What is the annual coupon payment paid in year 2 of a 10 year maturity TIPS with a par value of $1,000, annual coupon rate of 4%, and inflation of 1% in year 1, 2% in year 2 and 4% in year 3?

		$40
		$51
		$60
		$71

If the economy is expected to go into a contraction, __________ stocks will perform better than _______ stocks, and ________ bonds will perform better than ________bonds.

		cyclical, non-cyclical, junk, investment grade
		cyclical, non-cyclical, investment grade, junk
		risky, safer, risky, safer
		safer, risky, safer, risky

To calculate an future expected return use __________ mean returns, to calculate how much an investment grew based on compounded returns use _______ mean returns, and to calculate returns on an investment account with varying levels of funds invested use _______ mean returns. Which answer below fills in the blanks in the correct order.

		arithmetic, geometric, dollar weighted
		best guess, gordon growth, portfolio
		arithmetic, dollar weighted,geometric
		regression, gordon growth, portfolio

The bonds of ABC Company have received a rating of "A" by S&P. The "A" rating indicates the bonds are _________.

		low grade
		intermediate grade
		investment grade
		junk bonds

You want to invest in a bond portfolio that you will use later to payoff a liability due in 7 years. Which of the following bond portfolios would immunize you from interest rate risk.

		A) Zero coupon bonds with 7 years to maturity
		B) A portfolio of bonds with a duration of 7 years
		C) A portfolio of bonds with an average 7 years to maturity
		A and B
		A and C

Security A has a standard deviation of .12 and a correlation coefficient with the market of .6, while security B has a standard deviation of .14 and a correlation coefficient with the market of .5. Which security has a higher beta if the market standard deviation is .13?

		A
		B
		Not enough information

What would most likely happen to the YTM on the sovereign bonds of a country if that county becomes riskier and may have difficulty making future payments?

		YTM will rise
		YTM not affected
		YTM will fall

What is the YTM on a bond with 10 years to maturity, 8% coupon rate, semi-annual coupon payments, and a price of $921?

		4.0%
		4.6%
		9.2%
		9.6%

You have the following stock prices over several years. Assume that the stock pays no dividends.

Year Beginning of year price Number of shares bought or sold

2005 100 13 bought

2006 120 18 bought

2007 110 20 sold

2008 130 8 sold Taking into account stock purchases and sales data shown, what is the dollar weighted annual return over the entire time period?

		-3.8%
		3.8%
		7.5%
		10%