Question 1 � A stock’s average return is 10 percent. The average risk-free rate is 7 percent. The standard deviation of the stock’s return is 4 percent, and the stock’s beta is 1.5. What is the Treynor Index for the stock? Question 2 � The ____ index can be used to measure risk-adjusted performance of a stock while controlling for the stock’s beta. Question 3 � Technical analysis relies on the use of ____ to make investment decisions. Question 4 � The Sharpe Index measures the Question 5 � The limitations of the dividend discount model are most pronounced for a firm that Question 6 � The January effect refers to the ____ pressure on ____ stocks in January of every year. Question 7 � If the returns of two stocks are perfectly correlated, then Question 8 � Which of the following is not commonly used as the estimate of a stock’s volatility? Question 9 � Stock prices of U.S. firms primarily involved in exporting are likely to be ____ affected by a weak dollar and ____ affected by a strong dollar. Question 10 � The limitations of the dividend discount model are more pronounced when valuing stocks Question 11 � ____ is (are) not a firm-specific factor(s) that affect(s) stock prices. Question 12 � The price-earnings valuation method applies the ____ price-earnings ratio to ____ earnings per share in order to value the firm’s stock. Question 13 � The formula for a stock portfolio’s volatility does not contain the Question 14 � The ____ is not a measure of a stock’s risk. Question 15 � A stock’s beta can be measured from the estimate of the using regression analysis. Question 16 � A(n) ____ is a standardized agreement to deliver or receive a specified amount of a specified financial instrument at a specified price and date. Question 17 � According to the text, a futures contract on one financial instrument to protect a position in a different financial instrument is known as Question 18 � If a financial institution expects that the market value of its municipal bonds will decline because of economic conditions, it could hedge its position by ____ futures contracts on ____. Question 19 � According to the text, when a financial institution sells futures contracts on securities in order to hedge against a change in interest rates, this is referred to as Question 20 � Currency futures may be purchased to hedge ____ or to capitalize on the expected ____ of that currency against the dollar. Question 21 � ____ risk is the risk that the position being hedged by a futures contract is not affected in the same manner as the instrument underlying the futures contract. Question 22 � An unexpected ____ in the consumer price index tends to create expectations of ____ interest rates and places ____ pressure on Treasury bond futures prices. Question 23 � Assume that speculators had purchased a futures contract at the beginning of the year. If the price of a security represented by a futures contract ____ over the year, then these speculators would likely have purchased the futures contract for ____ than they can sell it for. Question 24 � Municipal Bond Index (MBI) futures Question 25 � Interest rate futures are not available on Question 26 � The initial margin of a futures contract is typically between ____ percent of a futures contract’s full value. Question 27 � Systemic risk reflects the risk that a particular event could Question 28 � The basis is the Question 29 � If speculators believe interest rates will ____, they would consider ____ a T-bill futures contract today. Question 30 � The profits of a financial institution with interest-rate sensitive liabilities and interest rate-insensitive assets are ____ with hedging than without hedging if interest rates decrease.
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