1.Greg Stiles, __CFA__, has recently liquidated most of a client's portfolio because the client is planning to buy a house. Stiles informs one of the brokers in his office who has his real estate license about the plans of his client. With respect to Standard III(E), Preservation of Confidentiality, this action:

Select exactly 1 answers from the following:

A. is appropriate since Stiles only tells a licensed salesman.

B. is appropriate since Stiles waited until after the liquidation of the securities.

C. is appropriate since Stiles keeps the information in the firm.

D. violates the Standard unless the client asks Stiles to tell the licensed salesman.

2.A firm issues a $5 million zero coupon bond with a maturity of four years when market rates are 8 percent. Assuming semiannual compounding periods, the total interest on this bond is:

Select exactly 1 answers from the following:

A. $1,200,000.

B. $1,200,411.

C. $1,346,549.

D. $1,600,000.

3.The JME Jumpers, a professional volleyball team, sells season tickets to all home games. The cost of a season ticket is $1,000 and the team plays 20 home games, which run from April through August. For the year ended June 30, 2005, JME sold 1,200 tickets, collected 80 percent of the amount owed, and played 12 home games. How much revenue should JME recognize?

Select exactly 1 answers from the following:

A. $0.

B. $960,000.

C. $1,200,000.

D. $720,000.

4.Which of the following most accurately describes the shapes of the average variable cost (AVC) and average total cost (ATC) curves?

Select exactly 1 answers from the following:

A. The AVC and ATC curves are both U-shaped

B. The AVC and ATC curves both decrease initially, and then flatten.

C. The AVC curve is U-shaped whereas the ATC curve declines initially then flattens.

D. The AVC curve declines initially then flattens, whereas the ATC curve is U-shaped

5.Which of the following is a difference between primary and secondary capital markets?

Select exactly 1 answers from the following:

A. Primary markets are where stocks trade while secondary markets are where bonds trade.

B. Both primary and secondary markets relate to where stocks and bonds trade after their initial offering.

C. Secondary capital markets relate to the sale of new issues of bonds, preferred, and common stock, while primary capital markets are where securities trade after their initial offering.

D. Primary capital markets relate to the sale of new issues of bonds, preferred, and common stock, while secondary capital markets are where securities trade after their initial offering.

6.A firm is expected to have four years of growth with a retention ratio of 100 percent. Afterwards the firm's dividends are expected to grow 4 percent annually, and the dividend payout ratio will be set at 50 percent. If earnings per share (EPS) = $2.4 in year 5 and the required return on equity is 10 percent, what is the stock's value today?

Select exactly 1 answers from the following:

A. $20.00.

B. $13.66.

C. $30.00.

D. $40.23.

7.The earnings multiplier model, derived from the dividend discount model, expresses a stock's P/E ratio (P0/E1) as the:

Select exactly 1 answers from the following:

A. expected dividend in one year divided by the difference between the required return on equity and the expected dividend growth rate.

B. expected dividend payout ratio divided by the difference between the required return on equity and the expected dividend growth rate.

C. expected dividend payout ratio divided by the sum of the expected dividend growth rate and the required return on equity.

D. dividend yield plus the expected dividend growth rate.

8.Which of the following statements about return objectives is FALSE?

Select exactly 1 answers from the following:

A. To achieve the capital appreciation objective, the nominal rate of return must exceed the rate of inflation.

B. The total return objective is riskier than the current income objective.

C. To achieve the capital preservation objective, the nominal rate of return must exceed the inflation rate.

D. The total return objective is less risky than the capital appreciation objective.

9.An analyst is currently considering a portfolio consisting of two stocks. The first stock, Remba Co., has an expected return of 12 percent and a standard deviation of 16 percent. The second stock, Labs, Inc, has an expected return of 18 percent and a standard deviation of 25 percent. The correlation of returns between the two securities is 0.25.

If the analyst forms a portfolio with 30 percent in Remba and 70 percent in Labs, what is the portfolio's expected return?

Select exactly 1 answers from the following:

A. 15.0%.

B. 17.3%.

C. 16.2%.

D. 21.5%.

10.Which of the following statements regarding the Markowitz model of portfolio theory is FALSE? The model assumes investors:

Select exactly 1 answers from the following:

A. evaluate investment opportunities as a probability distribution of expected returns over some time period.

B. view the mean of the distribution of potential outcomes as the expected risk of an investment.

C. estimate a portfolio's risk on the basis of the variability of expected returns.

D. prefer higher returns to lower returns if the expected risk is the same, and less risk to more risk if the expected return is the same.