2. Select the CORRECT statement regarding foreign investments. A. Global mutual funds invest exclusively in foreign securities. B. American depositary receipts (ADRs) pay dividends in U.S. dollars. C. Eurobonds are commonly used by U.S. companies to finance imports and exports. D. Investing directly in a foreign companys shares is a convenient way for the individual investor to diversify a portfolio.

4. Assume a convertible bond with a face value of $1,000 is currently selling for $900 in the secondary market. The bond's conversion price is $40 per share, and the underlying common stock is selling for $35 per share. The bond pays $25 interest semiannually and matures in 10 years. Calculate the conversion value of this bond. A. $700 B. $787 C. $875 D. $900

5. XYZ stock is currently trading at $38 per share and pays an annual dividend of $1.90 per share. You expect this dividend to increase to $2.00 next year. Analysts project a continued dividend growth rate of 5% annually, and your client requires a 10% rate of return. Analyze whether or not your client should purchase this stock. A. No, because the stock is overvalued B. Yes, because the stock is undervalued C. Yes, because your clients required rate of return exceeds the projected growth rate D. No, because your clients required rate of return is higher than the current dividend rate

6. You currently own 100 shares of a stock that has increased in value from $15 to $35 per share. You do not want to sell the stock but want to protect yourself against a large downturn in the market. Choose an effective action on your part. A. Sell a $30 call option on the stock B. Buy a $30 put option on the stock C. Sell a $30 put option on the stock D. Buy a $30 call option on the stock

7. Identify the primary difference between a closed-end fund and an open-end (mutual) fund. A. The required minimum amount of initial investment B. The method of SEC regulation applied to each fund C. The types of allowable investments that may be made within each fund D. The manner in which each is traded or redeemed subsequent to their initial offering

8. A client has come to you inquiring about establishing a contingency fund for emergency purposes. She tells you that safety of principal is very important but so, too, is the possibility of a modest rate of return and immediate liquidity. Which of these investments do you recommend and why? A. A money market mutual fund, because it provides federally insured, safe, liquid funds B. A 1-year certificate of deposit, because it may be redeemed without penalty at any time C. A money market deposit account, because it provides a modest interest rate with easy access to principal D. A guaranteed investment contract (GIC), because it has a maturity of less than 1 year and offers a guaranteed high interest rate

9. A portfolio manager should be able to perform all of the following functions EXCEPT A. eliminate systematic risk B. maintain diversification across asset classes C. keep accurate financial records and research relevant economic factors D. achieve superior risk-adjusted returns when compared to an appropriate benchmark