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investment analysis portfolio

Questions and Answers of Investment Analysis Portfolio

As a relatively new member of the business community, you decide it would be advantageous to join the local lunch club to network with businesspeople. Upon learning that you are a financial analyst,
How is the process of short selling shares of Siemens different from that of short selling a Siemens equity call option contract?
A buyer buys stock on margin and holds the position for exactly one year, during which time the stock pays a dividend. For simplicity, assume that the interest on the loan and the dividend are both
A trader buys stock on margin posting 40 percent of the initial stock price of $20 as equity. The maintenance margin requirement for the position is 25 percent. At what price will a margin call occur?
1. What is the difference between making a market and taking a market?2. What order types are most likely associated with making a market and taking a market?
You are the buy-side trader for a very clever investment manager. The manager has hired a commercial satellite firm to take regular pictures of the parking lots in which new car dealers store their
In what ways do limit and stop instructions differ?
Playtech is a designer, developer, and licensor of software for the gambling industry. On 28 March 2006, Playtech raised approximately d265 million gross through an initial public offering of
In what ways do private placements differ from public placements?
1. What is the main advantage of a call market compared with a continuous trading market?2. What is the main advantage of a continuous trading market compared with a call market?
Before the arrival of a large order, a market has the following limit orders standing on its book:Buyer Tsubasa submits a day order to buy 15 contracts, limit f100.5. With whom does he trade, what is
What are the primary advantages of quote-driven, order-driven, and brokered markets?
As a financial analyst specializing in emerging market equities, you understand that a well-functioning financial system contributes to the economic prosperity of a country.You are asked to start
You are the chief executive officer of a brokerage that is a member of a clearinghouse.A trader who clears through your firm is bankrupt at midday, but you do not yet know it even though your
Akihiko Takabe has designed a sophisticated forecasting model, which predicts the movements in the overall stock market, in the hope of earning a return in excess of a fair return for the risk
James Beach is young and has substantial wealth. A significant proportion of his stock portfolio consists of emerging market stocks that offer relatively high expected returns at the cost of
Lisa Smith owns a manufacturing company in the United States. Her company has sold goods to a customer in Brazil and will be paid in Brazilian real (BRL) in three months.Smith is concerned about the
Which of the following is not a function of the financial system?A. To regulate arbitrageurs’ profits (excess returns).B. To help the economy achieve allocational efficiency.C. To facilitate
An investor primarily invests in stocks of publicly traded companies. The investor wants to increase the diversification of his portfolio. A friend has recommended investing in real estate
A hedge fund holds its excess cash in 90-day commercial paper and negotiable certificates of deposit. The cash management policy of the hedge fund is best described as using:A. Capital market
An oil and gas exploration and production company announces that it is offering 30 million shares to the public at $45.50 each. This transaction is most likely a sale in the:A. Futures market.B.
Consider a mutual fund that invests primarily in fixed-income securities that have been determined to be appropriate given the fund’s investment goal. Which of the following is least likely to be a
A friend has asked you to explain the differences between open-end and closed-end funds. Which of the following will you most likely include in your explanation?A. Closed-end funds are unavailable to
The usefulness of a forward contract is limited by some problems. Which of the following is most likely one of those problems?A. Once you have entered into a forward contract, it is difficult to exit
Tony Harris is planning to start trading in commodities. He has heard about the use of futures contracts on commodities and is learning more about them. Which of the following is Harris least likely
A German company that exports machinery is expecting to receive \($10\) million in three months. The firm converts all its foreign currency receipts into euros. The chief financial officer of the
A book publisher requires substantial quantities of paper. The publisher and a paper producer have entered into an agreement for the publisher to buy and the producer to supply a given quantity of
The Standard & Poor’s Depositary Receipts (SPDRs) is an investment that tracks the S&P 500 stock market index. Purchases and sales of SPDRs during an average trading day are best described as:A.
Which of the following statements about exchange-traded funds is most correct?A. Exchange-traded funds are not backed by any assets.B. The investment companies that create exchange-traded funds are
Jason Schmidt works for a hedge fund and he specializes in finding profit opportunities that are the result of inefficiencies in the market for convertible bonds—bonds that can be converted into a
Pierre-Louis Robert just purchased a call option on shares of the Michelin Group. A few days ago he wrote a put option on Michelin shares. The call and put options have the same exercise price,
An online brokerage firm has set the minimum margin requirement at 55 percent. What is the maximum leverage ratio associated with a position financed by this minimum margin requirement?A. 1.55.B.
A trader has purchased 200 shares of a non-dividend-paying firm on margin at a price of $50 per share. The leverage ratio is 2.5. Six months later, the trader sells these shares at $60 per share.
Jason Williams purchased 500 shares of a company at \($32\) per share. The stock was bought on 75 percent margin. One month later, Williams had to pay interest on the amount borrowed at a rate of 2
Caroline Rogers believes the price of Gamma Corp. stock will go down in the near future. She has decided to sell short 200 shares of Gamma Corp. at the current market price of h47. The initial margin
The current price of a stock is \($25\) per share. You have \($10\),000 to invest. You borrow an additional \($10\),000 from your broker and invest \($20\),000 in the stock. If the maintenance margin
You have placed a sell market-on-open order—a market order that would automatically be submitted at the market’s open tomorrow and would fill at the market price. Your instruction, to sell the
A market has the following limit orders standing on its book for a particular stock. The bid and ask sizes are number of shares in hundreds.What is the market?A. 9.73 bid, offered at 10.14.B. 9.81
Consider the following limit order book for a stock. The bid and ask sizes are number of shares in hundreds.A new buy limit order is placed for 300 shares at f123.40. This limit order is said to:A.
Currently, the market in a stock is “\($54.62\) bid, offered at \($54.71\).” A new sell limit order is placed at \($54.62\). This limit order is said to:A. Take the market.B. Make the market.C.
Jim White has sold short 100 shares of Super Stores at a price of $42 per share. He has also simultaneously placed a “good-till-cancelled, stop 50, limit 55 buy” order. Assume that if the stop
You own shares of a company that are currently trading at \($30\) a share. Your technical analysis of the shares indicates a support level of \($27.50\). That is, if the price of the shares is going
In an underwritten offering, the risk that the entire issue may not be sold to the public at the stipulated offering price is borne by the:A. Issuer.B. Investment bank.C. Buyers of the part of the
A British company listed on the Alternative Investment Market of the London Stock Exchange, announced the sale of 6,686,665 shares to a small group of qualified investors at ₤ 0.025 per share.
A German publicly traded company, to raise new capital, gave its existing shareholders the opportunity to subscribe for new shares. The existing shareholders could purchase two new shares at a
Consider an order-driven system that allows hidden orders. The following four sell orders on a particular stock are currently in the system’s limit order book. Based on the commonly used order
Zhenhu Li has submitted an immediate-or-cancel buy order for 500 shares of a company at a limit price of CNY 74.25. There are two sell limit orders standing in that stock’s order book at that time.
A market has the following limit orders standing on its book for a particular stock:Ian submits a day order to sell 1,000 shares, limit d19.83. Assuming that no more buy orders are submitted on that
A financial analyst is examining whether a country’s financial market is well functioning.She finds that the transaction costs in this market are low and trading volumes are high. She concludes
The government of a country whose financial markets are in an early stage of development has hired you as a consultant on financial market regulation. Your first task is to prepare a list of the
A security market index represents the:A. Risk of a security market.B. Security market as a whole.C. Security market, market segment, or asset class.
Security market indices are:A. Constructed and managed like a portfolio of securities.B. Simple interchangeable tools for measuring the returns of different asset classes.C. Valued on a regular basis
When creating a security market index, an index provider must first determine the:A. Target market.B. Appropriate weighting method.C. Number of constituent securities.
One month after inception, the price return version and total return version of a single index (consisting of identical securities and weights) will be equal if:A. Market prices have not changed.B.
The values of a price return index and a total return index consisting of identical equalweighted dividend-paying equities will be equal:A. Only at inception.B. At inception and on rebalancing
An analyst gathers the following information for an equal-weighted index comprised of assets Able, Baker, and Charlie:The price return of the index is:A. 1.7%.B. 5.0%.C. 11.4%. Security Beginning of
An analyst gathers the following information for an equal-weighted index comprised of assets Able, Baker, and Charlie:The total return of the index is:A. 5.0%.B. 7.9%.C. 11.4%. Security Beginning of
An analyst gathers the following information for a price-weighted index comprised of securities ABC, DEF, and GHI:The price return of the index is:A. –4.6%.B. –9.3%.C. –13.9%. Security
An analyst gathers the following information for a market-capitalization-weighted index comprised of securities MNO, QRS, and XYZ:The price return of the index is:A. –9.33%.B. –10.23%.C.
An analyst gathers the following information for a market-capitalization-weighted index comprised of securities MNO, QRS, and XYZ:The total return of the index is:A. 1.04%.B. –5.35%.C. –10.23%.
When creating a security market index, the target market:A. Determines the investment universe.B. Is usually a broadly defined asset class.C. Determines the number of securities to be included in the
An analyst gathers the following data for a price-weighted index:The price return of the index over the period is:A. 4.2%.B. 7.1%.C. 21.4%. Beginning of Period End of Period Security Price () Shares
An analyst gathers the following data for a value-weighted index:The return on the value-weighted index over the period is:A. 7.1%.B. 11.0%.C. 21.4%. Beginning of Period End of Period Security Price
An analyst gathers the following data for an equal-weighted index:The return on the index over the period is:A. 4.2%.B. 6.8%.C. 7.1%. Beginning of Period End of Period Security Price () Shares Price
Which of the following index weighting methods requires an adjustment to the divisor after a stock split?A. Price weighting.B. Fundamental weighting.C. Market-capitalization weighting.
If the price return of an equal-weighted index exceeds that of a market-capitalizationweighted index comprised of the same securities, the most likely explanation is:A. Stock splits.B. Dividend
A float-adjusted market-capitalization-weighted index weights each of its constituent securities by its price and:A. Its trading volume.B. The number of its shares outstanding.C. The number of its
Which of the following index weighting methods is most likely subject to a value tilt?A. Equal weighting.B. Fundamental weighting.C. Market-capitalization weighting.
Rebalancing an index is the process of periodically adjusting the constituent:A. Securities’ weights to optimize investment performance.B. Securities to maintain consistency with the target
Which of the following index weighting methods requires the most frequent rebalancing?A. Price weighting.B. Equal weighting.C. Market-capitalization weighting.
Reconstitution of a security market index reduces:A. Portfolio turnover.B. The need for rebalancing.C. The likelihood that the index includes securities that are not representative of the target
Security market indices are used as:A. Measures of investment returns.B. Proxies to measure unsystematic risk.C. Proxies for specific asset classes in asset allocation models.
Uses of market indices do not include serving as a:A. Measure of systematic risk.B. Basis for new investment products.C. Benchmark for evaluating portfolio performance.
Which of the following statements regarding sector indices is most accurate? Sector indices:A. Track different economic sectors and cannot be aggregated to represent the equivalent of a broad market
Which of the following is an example of a style index? An index based on:A. Geography.B. Economic sector.C. Market capitalization.
Which of the following statements regarding fixed-income indices is most accurate?A. Liquidity issues make it difficult for investors to easily replicate fixed-income indices.B. Rebalancing and
An aggregate fixed-income index:A. Is comprised of corporate and asset-backed securities.B. Represents the market of government-issued securities.C. Can be subdivided by market or economic sector to
Fixed-income indices are least likely constructed on the basis of:A. Maturity.B. Type of issuer.C. Coupon frequency.
Commodity index values are based on:A. Futures contract prices.B. The market price of the specific commodity.C. The average market price of a basket of similar commodities.
Which of the following statements is most accurate?A. Commodity indices all share similar weighting methods.B. Commodity indices containing the same underlying commodities offer similar returns.C.
Which of the following is not a real estate index category?A. Appraisal index.B. Initial sales index.C. Repeat sales index.
A unique feature of hedge fund indices is that they:A. Are frequently equal weighted.B. Are determined by the constituents of the index.C. Reflect the value of private rather than public investments.
The returns of hedge fund indices are most likely:A. Biased upward.B. Biased downward.C. Similar across different index providers.
In comparison to equity indices, the constituent securities of fixed-income indices are:A. More liquid.B. Easier to price.C. Drawn from a larger investment universe.
a. The spot price of the U.S. dollar is currently C $ 1.35/US $. If the risk-free interest rate on 1-year government bonds is 4% in Canada and 6% in the United States, what must be the forward price
A bond with an annual coupon rate of 4.8% sells for $970. What is the bond's current yield?
A put on XYZ stock with a strike price of $40 is priced a t $2.00 per share, while a call with a strike price of $40 is priced at $3 .50. What is the maximum per-share loss to the writer of the
Suppose the U.S. yield curve is flat at 4% and the euro yield curve is flat at 3%. The current exchange rate is US $1.50 per euro. What will be the swap rate on an agreement to exchange currency over
Based on current dividend yields and expected capital gains, the expected rates of return on portfolios A and B are 12% and 16%, respectively. The beta of A is .7, while that of Bis 1.4. The T-bill
John Irish, C F A, is an independent in vestment adviser who is assisting Alfred Darwin, the head of the Investment Committee of General Techno logy Corp oration, to establish a new pension fund .
Suppose a hedge fund follows the excel following strategy. Each month it holds $100 million of an S&P 500 index fund and writes out-of-the-money put options on $100 million of the index with
The difference between a Tax-Free Savings Account (TSFA) and a Registered Retirement Savings Plan (RRSP) is that in a TSFA taxes are paid on the income that is contributed but the withdrawals at
Review Figure 20.1, which lists prices of various CAE options. Use the data in the figure to calculate the payoff and the profits for investments in each of the following June expiration options,
Consider the futures contract written on the S&P/TSX 60 index and maturing in 6 months. The interest rate is 3% per 6-month period, and the future value of dividends expected to be paid over the
Using historical risk premiums from Table 5.4 over the 1926-2016 period as your guide, what would be your estimate of the expected annual HPR on the BigNalue portfolio if the current risk-free
Suppose that you sell short 250 shares of Weston (WN), currently selling for $80 per share, and give your broker $15,000 to establish your margin account.a. If you earn no interest on the funds in
Consider the following information about a risky portfolio that you manage and a risk-free asset: E(rp) = 11 %, σp = 15%, rf = 5%.a. Your client wants to invest a proportion of her total
Tabulate and draw the investment opportunity set of the two risky funds. Use investment proportions for the stock fund of 0% to 100% in increments of 20%.
Use the following data to solve this problem.a. What are cash flows from operating activities?b. What are cash flows from investing activities?c. What are cash flows from financing activities? Cash
Consider the two (excess re turn) index model regression result s for A and B:RA = 1% + l.2RMR-square = .576Residual standard deviation = 10.3%Rn = - 2 % + .8 RMR-square = .436Residual

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