debts with operating cash flows
Choice
3Reinvestment ratio measures the firm’s ability to acquire assets with investing cash flows
1
Which of the following is most likely a sign of a good corporate governance structure?
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Choice
1
Independent board members comprise a minority proportion on the company’s board
Choice
2
The separation of the chief executive position from the chair position on the company’s
board
Choice
3
Independent board members are allowed to meet shareholders only in the presence of theentire board
3 not sure