FIN 325 Exam 1 Study Guide NEWEST EXAM 2026-
2027 COMPLETE 150 QUESTIONS AND
CORRECT DETAILED ANSWERS (VERIFIED
ANSWERS) ALREADY GRADED A+
A mutual fund has 71804 shares outstanding. You place an order to purchase $1000 worth of
shares at the market close today. At the close the fund owns 3 stocks shown below
Stock Shares owned Price at close
A 10,179 $5.75
B 5,005 $50.25
C 12204 $25.40
What is the price you will pay to purchase shares from this open-ended mutual fund? -
CORRECT ANSWER: 8.63
You need to calculate the market value of the mutual fund by adding up the three stocks market
capitalizations (10,179*5.75 + 5005*50.25...) then divide by the number of mutual fund shares
outstanding.
A mutual fund has the following returns in years 1 through 5: 12%, 9%, -5%, 15%, and -2%. If
you invested $1,000 at the beginning of year 1 how much would you have at the end of year 5? -
CORRECT ANSWER: 1307
You need to multiply 1000 by the return relatives. So if the returns for 3 years were 5%, -10%
and 12%, your answer would be $1000*1.05*.90*1.12 = $1,058.
A mutual fund owns three stocks shown below.
Stock Shares Market Price
Stock 1 10,000 $50.25
,Stock 2 5,000 $25.75
Stock 3 8,000 $37.13
If the fund has issued 71924 shares, what is the Net Asset Value (NAV)?
Hint: Calculate the total value of the portfolio and then divide by the number of shares the fund
has issued. - CORRECT ANSWER: 12.91
You need to calculate the value of the portfolio of 3 stocks. You simply multiply the number of
shares by the market price. For Stock 1 this is 10,000 * $50.25. Do this for the other 2 stocks and
sum the 3 totals. Divide that sum by the number of shares issued by the fund and that is the
answer.
A stock's returns over the past 5 years were 20%, 10%, -5%, 0%, and -3%. What is the standard
deviation of this sample of returns? - CORRECT ANSWER: 10.45
You can use your data and stat function in your TI calculator or the Excel formula
=STDEV.S(20,10,-5, 0%,-3).
A stock's returns over the past 5 years were 20%, 10%, -5%, 12%, and -3%. What is the
geometric mean return? - CORRECT ANSWER: 6.38
Take the product of the return relatives raised to the 1/5 power and subtract 1. So if you had two
returns of 5% and -10%, you would (1.05*.90)^(1/2)-1.
A stock's returns over the past 5 years were 20%, 10%, -5%, 29%, and -3%. What is the
arithmetic mean return? - CORRECT ANSWER: 10
You need to calculate a simple average here. Sum the 5 returns and then divide by 5.
,A stock's returns over the past 5 years were 20%, 10%, -5%, 50%, and -3%. What is the
cumulative wealth index assuming a base value of $1? - CORRECT ANSWER: 1.82
Simply take the product of the 5 return relatives and that is your answer.
All rational investors are risk averse and thus will seek to minimize the amount of risk they take.
- CORRECT ANSWER: False
This is a false statement. If you simply minimize risk you will only hold risk-free assets. The will
minimize their risk for any level of expected return. Thus, of all the portfolios that I could
construct that would have an expected return of 10%, I'll choose the one with the least amount of
risk.
An indifference curve shows: - CORRECT ANSWER: all combinations of portfolios that are
equally desirable to an investor.
A utility or indifference curve shows the portfolios that are equally satisfying to an investor. As
you move up to a higher curves the investor gets more satisfaction.
As of December 31, 2014, the 10-year annualized rate of return (geometric mean) for the Wall
Street Emerging Growth Fund was 6.42%. Assume an investor invested $10,000 in this fund on
January 1, 2005. How much would this investment be worth on December 31, 2014, a 10 year
period? - CORRECT ANSWER: 18631
You simply take 1000 * (1+rate)^10. So if the rate is 9.10%, your answer would be
10,000 * 1.091^10 = 23,892
Assume an investor is in the 17% tax bracket. What taxable equivalent yield must a taxable bond
pay to equal a municipal bond yield of 5.8%? - CORRECT ANSWER: 6.99
, TEY = tax-exempt muni yield / (1-marginal tax rate)
So if your muni yield is 5.4% and the marginal tax rate is 20% you would have
.054 / (1-.20) = 6.75%
Assume BND has a beta of -0.2. Which statement below is most correct? - CORRECT
ANSWER: If the market were to go down by 1%, BND would be expected to go up by 0.2%.
Because stocks historically have outperformed bonds and cash, all investors should overweight
stocks. - CORRECT ANSWER: False
Older investors tend to be more risk averse (lower risk tolerance) and thus may have very little
invested in stocks. They cant' go back in the work force and earn back losses.
Below are the annual returns for Zenon and Dynamics.
Year Zenon Dynamics
2005 15.56% 51.00%
2006 18.34% 78.56%
2007 16.47% 44.67%
2008 7.56% 67.56%
2009 20.09% 34.56%
2010 -15.23% 24.42%
2011 34.56% 7.89%
2012 13.56% 24.78%
2013 -12.34% 30.79%
2014 9.89% -47.67%
2027 COMPLETE 150 QUESTIONS AND
CORRECT DETAILED ANSWERS (VERIFIED
ANSWERS) ALREADY GRADED A+
A mutual fund has 71804 shares outstanding. You place an order to purchase $1000 worth of
shares at the market close today. At the close the fund owns 3 stocks shown below
Stock Shares owned Price at close
A 10,179 $5.75
B 5,005 $50.25
C 12204 $25.40
What is the price you will pay to purchase shares from this open-ended mutual fund? -
CORRECT ANSWER: 8.63
You need to calculate the market value of the mutual fund by adding up the three stocks market
capitalizations (10,179*5.75 + 5005*50.25...) then divide by the number of mutual fund shares
outstanding.
A mutual fund has the following returns in years 1 through 5: 12%, 9%, -5%, 15%, and -2%. If
you invested $1,000 at the beginning of year 1 how much would you have at the end of year 5? -
CORRECT ANSWER: 1307
You need to multiply 1000 by the return relatives. So if the returns for 3 years were 5%, -10%
and 12%, your answer would be $1000*1.05*.90*1.12 = $1,058.
A mutual fund owns three stocks shown below.
Stock Shares Market Price
Stock 1 10,000 $50.25
,Stock 2 5,000 $25.75
Stock 3 8,000 $37.13
If the fund has issued 71924 shares, what is the Net Asset Value (NAV)?
Hint: Calculate the total value of the portfolio and then divide by the number of shares the fund
has issued. - CORRECT ANSWER: 12.91
You need to calculate the value of the portfolio of 3 stocks. You simply multiply the number of
shares by the market price. For Stock 1 this is 10,000 * $50.25. Do this for the other 2 stocks and
sum the 3 totals. Divide that sum by the number of shares issued by the fund and that is the
answer.
A stock's returns over the past 5 years were 20%, 10%, -5%, 0%, and -3%. What is the standard
deviation of this sample of returns? - CORRECT ANSWER: 10.45
You can use your data and stat function in your TI calculator or the Excel formula
=STDEV.S(20,10,-5, 0%,-3).
A stock's returns over the past 5 years were 20%, 10%, -5%, 12%, and -3%. What is the
geometric mean return? - CORRECT ANSWER: 6.38
Take the product of the return relatives raised to the 1/5 power and subtract 1. So if you had two
returns of 5% and -10%, you would (1.05*.90)^(1/2)-1.
A stock's returns over the past 5 years were 20%, 10%, -5%, 29%, and -3%. What is the
arithmetic mean return? - CORRECT ANSWER: 10
You need to calculate a simple average here. Sum the 5 returns and then divide by 5.
,A stock's returns over the past 5 years were 20%, 10%, -5%, 50%, and -3%. What is the
cumulative wealth index assuming a base value of $1? - CORRECT ANSWER: 1.82
Simply take the product of the 5 return relatives and that is your answer.
All rational investors are risk averse and thus will seek to minimize the amount of risk they take.
- CORRECT ANSWER: False
This is a false statement. If you simply minimize risk you will only hold risk-free assets. The will
minimize their risk for any level of expected return. Thus, of all the portfolios that I could
construct that would have an expected return of 10%, I'll choose the one with the least amount of
risk.
An indifference curve shows: - CORRECT ANSWER: all combinations of portfolios that are
equally desirable to an investor.
A utility or indifference curve shows the portfolios that are equally satisfying to an investor. As
you move up to a higher curves the investor gets more satisfaction.
As of December 31, 2014, the 10-year annualized rate of return (geometric mean) for the Wall
Street Emerging Growth Fund was 6.42%. Assume an investor invested $10,000 in this fund on
January 1, 2005. How much would this investment be worth on December 31, 2014, a 10 year
period? - CORRECT ANSWER: 18631
You simply take 1000 * (1+rate)^10. So if the rate is 9.10%, your answer would be
10,000 * 1.091^10 = 23,892
Assume an investor is in the 17% tax bracket. What taxable equivalent yield must a taxable bond
pay to equal a municipal bond yield of 5.8%? - CORRECT ANSWER: 6.99
, TEY = tax-exempt muni yield / (1-marginal tax rate)
So if your muni yield is 5.4% and the marginal tax rate is 20% you would have
.054 / (1-.20) = 6.75%
Assume BND has a beta of -0.2. Which statement below is most correct? - CORRECT
ANSWER: If the market were to go down by 1%, BND would be expected to go up by 0.2%.
Because stocks historically have outperformed bonds and cash, all investors should overweight
stocks. - CORRECT ANSWER: False
Older investors tend to be more risk averse (lower risk tolerance) and thus may have very little
invested in stocks. They cant' go back in the work force and earn back losses.
Below are the annual returns for Zenon and Dynamics.
Year Zenon Dynamics
2005 15.56% 51.00%
2006 18.34% 78.56%
2007 16.47% 44.67%
2008 7.56% 67.56%
2009 20.09% 34.56%
2010 -15.23% 24.42%
2011 34.56% 7.89%
2012 13.56% 24.78%
2013 -12.34% 30.79%
2014 9.89% -47.67%
