1. Both investor A and investor B are considering the purchase of Corporation FJR bonds. The bonds are selling at a price of $1,100 each. Investor A decides to buy the bonds and Investor B does not buy the bonds.

Select one:

a. The yield to maturity for Investor A must be higher than the yield to maturity for Investor B.

b. The yield to maturity for Investor A must be less than the yield to maturity for Investor B.

c. Investor A must have a required return lower than the required return for Investor B.

d. The yield to maturity for this bond must be higher than the coupon rate.

2.

Which of the following is/are true?

Select one:

a. Most of the unsystematic risk is removed by the time a portfolio contains 30 stocks.

b. All securities have a beta between 0 and 1.

c. Two points on the Characteristic Line are the T-bill and the market portfolio.

d. The greater the total risk of an asset, the greater the expected return.

3.

Which of the following statements is MOST correct regarding beta?

Select one:

a. Beta for a particular company remains constant over time.

b. Beta can only be measured properly using daily returns.

c. Beta must be calculated using at least 5 years of monthly returns data to be accurate.

d. Even professionals may not agree on the measurement of beta.

4.

You purchased 500 shares of A.M.J. Inc. common stock one year ago for $50 per share. You received a dividend of $2 per share today and decide to take your profits by selling at $54.50 per share. What is your holding period return?

Select one:

a. 13.0%

b. 4.0%

c. 9.0%

d. 6.5%

5.

Fred and Ethel are both considering buying a corporate bond with a coupon rate of 8%, a face value of $1,000, and a maturity date of January 1, 2025. Which of the following statements is MOST correct?

Select one:

a. Fred and Ethel will only buy the bonds if the bonds are rated BBB or above.

b. Fred may determine a different value for a bond than Ethel because each investor may have a different level of risk aversion, and hence a different required return.

c. Because both Fred and Ethel will receive the same cash flows if they each buy a bond, they both must assign the same value to the bond.

d. If Fred decides to buy the bond, then Ethel will also decide to buy the bond, if markets are efficient.

6.

pr Corporation just issued $1,000 par 20-year bonds. The bonds sold for $936 and pay interest semiannually. Investors require a rate of 7.00% on the bonds. What is the amount of the semiannual interest payment on the bonds?

Select one:

a. $21.75

b. $64.50

c. $32.00

d. $55.00