Finance 355: InvestmentsQUIZ 1Quiz Paper A 1, Quiz Paper B 16Black Stone Mines stock returned 8, 16, -8, and 12 percent over the past four years,respectively. What is the geometric average return?a. 6.59 percentb. 7.36 percentc. 7.75 percentd. 9.94 percente. 10.33 percentQuiz Paper A 2, Quiz Paper B 17Asset allocation is the:a. selection of specific securities within a particular class or industry.b. division of a purchase price between a cash payment and a margin loan.c. division of a portfolio into short and long positions.d. distribution of investment funds among various broad asset classes.e. dividing of assets into those that are hypothecated and those that are not.Quiz Paper A 3, Quiz Paper B 18Marti purchased 100 shares of Better Foods stock on margin at a price of $43 ashare. The initial margin requirement is 60 percent and the maintenance margin is 30percent. What is the lowest the stock price can go before Marti receives a margincall?a. $17.20b. $22.36c. $24.57d. $26.18e. $29.90Quiz Paper A 4, Quiz Paper B 19A stock has an average historical risk premium of 6.4 percent. The expected risk-freerate for next year is 2.6 percent. What is the expected rate of return on this stock fornext year?a. 6.50 percentb. 8.86 percentc. 9.00 percentd. 9.34 percente. 11.70 percentQuiz Paper A 5, Quiz Paper B 20You purchase a stock at the beginning of the year for $76.20 a share. Your totalreturn for the year was 12.6 percent and the dividend yield was 3.2 percent. Whatwas the price of the stock at the end of the year?a. $69.65b. $74.07c. $83.36d. $85.80e. $89.22Quiz Paper A 6, Quiz Paper B 11Stacy purchased 500 shares of stock for $48 a share. She sold those shares sixmonths later for $44 a share. The initial margin requirement is 80 percent and themaintenance margin is 40 percent. Ignore margin interest and trading costs. If shepurchased the shares for cash her holding period return would be _____ percent ascompared to _____ percent if she had used margin.a. -8.33; -10.34b. -8.33; -10.42c. -9.63; -11.30d. -9.63; -12.54e. -10.27; -12.82Quiz Paper A 7, Quiz Paper B 12Riverside Metals recently issued some debt that had an original maturity of ninemonths. This debt is best classified as a(n):a. option contract.b. money market instrument.c. fixed-income security.d. derivative security.e. futures contract.Quiz Paper A 8, Quiz Paper B 13You short sold 500 shares of Jasper stock at $41 a share at an initial margin of 60percent. What is the highest the stock price can go before you receive a margin call ifthe maintenance margin is 40 percent?a. $46.86b. $47.08c. $55.50d. $56.90e. $57.40Quiz Paper A 9, Quiz Paper B 14The variance measures the:a. total difference between the actual returns and the average return.b. average squared difference between the actual returns and the average return.c. total difference between the average squared returns and the risk-free return.d. average squared difference between the actual returns and the risk-free return.e. average difference between the actual squared returns and the risk-free return.Quiz Paper A 10, Quiz Paper B 15A security originally sold by a business or government to raise money is called a(n):a. derivative.b. primary asset.c. primary debt.d. futures contract.e. option contract.Quiz Paper A 11, Quiz Paper B 6The Latest Trend Fund has $2,648,900 in assets, and $1,878,400 in liabilities. Howmany shares are outstanding if the NAV is $10.07?a. 75,481b. 76,514c. 77,089d. 79,142e. 79,638Quiz Paper A 12, Quiz Paper B 7Suppose you have $10,000 to invest. Youâre considering stock A, which is currentlyselling for $50 per share. You also notice that a call option with a $50 strike priceand 3 months to maturity is available. The premium is $4. Stock A pays nodividends. What is your annualized return if you invest all your money in the calloption if, in 3 months, stock A is selling for $55 per share?a. 73.33%b. 25.00%c. 2.44%d. 100.00%e. 144.14%Quiz Paper A 13, Quiz Paper B 8Which of the following is the least likely advantage of mutual fund investing?a. Diversificationb. Professional managementc. Convenienced. Mutual fund returns are normally higher than market average returns.Quiz Paper A 14, Quiz Paper B 9Matt short sold 900 shares of stock at $11.50 a share. The initial margin is 80 percentand the maintenance margin is 50 percent. The stock is currently selling for $6.80 ashare. What is Matt’s account equity at this time? Ignore margin interest.a. $2,070b. $3,590c. $10,350d. $11,950e. $12,510Quiz Paper A 15, Quiz Paper B 10Which one of the following statements is correct concerning common stock?a. Common stock pays a fixed dividend.b. Dividends on common stock are paid prior to dividends on preferred stock.c. Once a dividend is paid by a corporation, that corporation is obligated tocontinue paying dividends on a regular basis.d. A firmâs board of directors determines if and when a dividend will be paid oncommon stock.e. Common stock has a defined liquidation value.Quiz Paper A 16, Quiz Paper B 1A fee that is charged at the time mutual fund shares are purchased by an investor iscalled a:a. contingent deferred sales charge.b. 12b-1 fee.c. back-end load.d. front-end load.e. issuance charge.Quiz Paper A 17, Quiz Paper B 2Suppose the call money rate is 6.8%, and you pay a spread of 1.9% over that. Youbuy 1,000 shares at $51 per share with an initial margin of 40%. One year later, thestock is selling for $57 per share, and you close out your position. What is yourreturn assuming no dividends are paid?a. 20.62 percentb. 27.46 percentc. 16.36 percentd. 54.20 percente. 25.41 percentQuiz Paper A 18, Quiz Paper B 3The High Growth Technology Fund has an NAV of $54.08 and a 5.5 percent frontendload. What is the offering price?a. $50.84b. $51.36c. $57.23d. $57.53e. $57.81Quiz Paper A 19, Quiz Paper B 4You own one futures contract on gold that you purchased at a quoted price of $1,820per ounce. The current price quote is $1,830. The contract size is 100 ounces. Whatis your current profit or loss on this investment?a. $10b. â$10c. $1,000d. â$1,000e. $100Quiz Paper A 20, Quiz Paper B 5Eight months ago, you purchased 300 shares of a non-dividend paying stock for $27a share. Today, you sold those shares for $31.59 a share. What was your annualizedrate of return on this investment?a. 17.00 percentb. 21.45 percentc. 25.50 percentd. 26.55 percente. 28.00 percent
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