An analyst is evaluating an annual-pay bond with a yield to maturity of 7.0%. The bond-equivalent yield of this bond is:
A. equal to 7.0%
B. less than 7.0%
C. greater than 7.0%
An economist has forecast that the term structure of interest rates will remain perfectly flat. According to the liquidity preference theory, the economist's forecast implies that future short-term interest rates will:
A. decrease over time
B. increase over time
C. equal current short-term interest rates
A U.S. investor is considering investing in a security of a company in a developing country. The country's market is characterized by infrequent trading, high inflation, large market volatility, low operating leverage, political unrest, low debt usage, and a depreciating exchange rate. In determining the appropriate country risk premium for the developing country, the investor should consider:
A. liquidity risk, exchange rate risk, financial risk, business risk, balance sheet risk
B. financial risk, liquidity risk, exchange rate risk, country risk, business risk C. business risk, variability risk, country risk, exchange rate risk, financial risk
An advantage of the duration/convexity approach over the full valuation approach is:
A. its superior accuracy for nonparallel shifts in the yield curve
B. it is not based on yield to maturity, which is a summary measure.
C. it saves considerable time when working with portfolios of bonds.
Six-month LIBOR is an interest rate which:
A. represents the interest rate paid on a CD that matures in 6 months
B. is the return available on the shortest term euro-denominated securities.
C. is determined by adding a small spread to the yield available on a UK government bond maturing in 6 months.
Curzon Corp reported the following in its Shareholder's Equity account:
In calculating a Price to Book value for Curzon, the appropriate book value per common share is closest to:
A. $10.50
B. $12.50
C. $13.13
Given the academic research supporting the efficiency of the stock market, which of the following is the least accurate description of a portfolio manager's role in an efficient market?
A. Identifying and specifying a client's objectives and constraints.
B. Specifying an explicit investment strategy to meet the client's needs.
C. Diversifying the client's portfolio across all asset classes to eliminate systematic risk.
Which of the following is the least accurate statement about the price-to-sales multiple?
A. Price-to-sales is a poor valuation technique for growth companies.
B. Sales growth drives all subsequent earnings and cash flows.
C. Revenue has minimal accounting manipulation concerns relative to other numbers.
Rose Half, CFA, is analyzing EI Toro Electric Company. She has collected the following data: What is El Toro Electric Company's expected long-run rate of return?
A. 10.5%.
B. 13.3%.
C. 15.0%.
Peterson Manufacturing has earnings per share of $4.00 and paid a dividend of $1.00 per share. Peterson's return on equity is 16.0%. Peterson is considering a debt issue that would increase its financial leverage. Peterson is also considering increasing its dividend payout ratio. Assuming all other factors are constant, Peterson's potential growth rate:
A. will increase due to the increased leverage, and increase further due to the higher payout ratio.
B. will increase due to the higher payout ratio, but this increase will be offset to some extent by the increased leverage.
C. will increase due to the increased leverage, but this increase will be offset to some extent by the higher payout ratio.
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