Investment Analysis & Portfolio Management
FIN 630
1 ) The current yield on a bond is equal to
A) The internal rate of return.
B) The yield to maturity.
C) Annual interest divided by the current market price.
D) Annual interest divided by the par value.
E) None of the above
2) To earn a high rating from the bond rating agencies, a firm should have
A) A low times interest earned ratio.
B) A low debt to equity ratio.
C) A high quick ratio.
D) B and C.
E) A and C.
3) A coupon bond is a bond that
A) Does not pay interest on a regular basis but pays a lump sum at maturity.
B) Pays interest on a regular basis (typically every six months).
C) Can always be converted into a specific number of shares of common stock in
the issuing company.
D) Always sells at par.
E) None of the above
5)
In an efficient market the correlation coefficient between stock returns for two
non-overlapping time periods should be
A) Positive and large.
B) Positive and small.
C) Negative and large.
D) Negative and small.
E) Zero.
6) A zero-investment portfolio with a positive expected return arises when
A) An investor has downside risk only.
B) The opportunity set is not tangent to the capital allocation line.
C) A risk-free arbitrage opportunity exists.
D) The law of prices is not violated.
E) None of the above
4 The yield to maturity on a bond is
A) The discount rate that will set the present value of the payments equal to the
bond price.
B) Below the coupon rate when the bond sells at a discount, and equal to the
coupon rate when the bond sells at a premium.
C) Based on the assumption that any payments received are reinvested at the
coupon rate.
D) All of the above
E) None of the above
7) The following factors might affect stock returns:
A) Interest rate fluctuations.
B) The business cycle.
C) Inflation rates.
D) A and B.
E) All of the above
8) Which one of the following is not a money market instrument?
A) A Treasury bond
B) A negotiable certificate of deposit
C) A Eurodollar account
D) A Treasury bill
E) Commercial paper
9) Individual investors are most likely to trade securities in
A)The primary market.
B)A brokered market.
C)An auction market.
D)A block transaction.
E)A direct search market.
10) The duration of a bond is a function of the bond's .
A) Coupon rate.
B) Time to maturity.
C) Yield to maturity.
D) All of the above
E) None of the above
