1.Simpson Financial Corp. runs one fund, the Homer Equity Growth Fund. At the end of

1.Simpson Financial Corp. runs one fund, the Homer Equity Growth Fund. At the end of 2005, that fund’s portfolio was worth $10 million and it had 10 million units outstanding to investors. When 2006 came to a close the fund’s portfolio had risen to $12 million, but also saw its units outstanding rise to 12 million. What can we say about the fund’s Net Asset Value (NAV)?
2.The economy has been booming for a while, with the general price level rising. A government report is released in which economic growth is much higher than expected. What is likely going to happen?
3. Say you’re looking at a $100 face value Government of Canada bond, with a coupon of 4% and maturing in 2030. Its price went up yesterday from $98.50 to $99 This means:
4.Eric buys Aquafina stock because he needs to readjust his risk profile. Laura then sells the same stock because she needs money to put a down payment on a house. Bob then buys the stock because he works at Aquafina and is enrolled in the company’s employee stock purchase program . Eric, Laura, and Bob cause Aquafina stock to go up and down by their activity. According to the Efficient Markets Hypothesis, the price moves in Aquafina reflect:
5.The price of Acme Widget Corp. is $50.00 today. If I sell a call at $53.00 and a put at $47.00, both for 3 months out, what do I think about Acme Corp shares?
6.Suppose I buy a call for $2.50 on Acme Corp shares at $52 for 3 months out when they are trading right now at $50.00. If Acme’s price goes to $56.00 2 months from now I could make at least how much money?
7. Imagine that the following yields currently hold for U.S. government bonds: 1 year bond, 5.75%, 2 year bond 5.25%, 5 year bond 5%, 10 year bond 4.5%, 30 year bond 4.25%. This situation is:
8. Greg actively trades the stock market. He makes his decisions by constantly reading the financial papers and regularly keeping up with a number of websites providing research information. Nancy is a buy and hold investor who gets together with her broker once a year to review her portfolio against her long-term financial plans. One day, they compare their performance and it is found that Greg has not done nearly as well as Nancy. A sensible advisor would tell Greg that he was:
a.Putting too much effort into collecting information and not enough into testing it.
b.Affected by self-deception bias
c.Investing in stocks with poor 2-5 year historical performances
d.Affected by the conservatism bias
e.Putting too much effort into collecting information and not enough into testing it.
9.Diana listens to her stockbroker name several stocks that she might want to purchase. She seizes on Home Depot because she repeatedly sees their commercials. She buys Home Depot stock. Diana is:
a.Making a semi-informed decision that is nevertheless likely to pay off
b.Affected by an aversion to ambiguity
c.Affected by self-deception
d.Affected by the availability bias
e.Making a perfectly reasonable decision
10. Eric knowingly pays more for some rare dolls than they are really worth. Still, he figures that he can sell the dolls a month from now for double the price that he paid. Eric is acting upon:
a.The idea that his valuation model is better than the market
b.The greater fool expectation
c.The semi-strong version of the Efficient Markets Hypothesis (EMH)
d.The aversion to ambiguity
e.The gambler’s fallacy