The bond CUSIP # 913026AT7 traded as low as 66 percent of par in 2008.

The bond CUSIP # 913026AT7 traded as low as 66 percent of par in 2008.

Subject: Business    / Finance   
Question
Question 1

The bond CUSIP # 913026AT7 traded as low as 66 percent of par in 2008.

True

False

2.94118 points

Question 2

An investor who buys one year treasury notes in year 1 and then rolls over the principal into new investments in one year treasury notes every year for 30 years will have locked in certain annual rate of return for 30 years.

True

False

2.94118 points

Question 3

Investors who have combined the MSCI EAFE Index with the S&P 500 index between the years 1970 to 2009 have exposed themselves to less risk and received greater returns than those investors who held only the S&P 500.

True

False

2.94118 points

Question 4

On pretax and basis The S&P 500 Index outperformed the BlackRock Capital Appreciation Fund between 9/2003 and 9/2012.

True

False

2.94118 points

Question 5

Base your answer on yearly data from the following series that is available from Board of Governors of the Federal Reserve Website via the DDP Program.

10-year Treasury constant maturity (H15/H15/RIFLGFCY10_N.M)

Moody's Aaa (H15/H15/RIMLPAAAR_N.M)

Moody's Baa (H15/H15/RIMLPBAAR_N.M)

In October of 2001 investors demanded a larger yield premium to hold corporate bonds rated Baa by Moody's relative to the ten year treasury than in June of 2006.

True

False

2.94118 points

Question 6

As the number of assets whose returns are not perfectly correlated are added to a portfolio the risk of the portfolio will decline. The amount of risk reduction that can be achieved is limited. Assume that correlation coefficients between assets are not minus 1.

True

False

2.94118 points

Question 7

Prices of risky corporate bonds generally fell relative to the ten year treasury note between October 2001 and June 2006.

True

False

2.94118 points

Question 8

The maximum sales charge imposed on investors in the A shares of the BlackRock Capital Appreciation Fund is 5.25% of the share price.

True

False

2.94118 points

Question 9

If you invest in the BlackRock Capital Appreciation Fund your return will be affected by how frequently assets in the portfolio are turned over. This is because gains are taxed and transaction costs are positive. You would have to pay a share of these taxes and transaction costs.

True

False

2.94118 points

Question 10

Regulators require markets to be efficient.

True

False

2.94118 points

Question 11

Between 1969 and 2009 the two year rolling correlation between the S&P 500 and the MSCI EAFE Index has been steady at .4.

True

False

2.94118 points

Question 12

Investors assign are indifferent between the maximum losses that can be suffered from investments. Rather investors only care about expected values.

True

False

2.94118 points

Question 13

The annual yield investors demanded in November of 2008 from Baa rated bonds was 9.21% while in June of 2006 the required annual yield on these securities was 5.25%.

True

False

2.94118 points

Question 14

The bond CUSIP # 913026AT7 is trading at a premium.

True

False

2.94118 points

Question 15

As of 11/30/2013 the BlackRock Capital Appreciation Fund owned 4.6% of Google Inc.

True

False

2.94118 points

Question 16

As of 11/30/2013 One of the top five holdings of the BlackRock Capital Appreciation Fund as Apple Inc.

True

False

2.94118 points

Question 17

Herd behavior is can lead to the compounding of errors in valuation of financial assets.

True

False

2.94118 points

Question 18

On pretax and basis The Russell 1000 Growth Index outperformed the BlackRock Capital Appreciation Fund between 9/2003 and 9/2012.

True

False

2.94118 points

Question 19

Moody’s has given a B1 rating to the bond CUSIP # 48020UAA6. This indicates that the issuer of the bond is below investment grade and will most likely default in the next year.

True

False

2.94118 points

Question 20

You are given the following information:

Asset 1 and asset 2 returns are random. In fact you think that the returns are independent and evenly distributed between -1% and 5%. In Excel this is (=RANDBETWEEN(-1,5)/100)

A portfolio divided equally between asset 1 and asset 2 is inferior to either 100% invested in asset A or 100% invested in asset 2 if our investment criterion is to minimize the ratio of risk to reward.

(You use a sample of at least 50 returns before you make conclusions.)

True

False

2.94118 points

Question 21

Between 1969 and 2009 the two year rolling correlation between the S&P 500 and the MSCI Emerging Index has been negative for all periods.

True

False

2.94118 points

Question 22

Over the last (1/2013 to 1/2014) twelve months the yield on ten year treasury securities has increased.

True

False

2.94118 points

Question 23

Daniel Kahneman has shown that investors are frequently overconfident and this overconfidence leads to poor judgments regarding investments.

True

False

2.94118 points

Question 24

You are given the following information:

asset 1 returns are a random between -3% and +5%. In Excel this is (=RANDBETWEEN(-3,5)/100)

asset 2 returns are 5% if asset 1 returns are negative and 1% if asset 1 returns are zero or higher.

Constructing a portfolio invested 50% in asset 1 and 50% in asset 2 would create a portfolio that has lower risk than either asset 1 or 2 and a return that is between the returns of asset 1 and asset 2.

(You use a sample of at least 50 returns before you make conclusions.)

True

False

2.94118 points

Question 25

The investment objective of the BlackRock Capital Appreciation Fund, Inc. (the “Fund”) is to seek high dividend income.

True

False

2.94118 points

Question 26

If you had invested in a diversified portfolio of long term junk bonds in at the end of 2008 and held this portfolio until the end of 2013 you would have been financially ruined. (if ruin can be defined as a return of negative 4% per year).

True

False

2.94118 points

Question 27

It is possible to combine risky assets in proportions such that the resulting portfolio has less risk than the assets themselves.

True

False

2.94118 points

Question 28

An investor who buys and sells government notes each day is assured of a certain return because treasury notes have no default risk and the coupon is fixed.

True

False

2.94118 points

Question 29

When a market is efficient the prices in the market will eventually reflect all available information. Some markets are more efficient than others and information I more readily reflected in asset prices.

True

False

2.94118 points

Question 30

Yield premiums of Baa rated bonds relative to ten year treasury bonds were higher in June 2006 than in November 2013.

True

False

2.94118 points

Question 31

I have told a group of investors that a mutual fund advisor who worked at Goldman Sachs has earned a 13% return on his fund in 2013. This is the only information I have given prospective investors. Those who invest in this fund are demonstrating the bias called “representative heuristic” by the economists Kahneman and Tversky.

True

False

2.94118 points

Question 32

The yield spread between Baa rated bonds and Aaa bonds increased from 89 basis points to 309 basis points between June 2006 and November 2008.

True

False

2.94118 points

Question 33

The Annual Fund Operating Expenses (expenses that an investor pays each year) as a percentage of the value of your investment in the BlackRock Capital Appreciation Fund vary between 10% and 12%.

True

False

2.94118 points

Question 34

Prices of risky corporate bonds generally fell from November 2008 to November 2013.

True

False

2.94118 points