投资学期末试题库答案解析及分析[一]

TUTORIAL – SESSION 01

CHAPTER 01

1.Discuss the agency problem.

2.Discuss the similarities and differences between real and financial assets.

3.Discuss the following ongoing trends as they relate to the field of investments:

globalization, financial engineering, securitization, and computer networks. CHAPTER 02

Use the following to answer questions 1 to 3:

Consider the following three stocks:

1. The price-weighted index constructed with the three stocks is

A) 30

B) 40

C) 50

D) 60

E) 70

Answer: B Difficulty: Easy

Rationale: ($40 + $70 + $10)/3 = $40.

2. The value-weighted index constructed with the three stocks using a divisor of

100 is

A) 1.2

B) 1200

C) 490

D) 4900

E) 49

Answer:C Difficulty:Moderate

Rationale:The sum of the value of the three stocks divided by100is490:[($

40x200)+($70x500)+($10x600)]/100=490

3. Assume at these prices the value-weighted index constructed with the three

stocks is 490. What would the index be if stock B is split 2 for 1 and stock C 4 for 1?

A) 265

B) 430

C) 355

D) 490

E) 1000

Answer: D Difficulty: Moderate

Rationale: Value-weighted indexes are not affected by stock splits.

4. An investor purchases one municipal and one corporate bond that pay rates of

return of 8% and 10%, respectively. If the investor is in the 20% marginal tax bracket, his or her after tax rates of return on the municipal and corporate bonds would be ________ and ______, respectively.

A) 8% and 10%

B) 8% and 8%

C) 6.4% and 8%

D) 6.4% and 10%

E) 10% and 10%

Answer: B Difficulty: Moderate

Rationale: rc = 0.10(1 - 0.20) = 0.08, or 8%; rm = 0.08(1 - 0) = 8%.

5. A 5.5% 20-year municipal bond is currently priced to yield 7.2%. For a

taxpayer in the 33% marginal tax bracket, this bond would offer an equivalent taxable yield of:

A) 8.20%.

B) 10.75%.

C) 11.40%.

D) 4.82%.

E) none of the above.

Answer: B Difficulty: Moderate

Rationale: 0.072 = rm (1-t); 0.072 = rm / (0.67); rm = 0.1075 = 10.75%

6. In order for you to be indifferent between the after tax returns on a corporate

bond paying 8.5% and a tax-exempt municipal bond paying 6.12%, what would your tax bracket need to be?

A) 33%

B) 72%

C) 15%

D) 28%

E) Cannot tell from the information given

.0612 = .(1-t); (1-t) = 0.72; t = .28

7. Suppose an investor is considering a corporate bond with a 7.17% before-tax

yield and a municipal bond with a 5.93% before-tax yield. At what marginal tax rate would the investor be indifferent between investing in the corporate and investing in the muni?

A) 15.4%

B) 23.7%

C) 39.5%

D) 17.3%

E) 12.4%

tm = 1 - (5.93%/7.17%) = 17.29%

Use the following to answer questions 8 to 9:

8. Based on the information given, for a price-weighted index of the three stocks

calculate:

A) the rate of return for the first period (t=0 to t=1).

B) the value of the divisor in the second period (t=2). Assume that Stock A had

a 2-1 split during this period.

C) the rate of return for the second period (t=1 to t=2).

A. The price-weighted index at time 0 is (70 + 85 + 105)/3 = 86.67. The price-

weighted index at time 1 is (72 + 81 + 98)/3 = 83.67. The return on the

index is 83.67/86.67 - 1 = -3.46%.

B. The divisor must change to reflect the stock split. Because nothing else fundamentally

changed, the value of the index should remain 83.67. So the new divisor is

(36 + 81 + 98)/83.67 = 2.57. The index value is (36 + 81 + 98)/2.57 =

83.67.

C. The rate of return for the second period is 83.67/83.67 - 1 = 0.00%

9. Based on the information given for the three stocks, calculate the first-period

rates of return (from t=0 to t=1) on

A) a market-value-weighted index.

B) an equally-weighted index.

C) a geometric index.

A. The total market value at time 0 is $70 * 200 + $85 * 500 + $105 * 300 = $88,000.

The total market value at time 1 is $72 * 200 + $81 * 500 + $98 * 300 =

$84,300. The return is $84,300/$88,000 - 1 = -4.20%.

B. The return on Stock A for the first period is $72/$70 - 1 = 2.86%. The return on

Stock B for the first period is $81/$85 - 1 = -4.71%. The return on Stock C for

the first period is $98/$105 - 1 = -6.67%. The return on an equally weighted

index of the three stocks is (2.86% - 4.71% - 6.67%)/3 = -2.84%

C. The geometric average return is [(1+.0286)(1-.0471)(1-.0667)](1/3)-1 =

[(1.0286)(0.9529)(0.9333)]0.3333 -1 = -2.92%

10.Discuss the advantages and disadvantages of common stock ownership, relative

to other investment alternatives.

CHAPTER 03

1. Assume you purchased 200 shares of XYZ common stock on margin at $70 per

share from your broker. If the initial margin is 55%, how much did you borrow from the broker?

A) $6,000

B) $4,000

C) $7,700

D) $7,000

E) $6,300

Answer: E Difficulty: Moderate

Rationale: 200 shares * $70/share * (1-0.55) = $14,000 * (0.45) = $6,300.

2. You sold short 200 shares of common stock at $60 per share. The initial margin

is 60%. Your initial investment was

A) $4,800.

B) $12,000.

C) $5,600.

D) $7,200.

E) none of the above.

Answer: D Difficulty: Moderate

Rationale: 200 shares * $60/share * 0.60 = $12,000 * 0.60 = $7,200

3. You purchased 100 shares of ABC common stock on margin at $70 per share.

Assume the initial margin is 50% and the maintenance margin is 30%. Below what stock price level would you get a margin call? Assume the stock pays no dividend; ignore interest on margin.

A) $21

B) $50

C) $49

D) $80

E) none of the above

Answer: B Difficulty: Difficult

Rationale: 100 shares * $70 * .5 = $7,000 * 0.5 = $3,500 (loan amount); 0.30 = (100P - $3,500)/100P; 30P = 100P - $3,500; -70P = -$3,500; P = $50.

4. You purchased 100 shares of common stock on margin at $45 per share. Assume

the initial margin is 50% and the stock pays no dividend. What would the maintenance margin be if a margin call is made at a stock price of $30? Ignore interest on margin.

A) 0.33

B) 0.55

C) 0.43

D) 0.23

E) 0.25

Answer: E Difficulty: Difficult

Rationale: 100 shares * $45/share * 0.5 = $4,500 * 0.5 = $2,250 (loan amount); X = [100($30) - $2,250]/100($30); X = 0.25.

5. You purchased 300 shares of common stock on margin for $60 per share. The

initial margin is 60% and the stock pays no dividend. What would your rate of return be if you sell the stock at $45 per share? Ignore interest on margin.

A) 25%

B) -33%

C) 44%

D) -42%

E) –54%

Answer: D Difficulty: Difficult

Rationale: 300($60)(0.60) = $10,800 investment; 300($60) = $18,000 *(0.40) = $7,200 loan; Proceeds after selling stock and repaying loan: $13,500 -

$7,200 = $6,300; Return = ($6,300 - $10,800)/$10,800 = - 41.67%.

6. Assume you sell short 100 shares of common stock at $45 per share, with initial

margin at 50%. What would be your rate of return if you repurchase the stock at $40/share? The stock paid no dividends during the period, and you did not remove any money from the account before making the offsetting transaction.

A) 20%

B) 25%

C) 22%

D) 77%

E) none of the above

Answer: C Difficulty: Moderate

Rationale: Profit on stock = ($45 - $40) * 100 = $500, $500/$2,250 (initial investment) = 22.22%

7. You want to purchase XYZ stock at $60 from your broker using as little of your

own money as possible. If initial margin is 50% and you have $3000 to invest, how many shares can you buy?

A) 100 shares

B) 200 shares

C) 50 shares

D) 500 shares

E) 25 shares

Answer: A Difficulty: Moderate

Rationale: .5 = [(Q * $60)-$3,000] / (Q * $60); $30Q = $60Q-$3,000; $30Q = $3,000; Q=100.

8. You buy 300 shares of Qualitycorp for $30 per share and deposit initial margin

of 50%. The next day Qualitycorp's price drops to $25 per share. What is your actual margin?

A) 50%

B) 40%

C) 33%

D) 60%

E) 25%

Answer: B Difficulty: Moderate

Rationale: AM = [300 ($25) - .5 (300) ($30) ] / [300 ($25)] = .40

9. You sold short 100 shares of common stock at $45 per share. The initial margin

is 50%. Your initial investment was

A) $4,800.

B) $12,000.

C) $2,250.

D) $7,200.

E) none of the above.

Answer: C Difficulty: Moderate

Rationale: 100 shares * $45/share * 0.50 = $4,500 * 0.50 = $2,250

10. List three factors that are listing requirements for the New York Stock Exchange.

Why does the exchange have such requirements?

CHAPTER 04

1. Multiple Mutual Funds had year-end assets of $457,000,000 and liabilities of

$17,000,000. There were 24,300,000 shares in the fund at year-end. What was Multiple Mutual's Net Asset Value?

A) $18.11

B) $18.81

C) $69.96

D) $7.00

E) $181.07

Answer: A Difficulty: Moderate

Rationale: (457,000,000 - 17,000,000) / 24,300,000 = $18.11

2. Diversified Portfolios had year-end assets of $279,000,000 and liabilities of

$43,000,000. If Diversified's NAV was $42.13, how many shares must have

been held in the fund?

A) 43,000,000

B) 6,488,372

C) 5,601,709

D) 1,182,203

E) None of the above.

Answer: C Difficulty: Moderate

Rationale: ($279,000,000 - 43,000,000) / $42.13 = 5,601,708.996.

3. Pinnacle Fund had year-end assets of $825,000,000 and liabilities of

$25,000,000. If Pinnacle's NAV was $32.18, how many shares must have been

held in the fund?

A) 21,619,346,92

B) 22,930,546.28

C) 24,860,161.59

D) 25,693,645.25

E) None of the above.

Answer: C Difficulty: Moderate

Rationale: ($825,000,000 - 25,000,000) / $32.18 = 24,860,161.59.

4. The Profitability Fund had NAV per share of $17.50 on January 1, 200

5. On

December 31 of the same year the fund's NAV was $19.47. Income distributions

were $0.75 and the fund had capital gain distributions of $1.00. Without

considering taxes and transactions costs, what rate of return did an investor

receive on the Profitability fund last year?

A) 11.26%

B) 15.54%

C) 16.97%

D) 21.26%

E) 9.83%

Answer: D Difficulty: Moderate

Rationale: R = ($19.47 - 17.50 + .75 + 1.00) / $17.50 = 21.26%

5. Patty O'Furniture purchased 100 shares of Green Isle mutual fund at a net asset

value of $42 per share. During the year Patty received dividend income

distributions of $2.00 per share and capital gains distributions of $4.30 per share.

At the end of the year the shares had a net asset value of $40 per share. What

was Patty's rate of return on this investment?

A) 5.43%

B) 10.24%

C) 7.19%

D) 12.44%

E) 9.18%

（40-42+2+4.3）/42=10.24%

6. A mutual fund had year-end assets of $560,000,000 and liabilities of

$26,000,000. There were 23,850,000 shares in the fund at year end. What

was the mutual fund's Net Asset Value?

A) $22.87

B) $22.39

C) $22.24

D) $17.61

E) $19.25

Answer: B Difficulty: Moderate

Rationale: (560,000,000 - 26,000,000) / 23,850,000 = $22.389

7. A mutual fund had year-end assets of $465,000,000 and liabilities of

$37,000,000. If the fund NAV was $56.12, how many shares must have been

held in the fund?

A) 4,300,000

B) 6,488,372

C) 8,601,709

D) 7,626,515

E) None of the above.

Answer: D Difficulty: Moderate

Rationale: ($465,000,000 37,000,000) / $56.12 = 7,626,515

8. A mutual fund had NAV per share of $26.25 on January 1, 2005. On December

31 of the same year the fund's rate of return for the year was 16.4%. Income

distributions were $1.27 and the fund had capital gain distributions of $1.85.

Without considering taxes and transactions costs, what ending NAV would you calculate?

A) $27.44

B) $33.88

C) $24.69

D) $42.03

E) $16.62

Answer:A Difficulty:Moderate

Rationale:.164=(P-$26.25+1.27+1.85)/$26.25;P=$27.435

9. A mutual funds had average daily assets of $2.0 billion on 2005. The fund sold

$500 million worth of stock and purchased $600 million worth of stock during the year. The funds turnover ratio is ___.

A) 27.5%