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An investor purchases 100 shares of stock at a price of $40 per share. The investorholds the stock for exactly one year and then sells the 100 shares at a price of $41.50 per share. On the date of sale, the investor receives dividends totaling$200. The holding period return on the investment is closest to:

Choice

13.75 %

Choice

28.43 %

Choice

3 8.75 %

3

Which of the following statements is most accurate?

Choice

1Treasury stock is non-voting and receives no dividends

Choice

2

Minority interest on the balance sheet represents a position the company owns in other companies

Choice

3

A classified balance sheet arises when in an auditor’s opinion the financial statementsmaterially depart from accounting standards and are not presented fairly

1

 The primary monetary policy goal of most major central banks is best characterized as:

Choice

1

containing inflation

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Choice

2

stimulating economic growth

Choice

3maintaining low interest rates

1

An industry experiencing intense competitive rivalry among incumbent companies

is best characterized by:

Choice

1differentiated products and low exit barriers

Choice

2

a small number of competitors and low fixed costs

Choice

3

customers basing purchase decisions largely on price

3

Assume the U.S. Federal Reserve system (the Fed) has decided to lower interest rates in the

economy. To carry out this policy, the Fed will most likely :

Choice

1

sell securities

Choice

2

 buy securities

Choice

3

increase required reserve ratios

2

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Which of the following industries is most likely characterized by low barriers to entry, fierce

competition, fragmented structure, and weak pricing power?

Choice

1Restaurants

Choice

2

Proprietary drugs

Choice

3

Credit card processing

1

In general, which of the following institutions will most likely have a high need for liquidity and a

short investment time horizon?

Choice

1

Banks

Choice

2Endowments

Choice

3

Defined benefit pension plans

1

An analyst observes that the historic geometric returns are 9% for equities, 3% for treasury bills, an

2% for inflation. The real rate of return and risk premium for equities are closest to:

Choice

1

5.8% and 3.7%

Choice 6.9% and 3.8%

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2

Choice

3

6.9% and 5.8%

One advantage of exchange traded funds relative to open-end mutual funds is:

Choice

1

they trade throughout the day

Choice

2

they offer greater diversification

Choice

3

they have smaller bid-ask spreads

3

 Two parties agree to a forward contract on a non-dividend paying stock at a price of $103.00. At

contract expiration the stock trades at $105.00. In a cash-settled forward contract, the:

Choice

1

short pays the long $2.00

Choice

2

short pays the long $103.00

Choice

3

long pays the short $105.00

1

Holding all other characteristics the same, the bond exposed to the greatest level of reinvestment

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risk is most likely the one selling at:

 

Choice

1

 par 

Choice

2

discount

Choice

3

 premium

3

A company’s $100 par value preferred stock with a dividend rate of 9.5% per year is currently price

at $103.26 per share. The company's earnings are expected to grow at an annual rate of 5% for the

foreseeable future. The cost of the company’s preferred stock is closest to:

Choice

19.2 %

Choice

2

9.5 %

Choice

3

9.7 %

1

Which of the following statements best describes a trial balance? A trial balance is a document or

computer file that:

Choice shows all business transactions by account

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1

Choice

2

lists account balances at a particular point in time

Choice

3

contains business transactions recorded in the order in which they occur 

2

In a sales-driven pro forma analysis, retained earnings is most accurately forecasted as:

Choice

1

a percentage of forecasted sales

Choice

2

 previous retained earnings plus forecasted financing surplus or deficiency

Choice

3

 previous retained earnings plus forecasted net income less forecasted dividends

2

Which of the following is least likely to be a warning sign of low quality earnings?

Choice

1

Greater use of operating leases than peer companies

Choice

2Use of a higher discount rate in pension plan assumptions

Choice

3

A ratio of operating cash flow to net income greater than 1.0

3

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A bond has a 10-year maturity, a $1,000 face value, and a 7% coupon rate. If the market requires a

yield of 8% on the bond, it will most likely trade at a:

Choice

1discount

Choice

2

 premium

Choice

3

discount or premium, depending on its duration

A company currently has sales of €1,200 thousand and it makes the following forecasts for the nex

year:

Sales growth next year: 10%

Cost of goods sold as a proportion of 

sales:

75%

Salary, general, and administrativeexpenses as a proportion of sales:

10%

 The expected gross profit for next year (in thousands) is closest to:

Choice

1

 €198

Choice

2

 €300

Choice €330

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3

1

A portfolio with equal parts invested in a risk-free asset and a risky portfolio will most likely lie on:

Choice

1

the efficient frontier 

Choice

2

the security market line

Choice

3

a capital allocation line

3

Which statement best describes option price sensitivities? The value of a:

Choice

1

call option increases as interest rates rise

Choice

2

 put option increases as volatility decreases

Choice

3

 put option decreases as interest rates decline

An inventory system that reduces average inventory without affecting sales will most likely reduce

the:

Choice quick ratio

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1

Choice

2

inventory turnover 

Choice

3

cash conversion cycle

1

Assume that a monopoly is charging a price higher than the price that would exist in pure

competition. If the monopoly decides to increase the price even more, the deadweight loss to socie

will most likely:

Choice

1

increase

Choice

2

decrease

Choice

3

remain the same

1

 The following ten observations are a sample drawn from a normal population: 25, 20, 18, -5, 35, 21

-11, 8, 20, and 9. The fourth quintile (80th percentile) of the sample is closest to:

Choice

1

8.0

Choice

2

21.0

Choice 24.2

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3

3

A company has issued only one class of common shares and it does not pay dividends on them. It

has also issued two types of preference shares – one that is putable and the other callable – and

both have a non-cumulative feature. Which of these securities will most likely offer the lowest

expected return to the investor?

Choice

1

Common shares

Choice

2

Putable preference shares

Choice

3

Callable preference shares

3

Capital provided for companies beginning operation but before commercial manufacturing and sale

have occurred best describes which stage in venture capital investing?

Choice

1

Seed-stage

Choice

2 Early-stage

Choice

3

Later-stage

2

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An investor who has a 42% marginal tax rate is analyzing a tax-exempt bond that offers a yield of 

3.74%. The taxable-equivalent yield of the bond is closest to:

Choice

15.31 %

Choice

2

6.45 %

Choice

3

8.90 %

2

Using a discount rate of 5%, compounded monthly, the present value of $5,000 to be received thre

years from today is closest to:

Choice

1

$4,250

Choice

2$4,305

Choice

3

$4,320

2

If the stated annual interest rate is 9% and the frequency of compounding is daily, the effective

annual rate is closest to:

Choice

1

9.00 %

Choice 9.42 %

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2

Choice

3

9.88 %

2

If the volatility of returns of an underlying security increases, then:

Choice

1

 both call and put option prices increase

Choice

2

 both call and put option prices decrease

Choice

3

call prices increase and put prices decrease

3

Which of the following statements is most accurate regarding cash flow ratios?

Choice

1

Interest coverage ratio is calculated as operating cash flow over interest payments

Choice

2

Debt payment ratio measures the firm’s ability to pay debts with operating cash flows

Choice

3Reinvestment ratio measures the firm’s ability to acquire assets with investing cash flows

1

Which of the following is most likely a sign of a good corporate governance structure?

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Choice

1

Independent board members comprise a minority proportion on the company’s board

Choice

2

The separation of the chief executive position from the chair position on the company’s

 board

Choice

3

Independent board members are allowed to meet shareholders only in the presence of theentire board

3 not sure