Question 1

Portfolios that include more than one asset class are called ________ portfolios.

Options :

A : quasi-asset

B : multivariate

C : multiple leverage

D : univariate-asset

E : multiple-asset

Answer: E

Question 2

How much would an original deposit of $500 grow to be after 8 and a half years, if the deposit earns interestat 6.5% per year, compounded quarterly?

Options :

A : $853.97

B : $573.42

C : $4,254.58

D : $837.51

E : $864.95

Answer: E

Question 3

In the context of the security market line (SML), the expected (or required) return will decrease in thefollowing situations EXCEPT:

Options :

A : The U.S. Federal Reserve takes action that tightens the capital markets.

B : Leading market indicators decrease, causing consumers to expect lower inflation levels.

C : A firm announces that it has won a major product-liability lawsuit.

D : The growth in the U.S. economy is expected to slow from 2.7% last year to 1.5% this year.

Answer: A

Question 4

In the 1980s, the government cut back on the tax rates in an effort to spur the economy. This led to asignificant decrease in real tax revenues. A breakdown of this decrease indicated that most of the decreasecame from the lower tax brackets. Tax revenues from top tax bracket actually increased despite the cut.There was a modest growth in the GDP during this period, though amongst all the industrialized nations,only Japan matched this rate. This empirical evidence indicates that:

Options :

A : The supply side effects are not as potent as hypothesized by economists.

B : The supply-side response of tax payers can have a strong effect on a nation's growth.

C : The Rational Expectations model is a fair description of how people respond to fiscal policy.

D : The tax avoidance behavior governing the demand side has a significant impact on the economy.

Answer: B

Question 5

The buyer of a call option has the:

Options :

A : obligation to sell the underlying asset in the future under certain conditions.

B : right to sell the underlying asset in the future under certain conditions.

C : obligation to buy the underlying asset in the future under certain conditions.

D : right to buy the underlying asset in the future under certain conditions.

Answer: D

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