1. A stock has a Beta of 1.5, the risk free rate is 3%, and the expected market return is 8%. What is the expected return on the stock?

a. 10.5% b. 11.0% c. 15.0% d. 16.5%

2. One week before expiration, a call option with a strike of $50 is selling for $3 when the current stock price is $52. You buy the option and then sell it for $1 two days later.

I. The premium when you bought the option was $1. II. The stock most likely declined over your two day holding period. III. You lost $200 in this transaction.

Which of the following is correct?

a. Only I is true b. Only I and III are true c. Only II and III are true d. All three are true

3. Farmer Brown, a wheat farmer, shorts wheat futures contracts at $750 per bushel in an amount equal to his expected crop production.

a. Farmer Brown is hedging against a drop in the price of wheat below $750 per bushel. b. Farmer Brown will make additional money if the price of wheat is $800 per bushel. c. If the price of wheat is $600 per bushel at time of delivery, Farmer Brown has lost money in total. d. If the price of wheat falls to $600 per bushel, Farmer Brown will need to post additional margin.

4. ABC Mutual Fund has an investment objective is to provide long-term growth of capital by investing primarily in common stocks of issuers located in the U.S. with a record of above-average long-term growth. ABC Mutual Fund would be considered:

a. An Emerging Markets Fund b. An Income Fund c. An S&P ETF d. A Growth Fund

5. A Company has a qualified pension plan in which it pays a percentage of an employee