FINANCE

1. The correlation coefficient between two assets is

a) a measure of the relationship between two securities' returns b) always between -1 and +1

c) the true deciding factor for a portfolio's risk d) all of these are true.

2.The body that authorizes the sale of new securities in the primary market in Canada is called the

a) SEC b) ETF c) OSC d) NASDAQ

3.An options writer

a) is normally a hedger b) determines the price for the contract

c) has the right to exercise the option if prices are favorable, d) all of these are true.

4. For a closed-ended mutual fund,

a) no additional shares are sold after initial public offering b) prices are not equal to their NAVs

c) shares are normally sold as exchange traded funds d) all of these are true.

5. Asset A has a return of 14% and its risk is 16%. Asset B's return is 24% and its risk is 28%. In terms of coefficient of variation, the choice for the investor should be

a) Asset B b) Asset A c) either asset A or B d) none of these.

6. The phrase _________ refers to an off-exchange market for securities listed on an organized exchange

a) fourth market b) primary market c) third market d) secondary market

7. Which of the following statements is true regarding American and European options?

a) American options can be exercised only at expiration.

b) American options can be exercised only in the last week prior to expiration.

c) European options can be exercised only at expiration.

d) European options can be exercised any time prior to expiration.

8. An asset has an expected return of 8% and a standard deviation of 4%. If the returns are normally distributed, this would mean that

a) there is a 95% chance that the actual return will fall somewhere in the 4% to 12% range

b) the actual return in the next year will be 10%

c) there is a 95% chance that the actual return will fall somewhere in the 0% to 16% range

d) none of the above are true.

9. Security A and B have a correlation coefficient of -0.25. If Security A's return is expected to increase by 4%, Security B's return

a) should also increase by 4%. b) should decrease by 1%.

c) should also decrease by 4%. d) should increase by 1%

10. According to the Markowitz model

a) an efficient frontier for all assets can be drawn

b) international diversification is not allowed

c) only assets with negative correlations are included

d) a minimum variance portfolio draws the boundary between the efficient and the inefficient frontier.

11.The calculation of YTM implicitly assumes that

a) coupon earnings are reinvested at YTM till maturity b) no changes in the face value

c) bond will be sold prior to maturity d) all of these are true.

12. Treasury Bill is an example of a

a)equity security b) money market security

c) publicly issued security d) fixed income security.

13. Which of the following bonds would you expect to have the least price volatility?

a) 10%, 10 year bond b) 10%, 5 year bond c) 5%, 10 year bond d) 5%, 5 year bond

14.The daily settlement system at the futures exchange requires that

a. for every contract, the participant has to open an account with the maintenance margin

b. the opening futures price of that asset will be used everyday to find profits/losses for the client

c. the client must be able to keep the balance above the margin requirement

d. all of the above are true.

15. If an asset is placed _________ the security market line, it is said to be ______________

a) over, overpriced b) under, overpriced c) both (a) and (b) are true d) none of these are true.

16. The M-square measure is

a. just a number with no units. b. a percentage that shows excess volatility

c. a measure of excess return over market portfolio d. risk adjusted excess return per unit of risk.