1. Which of the following is(are) correct?

1. In a closed-end mutual fund the fund manager will create new units for the new investors.
2. Mutual funds with active portfolio management usually charges a higher management fee than mutual funds with passive portfolio management.

1. I only
2. II only
3. Both I and II
4. Neither I nor II

2. Which of the following is(are) correct?

1. It is possible for a Hong Kong investor to invest in the Japan stock market through mutual funds.
2. The cost of investing in mutual funds is usually lower than investing directly in stocks.

1. I only
2. II only
3. Both I and II
4. Neither I nor II

3. When an investor short sells a stock, _______________.

1. he most likely thinks the stock price will rise
2. he can only set the sell price a one tick below the last executed price

1. I only
2. II only
3. Both I and II
4. Neither I nor II

4. When an investor places a market buy order, ____________________.

1. it is possible that only part of his order will be filled
2. his buy price may get higher and higher

1. I only
2. II only
3. Both I and II
4. Neither I nor II

Use the following information for the next 2 questions.

Stock	Price per share		Number of free-float shares (million)
	Day 1	Day 2
A	$4.23	$4.76	83
B	$4.66	$5.71	48
C	$8.84	$8.98	22

5. Suppose the index level on day 1 is 10,000. Calculate the index level on day 2 using price-weighted method.

1. 9,116
2. 9,645
3. 10,970
4. 12,338

6. Suppose the index level on day 1 is 10,000. Calculate the index level on day 2 using free-float-weighted method.

1. 8,875
2. 9,473
3. 10,483
4. 11,267

7. Which of the following is(are) correct?

1. Stock indexes using price-weighted method can better reflect in the change of the market values of the companies in the indexes than free-float-weighted method.
2. The stock markets in most developed countries use price-weighted method.

1. I only
2. II only
3. Both I and II
4. Neither I nor II

8. Which of the following is(are) correct?

1. Most bonds are traded over-the-counter.
2. All else the same, the yield to maturity of a bond with credit rating of BBB will be lower than a bond with AA rating.

1. I only
2. II only
3. Both I and II
4. Neither I nor II

9. Which of the following is(are) correct?

1. The cash flows to be received by the investors from debt instruments are more certain than the cash flows to be received from equity instruments.
2. Most debt instruments do not have maturity dates and most equity instruments have maturity dates.

1. I only
2. II only
3. Both I and II
4. Neither I nor II

10. Which of the party that is responsible for keeping the record of the shares sold in an initial public offering (IPO)?

1. Dealer
2. Sponsor
3. Underwriter
4. D.Bookrunner