Hi,

Please help me on these questions.

Thank you

Economic Information :

The Quinns expect inflation to average 3% per year until they retire. They anticipate Jims salary will increase 10% annually, and Brendas will increase 3% annually.

The Quinns believe the risk-free rate is 3%, and the expected return on the market is 10% with a standard deviation of 6%. The 5-year average return of the S&P500 is 10%.

EDUCATION INFORMATION

The Quinns would like the twins to attend Halverton College since this is where Jim and Brenda met in the dorms their freshman year. The Quinns are not sure how they are going to be able to afford the tuition once the twins start college, as the current tuition is $37,000 per student. They expect the tuition to increase 3% per year.

Brendas 403(b) plan

Mutual Funds

Name Shares 5-Year Avg. Return Std. Deviation FMV

Aries (small-cap) 200 9.6% 11% $10,000

Leo (large value) 400 7% 9% 20,000

Scorpio (global) 200 2.9% 2% 10,000

Taurus (large-cap) 200 5.75% 5% 20,000

Gemini (small-cap intl.) 400 8.25% 15% 20,000

$80,000

Among the investments in the account are:

A $5,000, 6-month Treasury bill. They purchased it yesterday for $4,950.50.

A 10-year, $10,000 U.S. Treasury bond, 5% coupon, trading at par, purchased three years ago.

A 20-year, $5,000 U.S. Treasury bond, 6% coupon, trading at par, purchased two years ago.

Ten $1,000 convertible bonds of Alpha Corp., with maturities of 10 years.

600 shares of Beagle Fund, a closed-end investment company, purchased seven years ago with a beta of 1.2, a standard deviation of 12%, a coefficient of determination of 92%, and a five-year average return of 5%. The funds pay a $6 annual dividend per share.

200 shares of Berry Corp. common stock, which is a technology company that trades over-the-counter. It has a beta of 1.6, a standard deviation of 15%, a coefficient of determination of 70%, a five-year average return of 12%, a current price of $50, and an annual dividend of $1.00 per share, which is expected to grow at 4% per year for at least the next several years. The Quinns purchased the stock yesterday, believing they would earn their required 6.5% annual return for a stock with similar risks.

A Brittany Corp. 10-year, 5.5% bond, purchased for $1,010, which may not be called for three years, but can be called thereafter for $1,055.

A Citadel Corp. 10-year, noncallable, 9% bond, paid semiannually, purchased at par, and the bond was issued yesterday.

A Clemson Corp. five-year bond with a coupon rate of 8%, semiannual payments, and a face value of $1,000, purchased for $1,020.

Five bonds issued by the engineering company, Compass Corp., purchased at par. Each bond has a $1,000 face amount, an 8% annual coupon rate, and a call price of $1,080. The bonds are currently selling for $1,020 each, the same price as a year ago, and may be called any time prior to their maturity date, which is five years from now. The coupon interest payments are made once a year. They have a rating of B.

400 shares of Crazy Corp. preferred stock, which has a beta of .97, a standard deviation of 5%, a current price of $22 per share, a five-year average return of 6%, and pays an annual dividend of $2. The Quinns bought the stock last month with a goal of an 18% return, given the risks associated with the company.

Five zero-coupon bonds issued by an oil company called Dante Corp. which are scheduled to mature in six years at a face value of $1,000 each; the current market price of each bond is $920. They bought the bonds one year ago for $750 each.

300 shares of Indigo Fund, an open-end technology mutual fund. The stock has historically exhibited a beta of 2.0, has a standard deviation of 22%, a coefficient of determination of 65%, and a five-year average return of 15%; it is currently selling for $78.00 per share and pays no dividend. It is expected to grow at 6% per year for the near future. The P/E ratio is 3.

1,000 shares of Score Corp. common stock, which is a software company listed on the NYSE MKT (formerly AMEX). It has a beta of .90, a standard deviation of 11%, a coefficient of determination of 30%, a five-year average return of 8%, and is currently selling for $68, pays no dividend, and is expected to grow at 5% per year. The P/E ratio is 2.40.

Four tax-exempt municipal bonds issued by Spring Lake, the city in North Carolina where the Quinns live. Each bond has a $1,000 face amount, is selling for about $980 currently the same price as a year ago when they bought them, has a 5% annual coupon rate, and is scheduled to mature four years from now.

300 shares of Tanker Fund, an open-end investment company, purchased six years ago, with a beta of 1.8, a standard deviation of 17%, a coefficient of determination of 61%, and a five-year average return of 5%. The fund pays a $3 annual dividend per share.

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THE QUESTIONS ARE :

QUESTION 1 :

What would you recommend to the Quinns as a strategy to immunize their joint brokerage account for their goal of buying a second home ?

a. purchase 20-year bonds

b. purchase 30-years bonds

c. purchase bonds to give the account a weighted-acerage duration of 20 years

d. purchase bonds to give the account a weighted-acerage duration of 30 years

QUESTION 2 :

What would you suggest as the most appropriate cpurse of action if Sam wanted to start to save the 10% down payment for a pre-owned yacht from his employer, to be purchased in five years for $500,000 ?

a. he should increase his position in Nano Systems

b. he should increase his position in Rydel Properties

c. he should sell his Interiors Software stock and put the money into Nano Systems

d. he should purchase a couple of Treasury notes each year.

QUESTION 3 :

For which of the following is the measure of unsystematic risk assentially 30% ?

a. Score Corp.

b. Berry Corp.

c. Tanker Fund

d. Beagle Fund

QUESTION 4 :

Which of the Quinns investments is most affected by inflation risk ?

a. Compass Corp.

b. Berry Corp.

c. Tanker Fund

d. Beagle Fund

QUESTION 5 :

How would you advise Brenda if Sam is encouraging Brenda to add shares of the Stein & Cattle REIT Fund to her 403(b) plan to help balance it out ?

a. she should purchase some shares because the Fund has an opposite correlation with the majority of her holding

b. she should purchase some shares, as they will balance her Aries Fund investment

c. she should purchase some shares, as they will balance her Taurus Fund investment

d. she should not purchase some shares because it does not balance anything, as it positively correlated with her holdings.

QUESTION 6 :

Which of the following would be good advice for Sam ?

a. he should consider purchasing some bonds

b. he needs to rebalance his portfolio according to a more appropriate asset allocation plan

c. he needs to purchase some larger-cap stocks

d. he needs to rethink his percentage of real estate.

QUESTION 7 :

Which stock, Indigo Corp. or Score Corp., has a higher earnings per share :

a. Indigo Corp.

b. Score Corp.

c. They are identical

d. there is insufficient information to determine the answer.

QUESTION 8 :

With which form of efficient market hypothesis would Sam be most likely to agree ?

a. Strong form

b. Semi-strong form

c. Weak form

d. None. He would probably agree with anomalies.

QUESTION 9 :

What is the required rate of return under the security market line (SML) for Tabby Corp.?

a. 7%

b. 10%

c. 14%

d. 17%

QUESTION 10 :

Which of the following would move in the opposite direction of the Quinns new investment in a real estate investment trust inside their joint brokerage account?

a. Indigo Corp.

b. Spring Lake

c. U.S. Treasure bill

d. Compass Corp.

QUESTION 11 :

Which of the following is the closest to the Quinns current bond strategy?

a. A ladder

b. A barbell

c. A bullet

d. There does not appear to be a discernible stategy.

QUESTION 12 :

If the Alpha Corp.s business declines but remains viable, which of the following is most likely true?

a. The probable return of the investment will be closer to that of a bond

b. The bond will increase along with the stock price of Alpha Corp.

c. The bond will not pay interest

d. The bond will have a higher yield to maturity for the Quinns if the price declines.

QUESTION 13 :

The variation of which of the following assets can be attributed mostly to the movement of its index?

a. Score Corp.

b. Berry Corp.

c. Tanker Fund

d. Beagle Fund

QUESTION 14 :

If the Quinns wish to increase their equity exposure, what might be the best alternative?

a. A corporate bond fund

b. An index call option

c. An index fund

d. A closed-end, high-yield bond fund

QUESTION 15 :

What is the difference in structure of the Tanker Fund and the Beagle Fund?

a. The Beagle Fund has the ability to issue more shares to create more supply

b. The Tanker Fund always sells at its NAV after the exchanges close each day

c. The Tanker Fund can trade at a discount to its NAV

d. The Beagle Funds capitalization is not fixed.

QUESTION 16 :

The Quinns attitude toward the market and investing can be said to be closest to which of the following forms of the efficient market hypothesis?

a. Strong form

b. Semi-strong form

c. Weak form

d. None

QUESTION 17 :

Which of the following is correct if the Quinns create a portfolio composed of 50% Munster Corp. stock and 50% Flintstone stock, if Flintstone has an standard deviation around its rate of return as Munster?

a. If Munster Corp. and Flintstone Corp. are perfectly negative correlated, the standard deviation of the portfolio will be twice that of Minster Corp. or Flintstone Corp.

b. If Munster Corp. and Flintstone Corp. are perfectly positively correlated, the standard deviation of the portfolio will be zero

c. If Munster Corp. and Flintstone Corp. are perfectly positively correlated, the standard deviation of the portfolio will be twice that of either Munster Corp. or Flintstone Corp.

d. If Munster Corp. and Flintstone Corp. are perfectly negatively correlated, the standard deviation of the portfolio will be zero.

QUESTION 18 :

The Quinns are optimistic about the long-term growth of Berry Corp., which has had a 10% increase in share price in the last month. Which of the following would you recommend if they want to lock in a minimum price, in case the shares drop?

a. Buy $48 put options

b. Buy $52 call options

c. Sell $52 put options

d. Sell $48 call options

QUESTION 19 :

Which of the following investment has the most total risk?

a. Score Corp.

b. Beagle Fund

c. Tanker Fund

d. Indigo Corp.

QUESTION 20 :

Which of the following investment has the highest systematic risk?

a. Berry Corp.

b. Beagle Fund

c. Indigo Corp.

d. Tanker Fund