TRIN Finance Assingment Help With Solution
3 Investing Questions.
1) Which of the following activities would be most useful in an efficient market.
A) buying and holding a diversified portfolio
B) searching for patterns in charts based on stock price movements
C) analyzing financial ratios based on accounting data
D) buying only securities that have performed well in the recent past
2) Which one of the following statements concerning the random walk hypothesis is correct?
A) Stock price movements are predictable but only over short periods of time.
B) Random price movements support the weak form efficient market hypothesis.
C) Stock prices in general follow repetitive patterns but the actions of individual investors are random in nature.
D) Random price movements indicate that investors can earn abnormal profits on a routine basis.
3) Market anomalies are caused by
A) investors’ efforts to avoid or postpone taxes.
B) different levels of risk.
C) statistical quirks.
D) some poorly understood combination of factors.
4) Four “decision traps ” identified by behavioral finance are
A) overconfidence, representativeness, loss aversion, narrow framing
B) lack of confidence, representativeness, overreaction, narrow framing
C) overconfidence, representativeness, loss aversion, comprehensive framing
D) overconfidence, unfamiliarity bias, loss aversion. narrow framing
5) People tend to
A) ignore information that contradicts their current beliefs.
B) overestimate the effects of random chance.
C) beunderconfident in their judgment of investments.
D) look at the entire situation when analyzing an individual security.
6) The tendency of small firms to have higher returns than large firms , even after adjusting for risk, may be attributable to
C) familiarity bias.
D) loss aversion.
7) The principal objective of technical analysis is
A) determining the best time to get into or out of the market.
B) maintaining the lowest level of risk possible.
C) avoiding all unpleasant surprises in the market.
D) increasing trading to improve overall profits.
8) Chartists advocate that
A) history repeats itself.
B) patterns appear that are very clear and distinctive.
C) formations are less important than the direction of the latest price movement.
D) a breakout below a support line is a buy signal.
9) A high TRIN value is considered
A) good for the market when the number of advancing stocks is declining.
B) good for the market when the volume of advancing stocks is declining.
C) bad for the market when the trading volume in the declining stocks is rising.
D) bad for the market when the number of declining stocks is stable.
10) Which one of the following statements is correct concerning the mutual fund cash ratio (MFCR)?
A) The lower the value of the MFCR, the stronger the market will be in the future.
B) The MFCR is equal to the cash inflows into money market funds divided by the cash flows out of money market funds.
C) A low MFCR indicates that fund managers might be forced to sell securities should investors wish to withdraw funds.
D) A MFCR value greater than 12 is considered a bearish signal.
11) Under normal economic conditions, the major source of risk faced by investors who purchase investment grade bonds is
A) purchasing power risk.
B) interest rate risk.
C) liquidity risk.
D) default risk.
12) A note is generally defined as debt with an initial term to maturity of
A) zero to two years.
B) one year or less.
C) two to ten years.
D) ten to thirty years.
13) When a bond’s rating improves from A to AA
A) the coupon rate will fall and the price will rise.
B) both the coupon rate and the price will rise.
C) both the coupon rate will stay the same and the price will fall.
D) the coupon rate will stay the same, but the price will rise.
14) Bonds are least likely to be called if
A) they are selling at a substantial premium.
B) they are selling at a substantial discount.
C) the price is close to par value.
D) if they do not mature for at least 5 years.
15) An increase in the market rate of return on an outstanding bond will
A) increase the coupon rate.
B) decrease the coupon rate.
C) increase the bond price.
D) decrease the bond price.
16) Bob expects to retire in a few years and his primary goal is to avoid major losses in his 401-K account. Which of the following bond characteristics should he be seeking?
I. long maturities
II. high ratings
III high yields
IV. short maturities
A) I and III only.
B) I, III and III only
C) II and IV only
D) II, III and IV only.
17) Debt securities issued by the Federal Home Loan Bank, the Student Loan Marketing Association and the Government National Mortgage Association are known as
A) agency bonds.
B) organizational bonds.
C) municipal bonds.
D) Treasury bonds.
18) What is the tax-equivalent yield of a double tax-free 5% municipal bond if the investor is in the 28% federal and 7% state tax brackets?
19) Which one of the following statements correctly describes the major drawback of a zero-coupon bond?
A) Unless the bond is held in a tax-sheltered account, the investor must pay taxes on the annual accrued interest even though no interest is actually received.
B) The conversion feature found on most zero-coupon bonds generally requires the investor to switch to a coupon-bearing bond after a period of 5 years.
C) The lack of an annual coupon basically prohibits the investor from locking in a high rate of return.
D) Because there is no reinvestment of a coupon payment, large capital losses accrue when interest rates decline.
20) Which of the following is most likely to happen with a convertible bond when the market price of the stock exceeds the conversion price. The stock does not pay a dividend.
A) The bondholders will immediately convert their bonds to stock.
B) The issuing company will call the bonds and the bondholders will redeem them for the call price.
C) The issuing company will call the bonds and bondholders will convert them to common shares.
D) Both the issuing company and the bondholders will wait for the bonds to reach their maturity date.
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21) Which of the following factors will tend to cause the risk free rate to rise?
I. an increase in the money supply
II. an increase in the federal budget deficit
III. an increase in the level of economic activity
IV. falling rates in foreign markets
A) I, II, III only
B) II, III only
C) I and IV
D) I, II, III and IV
22) Which one of the following will tend to cause domestic interest rates to rise?
A) an increase in the money supply
B) a decrease in the rate of inflation
C) a decrease in the federal budget deficit
D) an increase in interest rates overseas
23) The expectations hypothesis states that investors
A) require higher long-term interest rates today if they expect higher inflation rates in the future.
B) expect higher long-term interest rates because of the lack of liquidity for long-term bonds.
C) require the real rate of return to rise in direct proportion to the length of time to maturity.
D) normally expect the yield curve to be downsloping.
24) When compared to the yield curve for Treasury securities, the yield curve for corporate securities should
A) slope in the opposite direction.
B) be similar in shape but higher.
C) be similar in shape but lower.
D) be nearly identical.
25) What is the current price of a 9%, $1,000 annual coupon bond that has eighteen years to maturity and a yield to maturity of 9.631%?
26) A bond is most likely to be called
A) when investors must reinvest at lower rates.
B) when the bond sells at a large discount.
C) when market yields are close to coupon rates.
D) when investors can reinvest at higher rates.
27) The actual return on a bond is dependent upon which of the following?
I. the coupon rate
II. the reinvested interest rate
III. any changes in par value
IV. any changes in market price
A) I, II and III only
B) II, III and IV only
C) I, III and IV only
D) I, II and IV only
28) Which one of the following bonds would have a duration that exactly matches its time to maturity?
A) discount bond
B) premium bond
C) zero-coupon bond
D) U.S. Treasury bond
29) A bond matures in 30 years, has a 20 year duration and a yield to maturity of 9.32%. The change in the level of the market interest rate is 0.47%. The modified duration is ________ and the percentage change in price is ________.
A) 9.4 years, -.47%
B) 14. years, 4.7%
C) 18.29 years., -8.6%
D) 18.29 years., 8.6%
30) The practical application of bond portfolio immunization to investors is that immunization
A) allows aggressive traders to eliminate the price effects caused by interest rate changes.
B) allows investors to derive a specified rate of return from bond investments for a given investment horizon.
C) eliminates the possibility of losing money due to a company defaulting on its bond payments.
D) allows investors to passively manage their bond portfolio once it is initially immunized.
31) One drawback of investing in mutual funds is the
A) annual management fee.
B) lack of liquidity of fund shares.
C) amount required for the initial investment.
D) lack of information on the performance of the fund.
32) Which of the following statements best describes the legal organization of mutual funds?
A) Funds are organized as a single entity that handles all functions such as custody and investment decisions.
B) Funds split their basic functions such as record keeping and investment decisions among two or more companies.
C) Funds are owned by the company that manages them.
D) A distributor keeps track of investment and redemption requests from shareholders and maintains other shareholder records.
33) Which of the following characteristics apply to exchange traded funds (ETFs)?
I. unlimited number of outstanding shares
II. typically track the performance of some index
III. Market prices may be higher or lower than NAV.
IV. May invest in the whole index or use a sample of securities to track the index as closely as possible.
A) I and II only
B) II and III only
C) I, II and III only
D) I, II and IV only
34) Back-end loads
A) are charged when an investor buys their mutual fund shares.
B) are charged if an investor sells his or her shares within the first few years.
C) were designed to help no-load funds cover their marketing expenses.
D) encourage short-term trading.
35) Which of the following statements is(are) correct concerning hedge funds?
I. They are highly regulated.
II. They hedge all positions to limit risks.
III. Management and other fees are extremely low compared to other types of funds.
IV. Access is limited to institutions and high net worth or high income individuals.
A) I, II and III only
B) II and IV only
C) IV only
D) I, II, III and, IV
36) An aggressive growth mutual fund is least likely to purchase a stock
A) with a high P/E ratio.
B) with a high anticipated rate of growth.
C) of an unseasoned firm.
D) with a high dividend yield.
37) One characteristic of bond funds is the
A) requirement of a minimum initial investment of $5,000 or more.
B) high anticipated short-term growth potential.
C) fluctuation in value in response to changing interest rates.
D) extremely aggressive trading approach.
38) Government securities money funds are structured to eliminate
A) interest rate risk.
B) inflation risk.
C) default risk.
D) market risk.
39) Mutual funds often report returns as the growth of $10,000 over a period of time. These returns assume that
A) all dividends and capital gains are reinvested.
B) all dividends and capital gains are withdrawn.
C) all dividends and capital gains are reinvested after deductions for income taxes.
D) the investor contributes money to the fund on a regular basis through an automatic investment plan.
40) A mutual fund is generally more tax efficient when it has a ________ turnover rate and a ________ dividend yield.
A) low; low
B) low; high
C) high; low
D) high; high
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