#1

Farma and French argued a Small-Minus-Big factors portfolio mimics the macroeconomic risk factor by capturing the effect of business cycle because bigger stocks are more sensitive to business conditions

True orFalse?

Question #2

Stocks with strong past performance over the past 2-12 months continue outperforming stocks with a poor past performance by about 1% per month .

True orFalse?

Question #3

The empirical evidence generally rejects the semi-strong form of market efficiency.

True orFalse?

Question #4

An option buyer collects the option premium.

True orFalse?

Question #5

In a strong form efficient market, investors were not compensate for bearing risk because information of any kind, public or private, is an instantaneously impounded into prices. True orFalse?

Question #6

Consider the multifactor APT with two factors. The risk premiums on the factor 1 and factor 2 portfolios are 5% and 6%, respectively. Stock A has a beta of 1.2 on factor 1, and a beta of 0.7 on factor 2. The expected return on stock A is 12.5%. If no arbitrage opportunities exist, the risk-free rate of return?

a. 6.8%.

b. 12.7%

c. 2.3%.

d. 20.1%.

E. None of the Above

Question #7

Find the present value of a 3-year zero-coupon bond with a $4,000 par value. Assume the annual market interest rate is 10%.

A.$ 3,500.26

B.$ 1,852.52

C.$ 2,502.72

D.$3,005.26

D.$ 4,023.85

E. NONE OF THE ABOVE

Question #8

Question #9

Eastern Digital has issued a bond with a par value of $1,000 each and a 5% per year coupon. The bonds mature in 5 years and pay interest annually. What is the current value of the bond if the market interest rate is 7%?

a) $917.996

b) $2,000

c)$1,242.67

d)$1835.99

e.)$3529.45

f) None of the above

Question #10

A $2,000 face value bond has a 6% coupon and pays interest annually. The bond matures in 2 years and the annual Market interest is 7%. What is the Macaulay duration?

A. 1.89734 YEARS

B. 1.94289 YEARS

C. 1.24368 YEARS

D. 2.17843 YEARS

E. NONE OF THE ABOVE