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Investment Management Iowa Exam 1 Question and answers 100% correct 2024

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Investment Management Iowa Exam 1 Question and answers 100% correct 2024 Investment Management Iowa Exam 1 A 20 year maturity bond with par value of $1,000 makes semiannual coupon payments at an annual coupon rate of 8%. Find the bond equivalent and effective annual yield to maturity of the bond...

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  • August 30, 2024
  • 16
  • 2024/2025
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Investment Management Iowa Exam 1
A 20 year maturity bond with par value of $1,000 makes semiannual coupon
payments at an annual coupon rate of 8%. Find the bond equivalent and
effective annual yield to maturity of the bond if the bond price is :
a. $950
b. $1,000
c. $1,050 - correct answer ✔a.
Par value: 1000
PV: 950
Coupon rate:8%
Years:20
Interest Rate: =rate(20*2,(8%*1000)/2,-950,1000)
Bond equivalent: (Interest rate *2)
Effective Yield: (1+Interest rate)^2-1


a. Bond equivalent: 8.53%
Effective Yield: 8.71%
b.Bond equivalent: 8.00%
Effective Yield: 8.16%
c. Bond equivalent: 7.51%
Effective Yield: 7.65%


Which of the following is an example of an agency problem?


- Mangers over-consume luxuries such as corporate jets
- Managers engage in empire building

,- Managers protect their jobs by avoiding risky projects
- All of the above - correct answer ✔All of the above


The value of a derivative security _________.


- affects the value of a related security
- depends on the value of another security
- is unrelated to the value of another security - correct answer ✔depends on
the value of another security


An order to buy or sell a security at the current price is a ______________.


- limit order
- stop-loss order
- market order
- stop-buy order - correct answer ✔market order


Mutual funds provide the following for their shareholders


- diversification
- professional management
- recordkeeping and admin
- all of the above - correct answer ✔All of the above


Underwriting is one of the services provided by _____.

, - the SEC
- investment bankers
- publicly traded companies
- FDIC - correct answer ✔investment bankers


Risk that can be eliminated through diversification is called ______ risk.


- unique
- firm-specific
- diversifiable
- all of the above - correct answer ✔All of the above


Adding additional risky assets to the investment opportunity set will generally
move the efficient frontier _____ and to the ______.


- up;right
- up;left
- down;right
- down; left - correct answer ✔up;left


A portfolio is composed of two stocks, A and B. Stock A has a standard
deviation of return of 35%, while stock B has a standard deviation of return of
15%. The correlation coefficient between the returns of A and B is 0.45. Stock
A comprises 40% of the portfolio, while stock B comprises 60% of the
portfolio. The standard deviation of the return for this portfolio is
_____________.


- 23%

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