Question:

Which of the following is not a form of a financial asset?

A.

Commercial paper

B.

Commodity futures

C.

Warrants

D.

Personal residence

Answer» c. Warrants

Question:

Common stock dividends are now taxed at a maximum rate of

A.

10 percent

B.

15 percent

C.

20 percent

D.

30 percent

Answer» b. 15 percent

Question:

A stock has an expected return of 15 percent. The market risk premium is 10 percent and the risk-free rate is 4 percent. What is the stock’s beta? (C)

A.

0.50

B.

0.75

C.

1.1

D.

1.8

Answer» c. 1.1

Question:

__________ refers to the highest priced transaction for an issue on a particular day.

A.

Close

B.

High

C.

Large

D.

Net change

Answer» c. Large

Question:

______ are a fixed income security.

A.

Equities

B.

Forex

C.

Derivatives

D.

Bonds

Answer» d. Bonds

Question:

A stock that pays low or no cash dividends is

A.

EBay

B.

Duke Power

C.

AT&T

D.

All of the above

Answer» a. EBay

Question:

If security prices exhibits semi-strong form of efficiency, one will not gain if he

A.

Depicts the prices in the form of charts to identify pattern which will beat the market.

B.

Buys stock of a company which has declared a bonus issue or has gone for a stock split

C.

Refers to insiders’ advice

D.

Both (a) and (b) above.

Answer» d. Both (a) and (b) above.

Question:

Deposits in an IRA are

A.

Allowed to grow tax free until withdrawal

B.

Deducted from current income tax due

C.

Deducted from current income to reduce income tax due

D.

A and C

Answer» d. A and C

Question:

The market portfolio has a beta of

A.

0.

B.

1.

C.

-1.

D.

0.5.

Answer» b. 1.

Question:

The Security Market Line (SML) is

A.

the line that describes the expected return-beta relationship for well-diversified portfolios only.

B.

also called the Capital Allocation Line.

C.

the line that is tangent to the efficient frontier of all risky assets.

D.

the line that represents the expected return-beta relationship.

Answer» d. the line that represents the expected return-beta relationship.