please answer questions 13, 14, 18, 27, 29, 32, 39

1) Marti is 31 years old and is saving for retirement. Which one of the following portfolio allocations might best suit her situation if she is willing to accept a fair amount of risk in exchange for long-term capital appreciation? A) 60% bonds, 15% money funds and 25% real estate B) 5% money funds, 10% bonds and 85% growth stocks C) 25% bank CDs, 40% corporate bonds, 15% money market, 20% value stocks D) 50% mortgage bonds, 5% money market, 45% municipal bonds 2) The fixed-weightings approach to asset allocation A) is based on an allocation of an equal percentage of the portfolio to each separate asset category. B) requires periodic rebalancing of the portfolio to maintain the desired weights. C) is based on periodic adjustments to category weights in response to market changes. D) uses stock-index futures and bond futures in a market timing strategy. 3) The best index to assess the performance of a portfolio diversified among several asset classes such as stocks, bonds and real estate is A) the Lipper Index. B) the NYSE Composite Index. C) the Value Line Index. D) No suitable index exists. 4) For a stock investment, the dividend yield is calculated by A) dividing a stock's annual cash dividend by its price. B) dividing a stock's price by its annual cash dividend. C) multiplying a stock's semi-annual dividend by two. D) dividing the annual change in the stock's price plus its annual dividend amount by the beginning of the year price. 5) Juan's investment portfolio was valued at $125,640 at the beginning of the year. During the year, Juan received $603 in interest income and $298 in dividend income. Juan also sold shares of stock and realized $1,459 in capital gains. Juan's portfolio is valued at $142,608 at the end of the year. All income and realized gains were reinvested. No funds were contributed or withdrawn during the year. What is the amount of income Juan must declare this year for income tax purposes? A) $0 B) $901 C) $2,360 D) $19,328 6) Tim purchased a stock ten months ago for $14 a share, received a $1 dividend per share last month, and sold the stock today for $16 per share. Tim has a marginal tax rate of 30%. Both capital gains for securities held more than one year and dividend income is taxed at 15%. What is Tim's after-tax holding period return? A) 14.1% B) 15.9% C) 16.1% D) 18.2% 7) Which of the following are reasons to consider selling an investment that is currently in a portfolio? I. The investment has met the original objective. II. Better investment opportunities currently exist. III. The outlook for the investment has improved. IV. The investment has not met expectations and no change is expected. A) I, II and IV only B) I, III and IV only C) I, II and III only D) I, II, III and IV 8) Sharpe's measure of portfolio performance compares the risk premium on a portfolio to A) a broad-based market index such as the S&P 500 index. B) the portfolio's standard deviation of return. C) the portfolio's beta. D) the prevailing risk-free rate of return. 9) Allison's portfolio has an expected return of 14% and a beta of 1.37. Brianna's portfolio has an expected rate of return of 11% and a beta of 1. The risk-free rate is 3%. According to the Treynor measure, A) Allison has the better portfolio. B) Brianna has the better portfolio. C) the portfolio's are equally desirable. D) the answer depends on Allison and Brianna's risk tolerance. 10) Which of the following statements about Jensen's measure are correct? I. Through its use of the capital asset pricing model, Jensen's measure automatically adjusts for market return. II. In general, the higher the Jensen's measure, the better a portfolio has performed. III. Jensen's measure is referred to as alpha. IV. A positive Jensen's measure indicates an investment has underperformed the market on a risk-adjusted basis. A) I and IV only B) I, II and III only C) II and III only D) I, III and IV only 11) Which one of the following statements is correct concerning dollar cost averaging plans? A) Dollar cost averaging is an active trading strategy. B) Dollar cost averaging is a short-term trading strategy. C) The goal of dollar cost averaging is current dividend income. D) The goal of dollar cost averaging is long-term capital appreciation. 12) Investors who who accept the random walk theory should use A) a dollar cost averaging plan. B) a constant dollar plan. C) a constant ratio plan. D) a variable ratio plan. 13) A stop loss order may not protect an investor's profits if A) the price drops even slightly below the stop price before the order can be executed. B) the price enters a prolonged period of gradual decline. C) an unexpected event cause the price to drop steeply when the markets are closed. D) the stop loss price is never reached. 14) Suppose the shares of the Chickadee Corporation traded seven times in the following sequence one day last week: 46, 45.88, 45.75, 45.50, 45.63, 46, 46.13. In this case, a limit order to sell at 46 would have been executed A) between 46 and 46.13, whereas a market order to sell could have been executed anywhere between 45.50 and 46.13. B) anywhere between 45.50 and 46.13, whereas a market order to sell would have been executed only at 46. C) only at 46, whereas a market order to sell would have been executed at 46.13. D) only at 46.13, and a market order to sell would have been executed between 46 and 46.13. 15) Which one of the following statements concerning options is correct? A) One option covers 1,000 shares of stock. B) A put gives the option holder the right to buy a stated amount of securities. C) The owner of a call is entitled to the dividends paid on the underlying shares of stock. D) Option holders can profit on movements of the price of the underlying security. 16) Which of the following is true about rights? A) They are usually attached to bonds as a "sweetener." B) The owner has several years in which to exercise the option. C) They are a type of short-lived call option. D) They are a type of short-lived put option. 17) One reason that writing options can be a viable and profitable investment strategy is that A) the option writer collects the quarterly dividends. B) most options expire unexercised. C) an option writer determines when the option is exercised. D) an option writer can exercise the option to avoid a potential loss. 18) The writer of a put option hopes that the price of the underlying stock will rise because A) the option is more likely to be exercised. B) the option is less likely to be exercised. C) the buyer of the put will have to purchase the stock at a higher price. D) the value of the put option will increase in the secondary market. 19) The two provisions which investors should carefully consider when evaluating stock options are the A) strike price and the exchange ratio. B) time until expiration and the strike price. C) leverage ratio and the time to maturity. D) premium and the discount. 20) Rex bought a put on Alpha stock with a strike price of $35 when the market price of Alpha stock was $33 a share. Alpha is currently selling at $34 a share. Which of the following statements are true given this information? I. Rex's option is worth at least $100 today. II. Rex's option is worthless today. III. Rex's option has more value today than when he bought it. IV. Rex's option has less value today than when he bought it. A) I and III only B) I and IV only C) II and III only D) II and IV only 21) Andrea wrote a three-month call on Echo stock. The option cost $200 and the strike price was $10. What does the market price of Echo have to be for Andrea to break-even on this investment if the option is exercised? Ignore transaction construed taxes. A) $10 B) $12 C) $8 D) cannot be determined from the information provided 22) Roselle paid $250 to buy one put option with a strike price of $35. What is the maximum profit Roselle can earn on her option contract? A) $100 B) $350 C) $3,250 D) Her profit potential is unlimited. 23) In January, JB stock was selling for $50 per share. When the calls and the puts with a strike price of $45 expired on March 20, JB was selling at $46. Which investors made a profit? I. the writer of the call II. the buyer of the call III. the writer of the put IV. the buyer of the put A) II and III B) I and III C) only III D) II and IV 24) Bill owns 200 shares of EG stock. In November, the market price of EG was $15.45. Bill sold two March 16 calls on EG for $246. Between November and March, EG stock fluctuated between $14.75 and $15.85. EG paid a quarterly dividend of $0.40 per share on January 31. Over the November-March period, Bill earned A) $80. B) $(176). C) $326. D) $256. 25) A vertical spread with limited risk might involve A) buying a call and a put on the same stock with the same strike price. B) buying a put at a lower strike price and a call at a higher strike price. C) buying a call at a lower strike price and writing a put at a higher price. D) buying a call at a lower strike price and writing a call at a higher strike price. 26) A long straddle A) consists of selling and writing an equal number of puts and calls with different strike prices but the same expiration date and the same underlying security. B) is a strategy based on the expectation that the price of the underlying security will be relatively constant. C) consists of buying a call at one strike price and then writing a call at a higher strike price. D) is a strategy that produces profits when the price of the underlying security moves significantly in either direction. 27) The premium on a stock index call would be expected to increase as the A) market becomes more volatile. B) option life nears expiration. C) index price falls further below the strike price. D) underlying securities stabilize in value. 28) Which of the following features are shared by futures contracts and options? I. They have specified expiration dates. II. Their value is derived from changes in the value of some other asset. III. Unprofitable futures or options can simply be allowed expire unexercised. IV. Futures contracts specify the price at which the commodity will be delivered at the expiration date. A) I and II only B) I and IV only C) II and III only D) I, II and III only 29) The amount paid at the time a futures contract is sold A) represents the maximum loss for the buyer of the contract. B) represents the maximum profit for the buyer of the contract. C) is simply a refundable security deposit. D) is the total value of the goods being traded in the future. 30) Larry is a corn farmer. To attempt to maximize the value of his crop, Larry is most likely to benefit from A) selling his crop at the market price when it is harvested. B) buying a futures contract on corn for delivery at harvest time. C) selling a futures contract on corn for delivery at harvest time. D) buying a futures contract on corn and selling a futures contract on wheat. 31) In the futures markets, gains and losses in a contract's value are calculated every day and added to or subtracted from the trader's account. This procedure is called A) checking the maintenance margin. B) checking the maintenance deposit. C) settling. D) mark-to-the-market. 32) Logan sold a corn futures contract using the initial margin of $2,700. His maintenance margin is $2,000. The price of began to rise in early summer, but Logan wants to keep his contract. When his margin falls below $2,000 (minimum maintenance) A) his contract will be automatically sold or canceled. B) he does not need to do anything since the most he can lose is $2,700. C) he will need to deposit at least $700 with his broker to bring his margin back up to the initial deposit. D) he will need to deliver the corn immediately. 33) Every commodity contract specifies all the following EXCEPT A) the settle price. B) the product. C) the delivery month. D) the unit size of the contract. 34) A wheat futures contract is quoted in cents per bushel with a contract unit of 5,000 bushels. If the contract is quoted at a settle price of 685, then the value of one wheat futures contract is A) $685. B) $3,425. C) $34,250. D) $68,500 35) Which of the following statements concerning futures are correct? I. Investors in financial futures can earn both dividend income from the underlying security as well as the potential capital gain from the futures contract. II. The return on a futures contract is computed by dividing the net difference between the sale and the purchase price of the contract by the amount of the margin deposit. III. It is very easy to lose your entire investment in a futures contract in a very short period of time due to the volatility of the futures market and also the use of leverage. IV. Conservative investors tend to purchase one futures contract as a means of increasing the return on their portfolio while maintaining minimal risk. A) I and II only B) II and III only C) I, II and IV only D) I, II and III only 36) Lakshmi is confident that the price of gold is going to rise because the rate of inflation is increasing. To profit from her prediction, Lakshmi should A) buy gold bullion today and then sell an equivalent amount of gold futures. B) buy a gold futures contract today. C) sell short a futures contract today. D) sell short one futures contract and offset it by buying an equivalent long futures contract. 37) Which of the following are advantages of using options for futures speculation? I. increased leverage II. Potential losses are limited to the cost of the option. III. Options are available on a broad range of commodity, index, and currency futures. IV. Investors avoid the possibility of having to take delivery of the commodity. A) I and II only B) II and III only C) I, II and IV only D) I, II, III and IV 38) Which one of the following statements concerning financial futures is correct? A) Except for short-term securities, interest rate futures are quoted based on a percentage of the par value of the underlying debt security. B) Stock-index futures are priced at an amount equal to the value of the index. C) Foreign currency futures are based on 100,000 units of the foreign currency. D) An investor who is long on a financial future loses money when the value of the future rises. 39) Klaus bought a December E-mini Dow contract at 17,750. On the December delivery date, the Dow closed at 18,035. Klaus' profit or loss was A) $1,425. B) $180,350. C) $28,500. D) $285. 40) The purpose of a spreading strategy with futures contracts is A) to maximize potential profit. B) increase leverage. C) limit potential losses. D) hedge against price changes in the underlying commodity