Question 25 Which securities can be valued by dividing the annual dividend by th
ID: 2744417 • Letter: Q
Question
Question 25
Which securities can be valued by dividing the annual dividend by the required rate of return?
Low coupon bonds
Junk bonds
Common stocks
Preferred stocks
Constant growth common stocks
Question 27
Dividend growth is a function of
Return on equity.
The retention rate.
The payout ratio.
All of the above.
None of the above.
Question 28
Growth rates of the (1) labor force, (2) average number of hours worked and (3) labor productivity are the main determinants of a foreign country's
Dividend payout ratio.
Beta.
Real risk free rate.
Nominal risk free rate.
Risk premium.
Question 30
General obligation bonds are
U.S. Treasury bonds backed by the full faith and credit of the issuer.
U.S. Treasury bonds backed by income generated form specific projects.
Municipal bonds backed by the full faith and credit of the issuer.
Municipal bonds backed by income generated from specific projects.
A type of U.S. agency security.
Question 32
Collateralized Mortgage obligations are
Mortgage pass-through securities.
Mortgage pass-through securities with varying maturities.
Mortgage pass-through securities with no default risk.
Mortgage pass-through securities with variable coupon rates.
None of the above.
Question 34
The legal document setting forth the obligations of a bond's issuer is called
A debenture.
A warrant.
An indenture.
A rights certificate.
A trustee deed.
Question 35
Collateralized mortgage obligations (CMOs) offset some of the problems associated with traditional mortgage pass-throughs because
They are overcollateralized.
They have variable rates.
Collateralized by auto-loans.
They are deep discount instruments.
Collateralized by credit card debt.
Question 36
A stock currently sells for $15 per share. A put option on the stock with an exercise price $20 currently sells for $6.50. The put option is
At-the-money.
In-the-money.
Out-of-the-money.
At breakeven.
None of the above.
Question 37
An equity portfolio manager can neutralize the risk of falling stock prices by entering into a hedge position where the payoffs are
Not correlated with the existing exposure.
Positively correlated with the existing exposure.
Negatively correlated with the existing exposure.
Any of the above.
None of the above.
Question 38
The derivative based strategy known as portfolio insurance involves
The sale of a put option on the underlying security position.
The purchase of a put on the underlying security position.
The sale of a call on the underlying security position.
The purchase of a call on the underlying security position.
b and d.
Question 40
A call option differs from a put option in that
a call option obliges the investor to purchase a given number of shares in a specific common stock at a set price; a put obliges the investor to sell a certain number of shares in a common stock at a set price.
both give the investor the opportunity to participate in stock market dealings without the risk of actual stock ownership.
a call option gives the investor the right to purchase a given number of shares of a specified stock at a set price; a put option gives the investor the right to sell a given number of shares of a stock at a set price.
a put option has risk, since leverage is not as great as with a call.
none of the above
Question 41
Which of the following statements is a true definition of an out-of-the-money option?
A call option in which the stock price exceeds the exercise price.
A call option in which the exercise price exceeds the stock price.
A put option in which the exercise price exceeds the stock price.
A call option in which the call premium exceeds the stock price.
Question 42
According to put/call parity
Stock price + Call Price = Put Price + Risk Free Bond Price
Stock price + Put Price = Call Price + Risk Free Bond Price
Put price + Call Price = Stock Price + Risk Free Bond Price
Stock price - Put Price = Call Price + Risk Free Bond Price
Stock price + Call Price = Put Price - Risk Free Bond Price
Question 44
The major difference between valuing futures versus forward contracts stems from the fact that future contracts are
Traded on exchange.
Backed by a clearinghouse.
Marked-to-market daily.
Less risky.
Relatively inflexible.
Question 45
In the absence of arbitrage opportunities, the forward contract price should be equal to the current price plus
Contract price.
The cost of carry.
Margin requirement.
The price discovery rate.
The convenience return
Question 47
Financial futures have become an increasingly attractive investment alternative since the Chicago Board of Trade (CBOT) began trading them in 1977, and their hedging function partly accounts for the growth in trading. Which of the following statements concerning financial futures is true?
Financial futures protect the investment portfolio against inflation in the economy.
Investors seek protection against the increasing volatility of interest rates.
Unlike commodity futures, factors that influence price shifts are not supply and demand of the commodity but buyer psychology.
A reason for their popularity is that trading is restricted to government obligations, which reduces risks.
All of the above are true statements
Question 11
At what stage in the industrial life cycle is there an influx of competition?
Early pioneering development
Rapid accelerating growth
Acquisition and consolidation
Mature growth
Stabilization and market maturity
Low coupon bonds
Junk bonds
Common stocks
Preferred stocks
Constant growth common stocks
Question 27
Dividend growth is a function of
Return on equity.
The retention rate.
The payout ratio.
All of the above.
None of the above.
Question 28
Growth rates of the (1) labor force, (2) average number of hours worked and (3) labor productivity are the main determinants of a foreign country's
Dividend payout ratio.
Beta.
Real risk free rate.
Nominal risk free rate.
Risk premium.
Question 30
General obligation bonds are
U.S. Treasury bonds backed by the full faith and credit of the issuer.
U.S. Treasury bonds backed by income generated form specific projects.
Municipal bonds backed by the full faith and credit of the issuer.
Municipal bonds backed by income generated from specific projects.
A type of U.S. agency security.
Question 32
Collateralized Mortgage obligations are
Mortgage pass-through securities.
Mortgage pass-through securities with varying maturities.
Mortgage pass-through securities with no default risk.
Mortgage pass-through securities with variable coupon rates.
None of the above.
Question 34
The legal document setting forth the obligations of a bond's issuer is called
A debenture.
A warrant.
An indenture.
A rights certificate.
A trustee deed.
Question 35
Collateralized mortgage obligations (CMOs) offset some of the problems associated with traditional mortgage pass-throughs because
They are overcollateralized.
They have variable rates.
Collateralized by auto-loans.
They are deep discount instruments.
Collateralized by credit card debt.
Question 36
A stock currently sells for $15 per share. A put option on the stock with an exercise price $20 currently sells for $6.50. The put option is
At-the-money.
In-the-money.
Out-of-the-money.
At breakeven.
None of the above.
Question 37
An equity portfolio manager can neutralize the risk of falling stock prices by entering into a hedge position where the payoffs are
Not correlated with the existing exposure.
Positively correlated with the existing exposure.
Negatively correlated with the existing exposure.
Any of the above.
None of the above.
Question 38
The derivative based strategy known as portfolio insurance involves
The sale of a put option on the underlying security position.
The purchase of a put on the underlying security position.
The sale of a call on the underlying security position.
The purchase of a call on the underlying security position.
b and d.
Question 40
A call option differs from a put option in that
a call option obliges the investor to purchase a given number of shares in a specific common stock at a set price; a put obliges the investor to sell a certain number of shares in a common stock at a set price.
both give the investor the opportunity to participate in stock market dealings without the risk of actual stock ownership.
a call option gives the investor the right to purchase a given number of shares of a specified stock at a set price; a put option gives the investor the right to sell a given number of shares of a stock at a set price.
a put option has risk, since leverage is not as great as with a call.
none of the above
Question 41
Which of the following statements is a true definition of an out-of-the-money option?
A call option in which the stock price exceeds the exercise price.
A call option in which the exercise price exceeds the stock price.
A put option in which the exercise price exceeds the stock price.
A call option in which the call premium exceeds the stock price.
Question 42
According to put/call parity
Stock price + Call Price = Put Price + Risk Free Bond Price
Stock price + Put Price = Call Price + Risk Free Bond Price
Put price + Call Price = Stock Price + Risk Free Bond Price
Stock price - Put Price = Call Price + Risk Free Bond Price
Stock price + Call Price = Put Price - Risk Free Bond Price
Question 44
The major difference between valuing futures versus forward contracts stems from the fact that future contracts are
Traded on exchange.
Backed by a clearinghouse.
Marked-to-market daily.
Less risky.
Relatively inflexible.
Question 45
In the absence of arbitrage opportunities, the forward contract price should be equal to the current price plus
Contract price.
The cost of carry.
Margin requirement.
The price discovery rate.
The convenience return
Question 47
Financial futures have become an increasingly attractive investment alternative since the Chicago Board of Trade (CBOT) began trading them in 1977, and their hedging function partly accounts for the growth in trading. Which of the following statements concerning financial futures is true?
Financial futures protect the investment portfolio against inflation in the economy.
Investors seek protection against the increasing volatility of interest rates.
Unlike commodity futures, factors that influence price shifts are not supply and demand of the commodity but buyer psychology.
A reason for their popularity is that trading is restricted to government obligations, which reduces risks.
All of the above are true statements
Question 11
At what stage in the industrial life cycle is there an influx of competition?
Early pioneering development
Rapid accelerating growth
Acquisition and consolidation
Mature growth
Stabilization and market maturity
Explanation / Answer
q.25 Answer Preferred stocks
Value of Preferred stock= preference Dividend/Required rate of return
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