1. A hedge ratio of 0.70 implies that a hedged portfolio should consist of

a) long 0.70 calls for each short stock

b) short 0.70 calls for each long stock

c)long 0.70 sharers for eacdh short call

d) long 0.70 shares for each long call

e) none of these

2. A put option on the S&P 500 index will best protect

a) a portfolio of 100 shares of IBM stock

b) a protfolio of 50 bonds

c) a portfolio that corresponds to the S&P 500

d) a portfolio of 50 shares of At&T and a 50 Shares of Xerox Stocks

e) a portfolio that replicates the Dow

3. Highflyer stock currently sells for $48.00. A one-year call option with strike price of $55.00 sells for $9.00 and the risk-free interest rate is 6%. what is the price of a one-year put with strike price of $55.00?

a)$9.00 b)$12.89 c)$16.00 d)$18.72 e)$15.60

4. A firm has a net profit/pre-tax profit ratio of 0.60, a leverage ratio of 2.0. a pre-tax profit/EBIT ratio of 0.60, an asset turnover ratio of 2.50, a current ratio of 1.50 and a return on sales ratio of 4.00%. The firm's ROE is

a)2.90% b)4.30% c)7.20% d)15% e) none of these

5. Par value bond XYZ has a modified duration of 6. Which of the following statement regarding the bond is true?

a) if the market yield increses by 1% the bonds price will decrease by $60

b)if the maket yeild increases by 1%, the bonds price will increse by $50

c)If the market yield increses by 1% the bonds price will decrease by $50

d) if the maket yeild decreses by 1%, the bond's price will increse by $60

e) none of these