MBA 641 Midterm PRACTICE Sp 13 KEY

MBA 641 MOCK Midterm Examination KEY Spring 2012

MBA 641: Investments & Portfolio Management

Midterm Examination PRACTICE

January 24, 2013 Name:_______KEY____________

Instruction: Please write legibly. You need to show steps to get full credit.

Part A: Multiple Choice (2 points each, total 40 points). Please circle the right answer.

1.55. The efficient markets hypothesis suggests that _______.

A. active portfolio management strategies are the most appropriate investment strategies B. passive portfolio management strategies are the most appropriate investment strategies C. either active or passive strategies may be appropriate, depending on the expected direction of the market

D. a bottom up approach is the most appropriate investment strategy

Difficulty: Easy

2.46. In calculating the Dow Jones Industrial Average, the adjustment for a stock split occurs _________. A. automatically

B. by adjusting the divisor C. by adjusting the numerator

D. by adjusting the market value weights

Difficulty: Medium

3. 53. Ownership of a call option entitles the owner to the __________ to __________ a specific stock, on or before a specific date, at a specific price. A. right, buy B. right, sell

C. obligation, buy D. obligation, sell

Difficulty: Easy

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MBA 641 MOCK Midterm Examination KEY Spring 2012

4. 73. You decide to purchase an equal number of shares of stocks of firms to create a portfolio. If you wished to construct an index to track your portfolio performance your best match for your portfolio would be to construct a/an ______. A. value weighted index B. equal weighted index C. price weighted index D. bond price index

Difficulty: Hard

5. 74. In a ___________ index changes in the value of the stock with the greatest market value will move the index value the most everything else equal. A. value weighted index B. equal weighted index C. price weighted index D. bond price index

Difficulty: Medium

6. 12. A ______ drop in the Dow Jones Industrial Average would stop trading for the day. A. 10% B. 20% C. 30% D. 40%

Difficulty: Medium

7. 23. If an investor places a _________ order the stock will be sold if its price falls to the stipulated level. If an investor places a __________ order the stock will be bought if its price rises above the stipulated level. A. stop-buy; stop-loss B. market; limit

C. stop-loss; stop-buy D. limit; market

Difficulty: Easy

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MBA 641 MOCK Midterm Examination KEY Spring 2012

8. 36. The __________ system enables exchange members to send orders directly to a specialist over computer lines. A. FAX

B. Direct Plus C. NASDAQ D. SUPERDOT

Difficulty: Easy

9. 42. The difference between the price at which a dealer is willing to buy, and the price at which a dealer is willing to sell, is called the _________. A. market spread B. bid-ask spread C. bid-ask gap D. market variation

Difficulty: Easy

10. 54. You short-sell 200 shares of Tuckerton Trading Co., now selling for $50 per share. What is your maximum possible loss? A. $50 B. $150 C. $10,000 D. unlimited

There is no upper limit to the price of a share of stock; therefore no upper limit the price you will have to pay to replace the 200 shares of Tuckerton.

Difficulty: Easy

11. 20. The primary measurement unit used for assessing the value of one's stake in an investment company is ___________________. A. Net Asset Value B. Average Asset Value C. Gross Asset Value D. Total Asset Value

Difficulty: Easy

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MBA 641 MOCK Midterm Examination KEY Spring 2012

12. 30. Investors who wish to liquidate their holdings in a unit investment trust may ___________________.

A. sell their shares back to the trustee at a discount B. sell their shares back to the trustee at net asset value C. sell their shares on the open market

D. sell their shares at a premium to net asset value

Difficulty: Easy

13. 44. Mutual funds that hold both equities and fixed-income securities in relatively stable proportions are called ____________________. A. income funds B. balanced funds C. asset allocation funds D. index funds

Difficulty: Easy

14. 3. If you want to measure the performance of your investment in a fund, including the timing of your purchases and redemptions you should calculate the __________. A. geometric average return B. arithmetic average return C. dollar weighted return D. index return

Difficulty: Medium

15. 26. The reward/variability ratio is given by _________. A. the slope of the capital allocation line

B. the second derivative of the capital allocation line

C. the point at which the second derivative of the investor's indifference curve reaches zero D. portfolio excess return

Difficulty: Easy

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