FINC 360 Flashcards

The total dollar return on a share of stock is defined as the:

a. change in the price of the stock over a period. b. dividend income divided by the beginning price per share. c. capital gain or loss plus any dividend income. d. change in the stock price divided by the original stock price. e. annual dividend income received.

The total dollar return on a share of stock is defined as the:

a. change in the price of the stock over a period. b. dividend income divided by the beginning price per share. c. capital gain or loss plus any dividend income. d. change in the stock price divided by the original stock price. e. annual dividend income received.

c.

When the total return on an investment is expressed on a per-year basis it is called the:

a. capital gains yield b. dividend yield c. holding period return d. effective annual return e. initial return

d.

The additional return earned for accepting risk is called the:

a. inflated return b. capital gains yield c. real return d. riskless rate e. risk premium

e.

If you multiply the number of shares outstanding for a stock by the price per share, you are computing the firm's:

a. equity ratio b. total book value c. market share d. market capitalization e. time value

d.

Which one of the following had the highest average return for the period 1926-2018?

a. large-company stocks b. U.S. Treasury bills c. long-term government bonds d. small-company stocks e. long-term corporate stocks

d.

The wider the distribution of an investment's returns over time, the _____ the expected average return and the _____ the expected volatility of those returns.

a. higher; higher b. higher; lower c. lower; higher d. lower; lower e. The distribution of returns does not affect the expected rate of return.

a.

A brokerage account in which purchases can be made using credit is referred to as which type of account?

a. clearing b. funds available c. cash d. call e. margin

e.

The minimum equity that must be maintained at all times in a margin account is called the:

a. initial margin b. initial equity position c. maintenance margin d. call requirement e. margin call

c.

Sam purchased 500 shares of Microsoft stock which he has pledged to his broker as collateral for the loan in his margin account. This process of pledging securities is called:

a. margin calling b. hypothecation c. leveraging d. maintaining the margin e. street securitization

b.

This morning, Josh sold 800 shares of stock that he did not own. This sale is referred to as a:

a. margin sale b. long position c. wrap trade d. hypothecated sale e. short sale

e.

Walter is trying to decide whether he wants to purchase shares in General Motors, Ford, or Honda, all of which are auto manufacturers. Walter is making a(n) _____ decision.

a. security selection b. tax-advantaged c. risk aversion d. active strategy e. asset allocation

a.

Brooke has decided to invest 55% of her money in large company stocks, 40% in small company stocks, and 5% in cash. This is a(n) _____ decision.

a. market timing b. security selection c. tax-advantaged d. active strategy e. asset allocation

e.

Kay plans to retire in two years and wishes to liquidate her account at that time. Kay has a _____ constraint.

a. resource b. horizon c. liquidity d. tax e. special circumstance

b.

An agreement that grants the owner the right, but not the obligation, to buy or sell a specific asset at a specified price during a specified time period is called a(n) _____ contract.

a. futures b. obligatory c. quoted d. fixed e. option

e.

The price paid to purchase an option contract is called the:

a. strike price b. option premium c. exercise price d. future premium e. current yield

b.

Which one of the following is a derivative asset?

a. common stock b. option contract c. government bond d. preferred stock e. corporate bond

b.

Great Lakes Farm agreed this morning to sell General Mills 25,000 bushels of wheat six months from now at a price/bushel of $9.75. This is an example of a:

a. call option b. put option c. forward contract d. money market security e. fixed-income security

c.

You owe thirteen 7.0% coupon bonds with a total maturity value of $13,000. How much will you receive every six months as an interest payment?

a. $213.50 b. $375.00 c. $455.00 d. $540.00 e. $750.00

c.

You purchased four put option contracts with a strike price of $34.5 and a premium of $.85. What is the total net amount you will receive for your shares if you exercise this contract when the underlying stock is selling for $31.50 a share?

a. $13,460 b. $13,700 c. $15,740 d. $16,340 e. $16,400

a.

What is the current price of a $1,000 face value Alpha Industrial bond?

a. $986.67 b. $991.04 c. $994.02 d. $998.23 e. $1,000.00

c.

How many whole shares of Ditch Digger stock traded today?

a. 11,298 b. 112,980 c. 11,298,006 d. 112,980,060 e. 1,129,800,600

c.

What price would you have paid today per bushel for the Mar 08 wheat futures contract if you bought the contract at the final price of the day?

a. $10.8010 b. $10.8025 c. $10.9320 d. $10.9325 e. $11.0960

d.

The price you will pay (per underlying share) to buy the 50 call option on JL stock is:

a. $4.75 b. $4.80 c. $5.00 d. $5.90 e. $6.00

c.

An investment company:

a. specializes in investing funds on behalf of a financial institution. b. is a closed-end fund that invests in real estate. c. pools funds from individual investors. d. is a specific type of a bank. e. is a specialized form of a joint stock company.

c.

An investment company that will repurchase shares at any time is called a(n) _____ fund.

a. hedge b. closed-end c. open-end d. public e. exchange traded

c.

An investment company that issues a fixed number of shares which can only be resold in the open stock market is called a(n) _____ fund.

a. hedge b. closed-end c. open-end d. public e. market

b.

A fee that is charged at the time mutual shares are purchased by an investor is called a:

a. contingent deferred sales charge b. 12b-1 fee c. back-end load d. front-end load e. issuance charge

d.

A fund that is basically an index fund that trades like a closed-end fund is called a(n):

a. open-end fund b. money market fund c. exchange-traded fund d. mutual fund e. depository receipt

c.

Today, you are selling shares of an open-end mutual fund and will be charged a CDSC of 3%. The price you will receive per share is equal to:

a. 103% of the opening NAV b. 97% of the opening offering price c. 97% of the closing NAV d. 103% of the closing offering price e. the closing offering price

c.