Question 1

Corporate directors are governed by the ________. Trustees are governed by the ________.

Anone of these answers

B'common sense doctrine'; business judgment rule

Cbusiness judgment rule; Prudent Man Rule

Dbusiness judgment rule; 'common sense doctrine'

E'common sense doctrine'; Prudent Man Rule

FPrudent Man Rule; business judgment rule

GPrudent Man Rule; 'common sense doctrine'

Answer : C

Question 2

Using the following assumptions, calculate the rate of return on a margin transaction and the stock price at which the investor who purchases the stock will receive a margin call.

What of the following choices is closest to the correct answer? The margin transaction return is:

A83.33%, and the investor will receive a margin call at a stock price of $15.43.

B33.33%, and the investor will receive a margin call at a stock price of $15.43.

C111.11%, and the investor will receive a margin call at a stock price of $21.00.

D111.11%, and the investor will receive a margin call at a stock price of $15.43.

Answer : A

Question 3

The table below lists information on price per share and shares outstanding for three stocks â€“ Rocking, Payton, and Strand.

Using the information in the table, calculate the value of a market-value weighted index at year-end and the one-year return on the price-weighted index. The beginning value for the market index is 100. (Note: The choices are listed in the order market-value weighted index value and price-weighted index percent return, respectively). Which of the following choices is closest to the correct answer?

A10.6, 6.3.

B110.6, -6.3.

C110.6, 50.0.

D10.6, 8.4.

Answer : B

Question 4

Caleb Gold is studying for the Level 1 CFA examination with a fellow group of first year MBA students at the London School of Economics. During that nightâ€™s study session, Stephan LeMond, the self-proclaimed group â€œleader,â€ gives a short presentation on the forms of the efficient market hypothesis (EMH). As Gold listens, he hears LeMond make an obviously incorrect statement. He quickly speaks up, and identifies which of the following statements as INCORRECT?

AThe weak-form EMH states that stock prices reflect current public market information and expectations.

BThe semi-strong form EMH addresses market and non-market public information.

CThe strong-form EMH assumes perfect markets.

DThe weak-form EMH suggests that technical analysis will not provide excess returns while the semi-strong form suggests that fundamental analysis cannot achieve excess returns.

Answer : A

Question 5

Tamira Scott, CFA, manager of an index fund, needs to raise money soon (although not immediately) to pay taxes. Although she believes in the efficient market hypothesis (EMH), she remembers that there are a few anomalies she may take advantage of to earn higher returns. Which of the following actions is most unlikely to provide excess returns? Scott should purchase stocks in:

Acompanies with low price/earnings ratios and/or with high book to market ratios.

Bcompanies that announce stock splits.

Ccompanies not followed by analysts.

Dmid-December, with the intent to sell in early January.