NO.1313 Futures markets are able to provide the price discovery function because:
I). spot prices and futures prices are unrelated
II). a relationship exists between spot and futures prices
III). futures prices allow forecasts of future spot prices

NO.1314 Suppose that JPK, Inc. paid dividends of $80,000 to its preferred shareholders and $40,000 to its common shareholders during 2000. The company had 20,000 shares of common stock issued and outstanding on 1/1/00, issued 7,000 more shares on 6/1/00, and paid a 10 percent stock dividend on
8 /1/00. Assuming that JPK had $150,000 in net income, what is the firm’s basic earnings per share (EPS) for 2000?

NO.1315 If a company depreciates equipment by using MACRS for income tax purposes but uses the straight-line method for financial accounting purposes, the tax consequences resulting from the difference will affect:

NO.1316 A trial generates only two results, “success” and “failure.” The probability of success is higher than that of failure. The variance of the number of failures in 20 trials equals 2.35. The probability of success on a given trial equals ________.

NO.1317 Your supervisor has asked you to increase trading volume in all discretionary accounts because he wants to increase revenues for the firm. You believe that this would be inappropriate for most of your clients. You should

NO.1318 Martha Halliburton, an analyst, is asked by her research director to increase the 2011 earnings estimate for Headley Electric, an important underwriting client. A violation of CFA Institute’s Standards of
Professional Conduct would result if the reason Halliburton increased her estimate was that:

NO.1319 The following statements regarding the NPV rule and the rate of return rule are true except:

NO.1320 Consider a two-year plain-vanilla swap. Fixed rate is 6%. Libor is currently 5.5%. Notional principal is
$ 10 million. Who pays whom how much when the swap is originated?

NO.1321 Which of the following components reduces the annual pension expense amount?

NO.1322 An investor buys shares of ABC Corp. at $30 and immediately writes a call on them. If the call carries a premium of $2.5 and its exercise price is $30, at what price of ABC shares will this investor break-even?

NO.1323 Which one of the following is least likely to be a reason why the GIPS were created?

NO.1324 What is the present value today of these annual cash flows: $1,000, $2,000, $3,000? Assume the first cash flow occurs 1 year from today and an interest rate of 10% per year, compounded annually.

NO.1325 An individual asset’s relative systematic risk is calculated based on the:

NO.1326 An investor reads an article regarding one of his holdings. He is surprised to find out that there is significant evidence of massive accounting fraud at the firm. This source of risk is best described as:

NO.1327 Greenbelt Processors had a beginning inventory of 798 units valued at a cost of 34,895. It purchased
4 ,474 units of new inventory worth 195,402 during the year. A year-end audit revealed that it had 853 units on hand. If the average unit price was 43.65 at the end of the year, what COGS would Greenbelt report?

NO.1328 The assumptions of capital market theory expand on those of the _______ portfolio model and include consideration of the _________ rate of return.

NO.1329 A futures contract whose underlying good is U.S. Treasury bills would be classified as a(n) ________ contract.

NO.1330 Which of the following statements is (are) true with respect to bond valuation?
I). Spot rates are equal to the yield to maturity of on-the-run coupon paying Treasury securities.
II). The arbitrage-free valuation approach discounts each cash flow of a bond using a different discount rate.
III). As the required yield to maturity increases, the discount on a zero-coupon bond will decrease.
IV). If the yield to maturity on a bond is greater than a bond’s coupon rate, then the bond will trade below par.

NO.1331 An old college friend provides you with a stock tip. He had heard that XYZ, Inc. was the sole patent holder in a new technology that will increase gasoline mileage on any automobile by 20%. You immediately purchase the stock for all client portfolios where it is suitable.

NO.1332 Two countries have free trade with each other, but they have different trade policies against other countries. This is an example of:

NO.1333 On May 25th, 2004, Dove Landing Corporation bought 2,500 shares of Hunt Corporation’s common stock at a total cost of $200,000. At 12/31/04 year-end, the Hunt Corp. stock was worth $212,750. The stock is classified as a trading security. The income tax rate is 35%. Which one of the following reflects the proper treatment for Dove Landing’s investment for the year 2004?

NO.1334 The bond indenture specifies that the 8% issue due June 2010 of Felton Corp. is redeemable at par value in the event of a merger. The bond is callable after December 31, 2005 at 103. In the event of a merger between Felton Corp. and a suitor company, owners of this issue will receive: