ONLINE QUIZ 2

TERM STRUCTURE OF INTEREST RATES

Question 1
0 out of 1 points
Suppose you want to find the arbitrage-free forward rate between time 1 and 2, 1f2.
What information would be sufficient?
A - The price of a two-year bond with an annual coupon payment of $10 and
a face value of $100.
B - The price of a two-year bond with an annual coupon payment of $20 and
a face value of $100.
C - The price of a one-year zero-coupon bond with a face value of $100.
Answer
Selected Answer:

1.
A and B

Question 2
1 out of 1 points
The expectations theory of the term structure of interest rates
states that

Answer
Selected
Answer:

forward rates are market expectations of future

interest rates.

Question 3
1 out of 1 points
Suppose the current term structure of interest rates is as follows:
r1 = 4%
r2 = 5%
r3 = 9%
r4 = 10%
r5 = 11%
What is the arbitrage-free forward rate between times 2 and 4, 2f4? Give your answer
in percentage units with two decimal points, e.g. answer 6.34 if you think the forward
rate is 0.06342.
Answer
Selected Answer:

15.24

 Question 4
1 out of 1 points
Suppose you observe the following interest rates in the market:
r3 = 6%
1f2 = 6%
1f3 = 5%
What is the arbitrage-free two-year spot rate, r2?
Answer
Selected Answer:
7%

Question 5
1 out of 1 points
Suppose you have an investment horizon of 3 years and hold a 5 year zero-coupon
bond. You would be facing:
Answer
Selected Answer:

B.
Liquidity risk

Question 6
1 out of 1 points
Suppose you observe the following two bonds in the market:

A one-year zero-coupon bond with a face value of $1000 trading at $900.

A two-year bond paying an annual coupon of $120 and a face value of $1000
trading at par.

What can you conclude about the arbitrage-free forward rate between times 1 and 2,
1f2?

Answer
Selected Answer:
It is 13%

Question 7
1 out of 1 points
Suppose a zero-coupon bond maturing in one year with a face value of $100 costs

$97 today. A zero-coupon bond maturing in two years time with a face value of
$1000 costs $890 today. What is the arbitrage-free price of a bond maturing in two
years time with a face value of $100 and an annual coupon of $5? Give your answer
with two decimal points precision.
Answer
Selected Answer:

98.30

Question 8
1 out of 1 points
Which of the following are important differences between the theoretical concept of
the term structure of interest as we've discussed it in class, and the zero-coupon
interest rates of government bonds we use to approximate it, e.g. in slide two of
lecture two?
Answer
Selected Answer:

D.
A and B

Question 9
0 out of 1 points
Which of the following are valid reasons why the yield on bonds with
long times to maturity may include a liquidity premium?

Answer
Selected Answer:
Investors are risk averse

Question 10
1 out of 1 points
Suppose the market does not expect spot rates to change in the future and
that issuers of bonds have a shorter investment horizon than buyers of bonds. What
shape would you expect the term structure of interest rates to have?
Answer
Selected Answer:
Downwards sloping

Question 1
1 out of 1 points
Suppose you observe the following interest rates in the market:

r3 = 6%
1f2 = 6%
1f3 = 5%
What is the arbitrage-free two-year spot rate, r2?
Answer
Selected Answer:
7%

Question 2
1 out of 1 points
Suppose a zero-coupon bond maturing in one year with a face value of $100 costs
$97 today. A zero-coupon bond maturing in two years time with a face value of
$1000 costs $890 today. What is the arbitrage-free price of a bond maturing in two
years time with a face value of $100 and an annual coupon of $5? Give your answer
with two decimal points precision.
Answer
Selected Answer:

98.30

Question 3
1 out of 1 points
Suppose you observe the following two bonds in the market:

A one-year zero-coupon bond with a face value of $1000 trading at $900.

A two-year bond paying an annual coupon of $120 and a face value of $1000
trading at par.

What can you conclude about the arbitrage-free forward rate between times 1 and 2,
1f2?
Answer
Selected Answer:
It is 13%

Question 4
1 out of 1 points
Suppose the current term structure of interest rates is as follows:
r1 = 4%
r2 = 5%
r3 = 9%
r4 = 10%

r5 = 11%
What is the arbitrage-free forward rate between times 2 and 4, 2f4? Give your answer
in percentage units with two decimal points, e.g. answer 6.34 if you think the forward
rate is 0.06342.
Answer
Selected Answer:

15.24

Question 5
0 out of 1 points
Which of the following are valid reasons why the yield on bonds with
long times to maturity may include a liquidity premium?

Answer
Selected
Answer:

Encourage investors with short investment horizons to

invest in long maturity bonds

Question 6
1 out of 1 points
The expectations theory of the term structure of interest rates
states that

Answer
Selected
Answer:

forward rates are market expectations of future

interest rates.

Question 7
1 out of 1 points
Which of the following are important differences between the theoretical concept of
the term structure of interest as we've discussed it in class, and the zero-coupon
interest rates of government bonds we use to approximate it, e.g. in slide two of
lecture two?
Answer
Selected Answer:

D.
A and B

Question 8
1 out of 1 points
Suppose you have an investment horizon of 3 years and hold a 5 year zero-coupon
bond. You would be facing:

Answer
Selected Answer:

B.
Liquidity risk

Question 9
1 out of 1 points
One way of interpreting the term structure of interest rates is that
it shows the relationship between:

Answer
Selected
Answer:

the yield on zero-coupon bonds and the time to

maturity of those bonds.

Question 10
1 out of 1 points
Suppose you want to find the arbitrage-free forward rate between time 1 and 2, 1f2.
What information would be sufficient?
A - The price of a two-year bond with an annual coupon payment of $10 and
a face value of $100.
B - The price of a two-year bond with an annual coupon payment of $20 and
a face value of $100.
C - The price of a one-year zero-coupon bond with a face value of $100.
Answer
Selected Answer:

4.
Any of the above combinations.

Question 1
1 out of 1 points
Suppose a zero-coupon bond maturing in one year with a face value of $100 costs
$97 today. A zero-coupon bond maturing in two years time with a face value of
$1000 costs $890 today. What is the arbitrage-free price of a bond maturing in two
years time with a face value of $100 and an annual coupon of $5? Give your answer
with two decimal points precision.
Answer
Selected Answer:

Question 2

98.30

1 out of 1 points
Suppose the market does not expect spot rates to change in the future and
that issuers of bonds have a shorter investment horizon than buyers of bonds. What
shape would you expect the term structure of interest rates to have?
Answer
Selected Answer:
Downwards sloping

Question 3
1 out of 1 points
Suppose the current term structure of interest rates is as follows:
r1 = 4%
r2 = 5%
r3 = 9%
r4 = 10%
r5 = 11%
What is the arbitrage-free forward rate between times 2 and 4, 2f4? Give your answer
in percentage units with two decimal points, e.g. answer 6.34 if you think the forward
rate is 0.06342.
Answer
Selected Answer:

15.24

Question 4
1 out of 1 points
Suppose you observe the following two bonds in the market:

A one-year zero-coupon bond with a face value of $1000 trading at $900.

A two-year bond paying an annual coupon of $120 and a face value of $1000
trading at par.

What can you conclude about the arbitrage-free forward rate between times 1 and 2,
1f2?

Answer
Selected Answer:
It is 13%

Question 5
1 out of 1 points
Which of the following are valid reasons why the yield on bonds with

long times to maturity may include a liquidity premium?

Answer
Selected Answer:
All of the above

Question 6
1 out of 1 points
The expectations theory of the term structure of interest rates
states that

Answer
Selected
Answer:

forward rates are market expectations of future

interest rates.

Question 7
1 out of 1 points
Which of the following are important differences between the theoretical concept of
the term structure of interest as we've discussed it in class, and the zero-coupon
interest rates of government bonds we use to approximate it, e.g. in slide two of
lecture two?
Answer
Selected Answer:

D.
A and B

Question 8
1 out of 1 points

Suppose you observe the three following bonds in the market:

A two-year zero-coupon bond with a face value of $100 trading for $89.00
A two-year bond with a face value of $100 and a $10 coupon trading for
$107.51
A two-year bond with a face value of $100 and a $20 coupon trading for
$127.53

Which of the following statements is true?

Answer
Selected
Answer:

B.
There is a possible arbitrage trade involving a short position in
bond C

 Question 9
1 out of 1 points
Suppose you want to find the arbitrage-free forward rate between time 1 and 2, 1f2.
What information would be sufficient?
A - The price of a two-year bond with an annual coupon payment of $10 and
a face value of $100.
B - The price of a two-year bond with an annual coupon payment of $20 and
a face value of $100.
C - The price of a one-year zero-coupon bond with a face value of $100.
Answer
Selected Answer:

4.
Any of the above combinations.

Question 10
1 out of 1 points
Suppose you have an investment horizon of 3 years and hold a 5 year zero-coupon
bond. You would be facing:
Answer
Selected Answer:

ONLINE QUIZ 3

B.
Liquidity risk

DURATION

Question 1
1 out of 1 points
Which of the following bonds has the longest duration?

Answer
SelectedAnswer:

A 10-year maturity, 0% coupon bond.

Question 2
1 out of 1 points

The duration of a bond that pays coupon interest annually is 8.05

years. The yield to maturity of the bond is 10%. If the yield falls
by 25 basis points, what is the percentage change in the price of the
bond?

Answer

SelectedAnswer:

1.83%

Question 3
1 out of 1 points
Holding other factors constant, the interest-rate risk of a coupon
bond is higher when the bond's:

Answer

SelectedAnswer:

yield to maturity is lower.

Question 4
1 out of 1 points
Some of the practical problems with immunization are

Answer
SelectedAnswer:

A, B, and C.

Question 5
1 out of 1 points
When immunizing a portfolio, we are typically balancing off

Answer

SelectedAnswer:

liquidity risk and reinvestment risk.

Question 6
1 out of 1 points
Compute the duration of a par value bond with a coupon rate of 8% and
a remaining time to maturity of 3 years. Assume coupon interest is
paid annually and the bond has a face value $100.

Answer

SelectedAnswer:

2.783 years.

Question 7
1 out of 1 points
Which of the following two bonds is more price sensitive to changes
in interest rates?
A bond, X, trading at par with 5 years to maturity and a 10% yield to
maturity.
A zero-coupon bond, Y, with 5 years to maturity and a 10% yield to
maturity.

Answer
SelectedAnswer:

Bond Y because of the longer duration.

Question 8
1 out of 1 points
Holding other factors constant, which one of the following bonds has
the smallest price volatility?

Answer

SelectedAnswer:

5 year, 14% coupon bond

 Question 9
1 out of 1 points
Which of the following is incorrect?

Answer
Selected
Answer:

The duration of a zero-coupon bond decreases with an

increase in time to maturity.

Question 10
1 out of 1 points
When interest rates decline, the duration of a 10-year bond selling
at a premium

Answer

SelectedAnswer:

increases.

Question 1
1 out of 1 points
Which of the following two bonds is more price sensitive to changes
in interest rates?
A bond, X, trading at par with 5 years to maturity and a 10% yield to
maturity.
A zero-coupon bond, Y, with 5 years to maturity and a 10% yield to
maturity.

Answer
SelectedAnswer:

Bond Y because of the longer duration.

Question 2
0 out of 1 points

Duration is important in bond portfolio management because

I) it can be used in immunization strategies.
II) it provides a gauge of the effective average maturity of the
portfolio.
III) it is related to the interest rate sensitivity of the portfolio.
IV) it is a good predictor of interest rate changes.

Answer
SelectedAnswer:

III and IV

Question 3
1 out of 1 points
Youhaveanobligationtopay$148infouryearsand2months.Inwhichbondwouldyou
investyour$100toaccumulatethisamount,withrelativecertainty,evenifthethereisa
parallelshiftinthetermstructureofinterestrates?Allbondspayinterestannuallyandhave
afacevalueof$100.

Answer
SelectedAnswer:

a 5-year; 10% coupon par value bond

Question 4
1 out of 1 points
The duration of a bond is positively correlated with the bond's

Answer
SelectedAnswer:

time to maturity.

Question 5
1 out of 1 points
The basic purpose of immunization is to

Answer
SelectedAnswer:

B and C.

Question 6
1 out of 1 points
Holding other factors constant, the interest-rate risk of a coupon
bond is higher when the bond's:

Answer

SelectedAnswer:

yield to maturity is lower.

Question 7
1 out of 1 points
Which of the following is incorrect?

Answer
Selected
Answer:

The duration of a zero-coupon bond decreases with an

increase in time to maturity.

Question 8
1 out of 1 points
Which of the following bonds has the longest duration?

Answer
SelectedAnswer:

A 10-year maturity, 0% coupon bond.

 Question 9
1 out of 1 points
The duration of a bond that pays coupon interest annually is 8.05
years. The yield to maturity of the bond is 10%. If the yield falls
by 25 basis points, what is the percentage change in the price of the
bond?

Answer

SelectedAnswer:

1.83%

Question 10
1 out of 1 points
Holding other factors constant, which one of the following bonds has
the smallest price volatility?

Answer

SelectedAnswer:

5 year, 14% coupon bond

Question 1
1 out of 1 points

Which of the following are true about the interest-rate sensitivity

of coupon bonds?
I
Bond prices and yields are inversely related.
II
Prices of long-term bonds tend to be more sensitive to interest
rate changes than prices of short-term bonds.
III
Interest-rate risk is positively related to the bond's coupon
rate.
IV
The sensitivity of a bond's price to a change in its yield to
maturity is inversely related to the yield to maturity at which the
bond is currently selling.

Answer
SelectedAnswer:

I, II, and IV

 Question 2
1 out of 1 points
Holding other factors constant, the interest-rate risk of a coupon
bond is higher when the bond's:

Answer

SelectedAnswer:

yield to maturity is lower.

Question 3
1 out of 1 points
Compute the duration of a par value bond with a coupon rate of 8% and
a remaining time to maturity of 3 years. Assume coupon interest is
paid annually and the bond has a face value $100.

Answer

SelectedAnswer:

2.783 years.

Question 4
1 out of 1 points
The duration of a bond is positively correlated with the bond's

Answer
SelectedAnswer:

time to maturity.

Question 5
1 out of 1 points
Which of the following is incorrect?

Answer

Selected
Answer:

The duration of a zero-coupon bond decreases with an

increase in time to maturity.

Question 6
0 out of 1 points
Duration is important in bond portfolio management because
I) it can be used in immunization strategies.
II) it provides a gauge of the effective average maturity of the
portfolio.
III) it is related to the interest rate sensitivity of the portfolio.
IV) it is a good predictor of interest rate changes.

Answer
SelectedAnswer:

I and III

Question 7
1 out of 1 points
Some of the practical problems with immunization are

Answer
SelectedAnswer:

A, B, and C.

Question 8
1 out of 1 points

Youhaveanobligationtopay$148infouryearsand2months.Inwhichbondwouldyou
investyour$100toaccumulatethisamount,withrelativecertainty,evenifthethereisa
parallelshiftinthetermstructureofinterestrates?Allbondspayinterestannuallyandhave
afacevalueof$100.
Answer

SelectedAnswer:

a 5-year; 10% coupon par value bond

Question 9
1 out of 1 points
Which of the following two bonds is more price sensitive to changes
in interest rates?
A bond, X, trading at par with 5 years to maturity and a 10% yield to
maturity.
A zero-coupon bond, Y, with 5 years to maturity and a 10% yield to
maturity.

Answer
SelectedAnswer:

Bond Y because of the longer duration.

Question 10
1 out of 1 points
The basic purpose of immunization is to

Answer
SelectedAnswer:

B and C.

ONLINE QUIZ 4

MARKOWITZ PORTFOLIOS

Question 1
1 out of 1 points
Inareturnstandarddeviationspace,whichofthefollowingstatementsis(are)trueforrisk
averseinvestors?
Answer

SelectedAnswer:

BandC

Question 2
1 out of 1 points
ThevariableAintheutilityfunctionrepresentsthe:
Answer
SelectedAnswer:

Investorsaversiontorisk

Question 3
1 out of 1 points
Theexpectedreturnofaportfolioofriskysecurities:
Answer
SelectedAnswer:

Isaweightedaverageofthesecuritiesreturns

Question 4
1 out of 1 points
Assumeaninvestorhasthefollowingutilityfunction,U=E(RP)0.5AP2,whereherdegree
ofriskaversionis2.Tomaximiseherexpectedutility,shewouldchoosetheassetwithan
expectedreturnof________andastandarddeviationofreturnsof________,respectively.
Answer

SelectedAnswer:

10%;10%

Question 5
1 out of 1 points

Astatisticthatmeasureshowthereturnsoftworiskyassetsmovetogetheris:
Answer
SelectedAnswer:

CandD

Question 6
1 out of 1 points
SteveismoreriskaversethanEdie.OnagraphthatshowsSteveandEdiesindifference
curves,whichofthefollowingistrue?
Answer

SelectedAnswer:

Steves indifference curves will have steeper slopes than Edies

Question 7
1 out of 1 points
Whencombiningassetsthatarenotperfectlycorrelatedwemayachieve:
Answer
SelectedAnswer:

F.
AandC

Question 8
1 out of 1 points
Otherthingsequal,diversificationismosteffectivewhen:
Answer
SelectedAnswer:

Securitiesreturnsarenegativelycorrelated

 Question 9
1 out of 1 points
Whentworiskysecuritiesthatarenotperfectlypositivelycorrelatedareheldina
portfolio,theportfoliostandarddeviationofreturnswillbe____theweightedaverageof
theindividualsecuritystandarddeviations.
Answer

SelectedAnswer:

lessthan

Question 10
1 out of 1 points
Thecovarianceofastochasticvariablewithitselfwillbelowerthanthevarianceofthat
variablebecauseofthediversificationeffect.Isthiscorrect?
Answer

SelectedAnswer:

No

ONLINE QUIZ 6

CAPM

Question 1
1 out of 1 points
Youinvest$600inasecuritywithabetaof1.2and$400inanothersecuritywithabetaof
0.90.Thebetaoftheresultingportfoliois
Answer

SelectedAnswer:

1.08

Question 2

1 out of 1 points
YouropinionisthatBoeinghasanexpectedrateofreturnof0.08.Ithasabetaof0.92.The
riskfreerateis0.04andthemarketexpectedrateofreturnis0.10.AccordingtotheCapital
AssetPricingModel,thissecurityis
Answer

SelectedAnswer:

overpriced.

Question 3
1 out of 1 points
TheSecurityMarketLine(SML)is
Answer
SelectedAnswer:

thelinethatrepresentstheexpectedreturnbetarelationship.

Question 4
0 out of 1 points
Inequilibrium,themarginalpriceofriskforariskysecuritymustbe
Answer
SelectedAnswer:

greaterthanthemarginalpriceofriskforthemarketportfolio.

Question 5
1 out of 1 points

GiventhefollowingtwostocksAandB

Security

ExpectedRateofReturn

Beta

0.12

1.20

0.14

1.80

Iftheexpectedmarketrateofreturnis0.09andtheriskfreerateis0.05,whichsecurity
wouldbeconsideredthebetterbuyandwhy?
Answer
SelectedAnswer:

Abecauseitoffersanexpectedexcessreturnof2.2%.

Question 6
1 out of 1 points
Anoverpricedsecuritywillplot
Answer
SelectedAnswer:

belowtheSecurityMarketLine.

Question 7
1 out of 1 points
Whichstatementisnottrueregardingthemarketportfoliosuggestedbythecapitalasset
pricingmodel?
Answer

SelectedAnswer:

Itdependsontheindifferencecurvesofindividualeachinvestor.

Question 8
1 out of 1 points

AccordingtotheCapitalAssetPricingModel,overpricedsecurities
Answer
SelectedAnswer:

havenegativealphas.

Question 9
1 out of 1 points
Theriskfreerateis7percent.Theexpectedmarketrateofreturnis15percent.Ifyou
expectastockwithabetaof1.3toofferarateofreturnof12percent,youshould
Answer

SelectedAnswer:

sellshortthestockbecauseitisoverpriced.

Question 10
1 out of 1 points
Asecurityhasanexpectedrateofreturnof0.10andabetaof1.1.Themarketexpected
rateofreturnis0.08andtheriskfreerateis0.05.Thealphaofthestockis
Answer

SelectedAnswer:

1.7%.

Question 1
1 out of 1 points

Theamountthataninvestorallocatestothemarketportfolioisnegativelyrelatedto
Itheexpectedreturnonthemarketportfolio.
IItheinvestor'sriskaversioncoefficient.
IIIthemarketriskpremium.
IVthevarianceofthemarketportfolio

Answer
SelectedAnswer:

IIandIV

Question 2
1 out of 1 points
Asecurityhasanexpectedrateofreturnof0.10andabetaof1.1.Themarketexpected
rateofreturnis0.08andtheriskfreerateis0.05.Thealphaofthestockis
Answer

SelectedAnswer:

1.7%.

Question 3
1 out of 1 points
Thebetaofasecurityisequalto
Answer
Selected
Answer:

thecovariancebetweenthereturnsofthesecurityandthemarketdivided
bythevarianceofreturnsofthemarket.

Question 4
1 out of 1 points
Anoverpricedsecuritywillplot
Answer
SelectedAnswer:

belowtheSecurityMarketLine.

 Question 5
1 out of 1 points
YouropinionisthatBoeinghasanexpectedrateofreturnof0.08.Ithasabetaof0.92.The
riskfreerateis0.04andthemarketexpectedrateofreturnis0.10.AccordingtotheCapital
AssetPricingModel,thissecurityis
Answer

SelectedAnswer:

overpriced.

Question 6
1 out of 1 points
Theriskfreerateis7percent.Theexpectedmarketrateofreturnis15percent.Ifyou
expectastockwithabetaof1.3toofferarateofreturnof12percent,youshould
Answer

SelectedAnswer:

sellshortthestockbecauseitisoverpriced.

Question 7
1 out of 1 points
Youinvest$600inasecuritywithabetaof1.2and$400inanothersecuritywithabetaof
0.90.Thebetaoftheresultingportfoliois
Answer

SelectedAnswer:

1.08

Question 8
1 out of 1 points

GiventhefollowingtwostocksAandB

Security

ExpectedRateofReturn

Beta

0.12

1.20

0.14

1.80

Iftheexpectedmarketrateofreturnis0.09andtheriskfreerateis0.05,whichsecurity
wouldbeconsideredthebetterbuyandwhy?
Answer
SelectedAnswer:

Abecauseitoffersanexpectedexcessreturnof2.2%.

Question 9
1 out of 1 points
AccordingtotheCapitalAssetPricingModel,overpricedsecurities
Answer
SelectedAnswer:

havenegativealphas.

Question 10
1 out of 1 points
Whichstatementisnottrueregardingthemarketportfoliosuggestedbythecapitalasset
pricingmodel?
Answer

SelectedAnswer:

Itdependsontheindifferencecurvesofindividualeachinvestor.

ONLINE QUIZ 7
Question 1
1 out of 1 points
Accordingtothefourfactormodel
Answer
SelectedAnswer:

Noneoftheaboveanswersaretrue

Question 2
1 out of 1 points
Theoptimalweightintheactiveportfolioincreaseswith(ispositivelycorrelatedwith)
Answer
SelectedAnswer:

themispricing(alpha)oftheportfolio

Question 3
1 out of 1 points
Ifallinvestorsarepassive,marketswillbe
Answer
SelectedAnswer:

unabletoincorporatenewinformation

Question 4
1 out of 1 points
Inpractice,arbitrageursarelikelytoface

Answer
SelectedAnswer:

Morethanoneoftheaboveanswersaretrue

Question 5
1 out of 1 points
Thefourfactormodelis
Answer
SelectedAnswer:

incompatiblewiththeCAPM

Question 6
0 out of 1 points
Anchoringis
Answer
SelectedAnswer:

strongerfortechstocks

Question 7
1 out of 1 points
Aheuristicis
Answer
SelectedAnswer:

aruleofthumb

Question 8

1 out of 1 points
Overconfidentinvestors
Answer
SelectedAnswer:

Morethanoneoftheaboveanswersaretrue

Question 9
1 out of 1 points
WecanonlyraiseourSharperatiohigherthanthemarket'sby
Answer
SelectedAnswer:

exploitingmispricedstocks

Question 10
1 out of 1 points
Whichstatementistrueaboutmispricedstocks?Mispricedstocks
Answer
SelectedAnswer:

Noneoftheaboveanswersaretrue

Question 1
1 out of 1 points
Ifallinvestorsarepassive,marketswillbe
Answer

SelectedAnswer:

unabletoincorporatenewinformation

Question 2
1 out of 1 points
Whichstatementistrueaboutmispricedstocks?Mispricedstocks
Answer
SelectedAnswer:

Noneoftheaboveanswersaretrue

Question 3
1 out of 1 points
Anchoringis
Answer
SelectedAnswer:

Noneoftheaboveanswersaretrue

Question 4
1 out of 1 points
Inpractice,arbitrageursarelikelytoface
Answer
SelectedAnswer:

Morethanoneoftheaboveanswersaretrue

Question 5
1 out of 1 points

Theoptimalweightintheactiveportfolioincreaseswith(ispositivelycorrelatedwith)
Answer
SelectedAnswer:

themispricing(alpha)oftheportfolio

Question 6
1 out of 1 points
Aheuristicis
Answer
SelectedAnswer:

aruleofthumb

Question 7
1 out of 1 points
Accordingtothefourfactormodel
Answer
SelectedAnswer:

Noneoftheaboveanswersaretrue

Question 8
1 out of 1 points
Overconfidentinvestors
Answer
SelectedAnswer:

Morethanoneoftheaboveanswersaretrue

 Question 9
1 out of 1 points
Thefourfactormodelis
Answer
SelectedAnswer:

incompatiblewiththeCAPM

Question 10
1 out of 1 points
WecanonlyraiseourSharperatiohigherthanthemarket'sby
Answer
SelectedAnswer:

exploitingmispricedstocks

EFFICIENT MARKET HYPOTHESIS

Question 1
1 out of 1 points
The Food and Drug Administration (FDA) just announced yesterday that
they would approve a new cancer-fighting drug from GlaxoSmithKline.
You observe that GlaxoSmithKline had an abnormal return of 0%
yesterday. This suggests that

Answer

SelectedAnswer:

the approval was already anticipated by the market

Question 2
0 out of 1 points

If you believe in the

form of the EMH, you believe that you
can use information that is available only to insiders to earn
abnormal returns.

Answer

SelectedAnswer:

strong

Question 3
1 out of 1 points
Proponents of the EMH typically advocate
Answer
Selected
Answer:

investing in an index fund and a passive investment

strategy.

Question 4
1 out of 1 points
focus more on past price movements of a firm's stock than on
the underlying fundamentals of future profitability.

Answer

SelectedAnswer:

Technical analysts

Question 5
0 out of 1 points

Apple has a beta of 1.3. The annualized market return yesterday was
8%, and the risk-free rate is currently 3%. You observe that Apple
had an annualized return yesterday of 10%. Assuming that markets are
efficient, this suggests that

Answer
SelectedAnswer:

bad news about Apple was announced yesterday.

Question 6
1 out of 1 points
Inanefficientmarketthecorrelationcoefficientbetweenstockreturnsfortwonon
overlappingtimeperiodsshouldbe
Answer

SelectedAnswer:

zero

Question 7
1 out of 1 points
Studies of negative earnings surprises have shown that there is

Answer
SelectedAnswer:

both A and C are true.

Question 8
1 out of 1 points
If you believe in the
form of the EMH, you believe that
stock prices reflect all relevant information including historical
stock prices and current public information about the firm, but not
information that is available only to insiders.

Answer
SelectedAnswer:

semi-strong

Question 9
1 out of 1 points
Cumulative abnormal returns (CAR)

Answer
SelectedAnswer:

A, B and C.

Question 10
1 out of 1 points
Alpha Manufacturing just announced yesterday that its 4th quarter
earnings will be 10% higher than last year's 4th quarter. You observe
that Alpha had an abnormal return of -1.2% yesterday. This suggests
that

Answer

Selected
Answer:

investors expected the earnings increase to be larger

than what was actually announced.

Question 1
1 out of 1 points
A new study explains an anomaly known as the wandering weekday
effect. This study finds that the traditional weekday effect changes
every 12 to 18 months so that technical analysts cannot make an
abnormal profit just by trading on one particular day of the week.
The wandering weekday effect __________.

Answer
SelectedAnswer:

supports weak form market efficiency

Question 2
1 out of 1 points
Cumulative abnormal returns (CAR)

Answer
SelectedAnswer:

A, B and C.

Question 3
1 out of 1 points
If you believe in the
form of the EMH, you believe that you
can use information that is available only to insiders to earn
abnormal returns.

Answer
SelectedAnswer:

none of the above

Question 4
1 out of 1 points
The Food and Drug Administration (FDA) just announced yesterday that
they would approve a new cancer-fighting drug from GlaxoSmithKline.
You observe that GlaxoSmithKline had an abnormal return of 0%
yesterday. This suggests that

Answer
SelectedAnswer:

the approval was already anticipated by the market

Question 5
1 out of 1 points
Alpha Manufacturing just announced yesterday that its 4th quarter
earnings will be 10% higher than last year's 4th quarter. You observe
that Alpha had an abnormal return of -1.2% yesterday. This suggests
that

Answer

Selected
Answer:

investors expected the earnings increase to be larger

than what was actually announced.

Question 6
1 out of 1 points
Apple has a beta of 1.3. The annualized market return yesterday was
8%, and the risk-free rate is currently 3%. You observe that Apple
had an annualized return yesterday of 10%. Assuming that markets are
efficient, this suggests that

Answer

SelectedAnswer:

good news about Apple was announced yesterday.

Question 7
1 out of 1 points
Inanefficientmarketthecorrelationcoefficientbetweenstockreturnsfortwonon
overlappingtimeperiodsshouldbe
Answer

SelectedAnswer:

zero

 Question 8
1 out of 1 points
In an efficient market,

Answer
SelectedAnswer:

A, B, and C

Question 9
1 out of 1 points
If you believe in the
form of the EMH, you believe that
stock prices reflect all relevant information including historical
stock prices and current public information about the firm, but not
information that is available only to insiders.

Answer

SelectedAnswer:

semi-strong

Question 10
1 out of 1 points
Studies of negative earnings surprises have shown that there is

Answer
SelectedAnswer:

both A and C are true.

PORTFOLIO PERFORMANCE EVALUATION

Question 1
1 out of 1 points

You want to evaluate three mutual funds using the Sharpe measure for
performance evaluation. The risk-free return during the sample period
is 6%. The average returns, standard deviations and betas for the
three funds are given below, as is the data for the S&P 500 index.

Fund A
Fund B
Fund C
S&P500

Average
Return
24%
12%
22%
18%

Standard
Deviation
30%
10%
20%
16%

Beta
1.5
0.5
1.0
1.0

The fund with the highest Sharpe measure is __________.

Answer
SelectedAnswer:

Fund C

Question 2
1 out of 1 points
The following data relates to the performance of Sooner Stock Fund
and the market portfolio:

Average Return
Standard Deviation of
Returns
Beta
Residual Variance

Sooner
20%
44%

Market Portfoli
11%
19%

1.8
0.02

1.0
0

The risk-free return during the sample period was 3%.

What is the Treynor measure of performance evaluation for Sooner
Stock Fund?

Answer
SelectedAnswer:

0.0944

Question 3
1 out of 1 points

The Jensen portfolio evaluation measure

Answer
Selected
Answer:

is an absolute measure of abnormal return above or below

that predicted by the CAPM.

Question 4
1 out of 1 points
Suppose the risk-free return is 4%. The beta of a managed portfolio
is 1.2, the alpha is 1%, and the average return is 14%. Based on
Jensen's measure of portfolio performance, you would calculate the
return on the market portfolio as

Answer

SelectedAnswer:

11.5%

Question 5
1 out of 1 points
Suppose you purchase 100 shares of GM stock at the beginning of year
1, and purchase another 100 shares at the end of year 1. You sell all
200 shares at the end of year 2. Assume that the price of GM stock is
$50 at the beginning of year 1, $55 at the end of year 1, and $65 at
the end of year 2. Assume no dividends were paid on GM stock. Your
dollar-weighted return on the stock will be __________ your timeweighted return on the stock.

Answer
SelectedAnswer:

higher than

Question 6
1 out of 1 points
Suppose two portfolios have the same average excess return, the same
standard deviation of returns, but portfolio A has a higher beta than

portfolio B. According to the Treynor measure, the performance of

portfolio A __________.

Answer
SelectedAnswer:

is poorer than the performance of portfolio B

Question 7
1 out of 1 points
The
measures the reward to volatility trade-off by
dividing the average portfolio excess return by the standard
deviation of returns.

Answer

SelectedAnswer:

Sharpe index

Question 8
1 out of 1 points
Suppose you own two stocks, A and B. In year 1, stock A earns a 2%
return and stock B earns a 9% return. In year 2, stock A earns an 18%
return and stock B earns an 11% return. Which stock has the higher
geometric average return?

Answer

SelectedAnswer:

stock B

Question 9
1 out of 1 points
The following data relates to the performance of Sooner Stock Fund
and the market portfolio:

Average Return

Sooner
20%

Market Portfolio
11%

Standard Deviation of Returns 44%

Beta
1.8
Residual Variance
0.02

19%
1.0
0

The risk-free return during the sample period was 3%.

What is the Sharpe measure of performance evaluation for Sooner Stock
Fund?

Answer
SelectedAnswer:

0.386

Question 10
1 out of 1 points
Suppose two portfolios have the same average excess return, the same
standard deviation of returns, but Buckeye Fund has a higher beta
than Gator Fund. According to the Sharpe measure, the performance of
Buckeye Fund _________.

Answer

SelectedAnswer:

is the same as the performance of Gator Fund.

Question 1
0 out of 1 points
The following data relates to the performance of Sooner Stock Fund
and the market portfolio:

Average Return
Standard Deviation of
Returns
Beta
Residual Variance

Sooner
20%
44%

Market Portfoli
11%
19%

1.8
0.02

1.0
0

The risk-free return during the sample period was 3%.

Calculate the appraisal ratio for Sooner Stock Fund?

Answer

SelectedAnswer:

0.13

Question 2
1 out of 1 points
You want to evaluate three mutual funds using the Treynor measure for
performance evaluation. The risk-free return during the sample period
is 6%. The average returns, standard deviations, and betas for the
three funds are given below, in addition to information regarding the
S&P 500 index.

Fund A
Fund B
Fund C
S&P500

Average
Return
13%
19%
25%
18%

Standard
Deviation
10%
20%
30%
16%

Beta
0.5
1.0
1.5
1.0

The fund with the highest Treynor measure is __________.

Answer
SelectedAnswer:

Fund A

Question 3
1 out of 1 points
Suppose the risk-free return is 4%. The beta of a managed portfolio
is 1.2, the alpha is 1%, and the average return is 14%. Based on
Jensen's measure of portfolio performance, you would calculate the
return on the market portfolio as

Answer

SelectedAnswer:

11.5%

Question 4
1 out of 1 points

The following data relates to the performance of Sooner Stock Fund

and the market portfolio:

Average Return
Standard Deviation of
Returns
Beta
Residual Variance

Sooner
20%
44%

Market Portfoli
11%
19%

1.8
0.02

1.0
0

The risk-free return during the sample period was 3%.

What is the Treynor measure of performance evaluation for Sooner
Stock Fund?

Answer
SelectedAnswer:

0.0944

Question 5
1 out of 1 points
You want to evaluate three mutual funds using the Sharpe measure for
performance evaluation. The risk-free return during the sample period
is 6%. The average returns, standard deviations and betas for the
three funds are given below, as is the data for the S&P 500 index.

Fund A
Fund B
Fund C
S&P500

Average
Return
24%
12%
22%
18%

Standard
Deviation
30%
10%
20%
16%

Beta
1.5
0.5
1.0
1.0

The fund with the highest Sharpe measure is __________.

Answer
SelectedAnswer:

Fund C

Question 6
1 out of 1 points

Suppose you purchase 100 shares of GM stock at the beginning of year

1, and purchase another 100 shares at the end of year 1. You sell all
200 shares at the end of year 2. Assume that the price of GM stock is
$50 at the beginning of year 1, $55 at the end of year 1, and $65 at
the end of year 2. Assume no dividends were paid on GM stock. Your
dollar-weighted return on the stock will be __________ your timeweighted return on the stock.

Answer
SelectedAnswer:

higher than

Question 7
1 out of 1 points
Suppose two portfolios have the same average excess return, the same
standard deviation of returns, but portfolio A has a higher beta than
portfolio B. According to the Treynor measure, the performance of
portfolio A __________.

Answer

SelectedAnswer:

is poorer than the performance of portfolio B

Question 8
1 out of 1 points
The Jensen portfolio evaluation measure

Answer
Selected
Answer:

is an absolute measure of abnormal return above or below

that predicted by the CAPM.

Question 9
1 out of 1 points
The
measures the reward to volatility trade-off by
dividing the average portfolio excess return by the standard

deviation of returns.

Answer
SelectedAnswer:

Sharpe index

Question 10
1 out of 1 points
The following data relates to the performance of Sooner Stock Fund
and the market portfolio:

Sooner
Average Return
20%
Standard Deviation of Returns 44%
Beta
1.8
Residual Variance
0.02

Market Portfolio
11%
19%
1.0
0

The risk-free return during the sample period was 3%.

What is the Sharpe measure of performance evaluation for Sooner Stock
Fund?

Answer
SelectedAnswer:

0.386

Question 1
1 out of 1 points
Suppose you purchase 100 shares of GM stock at the beginning of year
1, and purchase another 100 shares at the end of year 1. You sell all
200 shares at the end of year 2. Assume that the price of GM stock is
$50 at the beginning of year 1, $55 at the end of year 1, and $65 at
the end of year 2. Assume no dividends were paid on GM stock. Your
dollar-weighted return on the stock will be __________ your timeweighted return on the stock.

Answer
SelectedAnswer:

higher than

 Question 2
1 out of 1 points
Suppose two portfolios have the same average excess return, the same
standard deviation of returns, but Buckeye Fund has a higher beta
than Gator Fund. According to the Sharpe measure, the performance of
Buckeye Fund _________.

Answer

SelectedAnswer:

is the same as the performance of Gator Fund.

Question 3
1 out of 1 points
You want to evaluate three mutual funds using the Treynor measure for
performance evaluation. The risk-free return during the sample period
is 6%. The average returns, standard deviations, and betas for the
three funds are given below, in addition to information regarding the
S&P 500 index.

Fund A
Fund B
Fund C
S&P500

Average
Return
13%
19%
25%
18%

Standard
Deviation
10%
20%
30%
16%

Beta
0.5
1.0
1.5
1.0

The fund with the highest Treynor measure is __________.

Answer
SelectedAnswer:

Fund A

Question 4
1 out of 1 points

You want to evaluate three mutual funds using the Sharpe measure for
performance evaluation. The risk-free return during the sample period
is 6%. The average returns, standard deviations and betas for the
three funds are given below, as is the data for the S&P 500 index.

Fund A
Fund B
Fund C
S&P500

Average
Return
24%
12%
22%
18%

Standard
Deviation
30%
10%
20%
16%

Beta
1.5
0.5
1.0
1.0

The fund with the highest Sharpe measure is __________.

Answer
SelectedAnswer:

Fund C

Question 5
1 out of 1 points
Suppose you own two stocks, A and B. In year 1, stock A earns a 2%
return and stock B earns a 9% return. In year 2, stock A earns an 18%
return and stock B earns an 11% return. Which stock has the higher
geometric average return?

Answer

SelectedAnswer:

stock B

Question 6
1 out of 1 points
The Jensen portfolio evaluation measure

Answer
Selected
Answer:

Question 7
1 out of 1 points

is an absolute measure of abnormal return above or below

that predicted by the CAPM.

The following data relates to the performance of Sooner Stock Fund

and the market portfolio:

Average Return
Standard Deviation of
Returns
Beta
Residual Variance

Sooner
20%
44%

Market Portfoli
11%
19%

1.8
0.02

1.0
0

The risk-free return during the sample period was 3%.

What is the Treynor measure of performance evaluation for Sooner
Stock Fund?

Answer
SelectedAnswer:

0.0944

Question 8
1 out of 1 points
The
measures the reward to volatility trade-off by
dividing the average portfolio excess return by the standard
deviation of returns.

Answer

SelectedAnswer:

Sharpe index

Question 9
1 out of 1 points

Suppose you buy 100 shares of Abolishing Dividend Corporation at the

beginning of year 1 for $80. Abolishing Dividend Corporation pays no
dividends. The stock price at the end of year 1 is $100, the price
$120 at the end of year 2, and the price is $150 at the end of year
3. The stock price declines to $100 at the end of year 4, and you
sell your 100 shares. For the four years, your geometric average
return per annum is

Answer

SelectedAnswer:

5.7%

Question 10
0 out of 1 points
The following data relates to the performance of Sooner Stock Fund
and the market portfolio:

Average Return
Standard Deviation of
Returns
Beta
Residual Variance

Sooner
20%
44%

Market Portfoli
11%
19%

1.8
0.02

1.0
0

The risk-free return during the sample period was 3%.

Calculate the appraisal ratio for Sooner Stock Fund?

Answer
SelectedAnswer:

0.23

OPTION MARKETS
Question 1
0 out of 1 points
SupposeyoupurchaseoneRIODec100callcontractat$5andwriteoneRIODec105call
contractat$2.Theoptioncontractsizeis1000sharespercontract.Themaximumpotential
profitofyourstrategyis
Answer

SelectedAnswer:

$5000

Question 2
1 out of 1 points

Theintrinsicvalueofanoutofthemoneycalloptionisequalto
Answer
SelectedAnswer:

zero.

Question 3
1 out of 1 points
AEuropeanputoptionallowstheholderto
Answer
SelectedAnswer:

CandD.

Question 4
0 out of 1 points

You buy one ANZ June 60 call contract and one June 60 put contract. The
call premium is $5 and the put premium is $3. The size of the option contract
is 1000 shares. The maximum loss from this position could be:

Answer
SelectedAnswer:

$2000

Question 5
0 out of 1 points

SupposeyoupurchaseoneRIOJan100callcontractat$5andwriteoneRIOJan105call
contractat$2.Theoptioncontractsizeis1000sharespercontract.If,atexpiration,the
priceofashareofRIOstockis$103,yourprofitwouldbe

Answer
SelectedAnswer:

$3000

Question 6
1 out of 1 points
Buyersofputoptionswouldprefera____inthevalueoftheunderlyingassetandsellersof
calloptionswouldprefera____inthevalueoftheunderlyingasset.
Answer

SelectedAnswer:

decrease;decrease

Question 7
1 out of 1 points
Themaximumlossforawriterofanakedstockcalloptionis
Answer
SelectedAnswer:

unlimited.

Question 8
1 out of 1 points
YouwriteoneRIOFebruary70putforapremiumof$5.Ignoringtransactionscosts,whatis
thebreakevenpriceofthisposition?
Answer

SelectedAnswer:

$65

 Question 9
1 out of 1 points
Themaximumlossabuyerofastockcalloption cansufferisequalto
Answer
SelectedAnswer:

thecallpremium.

Question 10
0 out of 1 points
ThesharesofCBAarecurrentlypricedat$50each.IfacalloptiononCBAhasanexercise
priceof$45,thecall
Answer

SelectedAnswer:

isinthemoney.

Question 1
1 out of 1 points
ThesharesofCBAarecurrentlypricedat$50each.IfacalloptiononCBAhasanexercise
priceof$45,thecall
Answer

SelectedAnswer:

BandC.

Question 2
1 out of 1 points
YoupurchaseoneSeptember50putcontractforaputpremiumof$2.Whatisthe

maximumprofitthatyoucouldgainfromthisstrategy?Theoptioncontractsizeis1000
sharespercontract.
Answer
SelectedAnswer:

$48,000

Question 3
1 out of 1 points
SupposeyoupurchaseoneRIODec100callcontractat$5andwriteoneRIODec105call
contractat$2.Theoptioncontractsizeis1000sharespercontract.Themaximumpotential
profitofyourstrategyis
Answer

SelectedAnswer:

$2000

Question 4
1 out of 1 points
Themaximumlossforawriterofanakedstockcalloptionis
Answer
SelectedAnswer:

unlimited.

Question 5
1 out of 1 points
Thepricethatatraderreceivesfromwritingastockoptionisthe

Answer

SelectedAnswer:

premium

Question 6
1 out of 1 points
Consider a one-year maturity call option and a one-year put option on the same
stock, both with striking price $100. If the risk-free rate is 5%, the stock price is $103,
and the put sells for $7.50, what should be the price of the call?
Answer

SelectedAnswer:

$15.26

Question 7
1 out of 1 points
Acalloptiononastockissaidtobeoutofthemoneyif
Answer
SelectedAnswer:

theexercisepriceishigherthanthestockprice.

Question 8
1 out of 1 points
Buyersofputoptionswouldprefera____inthevalueoftheunderlyingassetandsellersof
calloptionswouldprefera____inthevalueoftheunderlyingasset.
Answer

SelectedAnswer:

decrease;decrease

 Question 9
1 out of 1 points
AEuropeanputoptionallowstheholderto
Answer
SelectedAnswer:

CandD.

Question 10
1 out of 1 points
YouwriteoneRIOFebruary70putforapremiumof$5.Ignoringtransactionscosts,whatis
thebreakevenpriceofthisposition?
Answer

SelectedAnswer:

$65

OPTION MARKET VALUATION

Question 1
1 out of 1 points
If the stock price increases, the price of a put option on that stock
__________ and that of a call option __________.

Answer

SelectedAnswer:

decreases, increases

Question 2
1 out of 1 points
A hedge ratio of 0.70 implies that a hedged portfolio should consist

of stocks and options in the following proportion

Answer
SelectedAnswer:

long 0.70 shares for each short call.

Question 3
1 out of 1 points
Delta is defined as

Answer
Selected
Answer:

the change in the value of an option for a dollar change

in the price of the underlying asset.

Question 4
0 out of 1 points
A portfolio consists of 100 shares of stock and 2 call contracts on that stock. If the
hedge ratio for the call is 0.7, what would be the dollar change in the value of the
portfolio in response to a one dollar decline in the stock price?Eachcallcontracthas
1000underlyingshares.
Answer

SelectedAnswer:

-$1400

Question 5
0 out of 1 points
Other things equal, the price of a stock put option is positively
correlated with the following factors except

Answer

SelectedAnswer:

none of the above.

Question 6
1 out of 1 points
All the inputs in the Black-Scholes Option Pricing Model are directly
observable except

Answer
Selected
Answer:

the variance of returns of the underlying asset

return.

Question 7
1 out of 1 points
An American-style call option with six months to maturity has a strike
price of $35. The underlying stock now sells for $43. The call premium
is $12. What is the intrinsic value of the call?

Answer

SelectedAnswer:

$8

Question 8
0 out of 1 points
Prior to expiration

Answer
SelectedAnswer:

none of the above.

 Question 9
1 out of 1 points
You purchased a call option for a premium of $4. The call has an
exercise price of $29 and is expiring today. The current stock price
is $31. What would be your best course of action?

Answer

Selected
Answer:

Exercise the call because the stock price is greater

than the exercise price.

Question 10
1 out of 1 points
Portfolio A consists of 150 shares of stock and 300 calls on that stock. Portfolio B
consists of 575 shares of stock. The call delta is 0.7. Which portfolio has a higher
dollar exposure to a change in stock price?
Answer

SelectedAnswer:

Portfolio B

Question 1
1 out of 1 points
Other things equal, the price of a stock put option is positively
correlated with the following factors except

Answer

SelectedAnswer:

the stock price.

Question 2
1 out of 1 points

Portfolio A consists of 150 shares of stock and 300 calls on that stock. Portfolio B
consists of 575 shares of stock. The call delta is 0.7. Which portfolio has a higher
dollar exposure to a change in stock price?
Answer

SelectedAnswer:

Portfolio B

Question 3
1 out of 1 points
You purchased a call option for a premium of $4. The call has an
exercise price of $29 and is expiring today. The current stock price
is $31. What would be your best course of action?

Answer

Selected
Answer:

Exercise the call because the stock price is greater

than the exercise price.

Question 4
1 out of 1 points
An American-style call option with six months to maturity has a strike
price of $35. The underlying stock now sells for $43. The call premium
is $12. What is the intrinsic value of the call?

Answer

SelectedAnswer:

$8

Question 5
1 out of 1 points
Given: S0 = $35; X = $29; T = 180 days; r = 0.08 (annual); N(d1) =
0.7300; N(d2) = 0.6583. The value of the call option is _______.

Answer
SelectedAnswer:

$7.20

Question 6
1 out of 1 points
A normal distribution has the following properties:
I. the number of observations above the mean is equal to that below
the mean
II. if x is normally distributed with mean 0 and standard deviation
1, it is well documented that the probability that x will lie between
-1 and 1 is 0.95
III. normal distribution has fat tails

Answer
SelectedAnswer:

I only

Question 7
1 out of 1 points
Which one of the following variables influence the value of call
options?
I) Level of interest rates.
II) Time to expiration of the option.
III) exercise price.
IV) Stock price volatility.

Answer
SelectedAnswer:

I, II, III, and IV.

Question 8
1 out of 1 points
If the stock price increases, the price of a put option on that stock
__________ and that of a call option __________.

Answer
SelectedAnswer:

decreases, increases

Question 9
1 out of 1 points
Before expiration, the time value of an in the money call option is
always

Answer

SelectedAnswer:

positive.

Question 10
1 out of 1 points
A hedge ratio of 0.70 implies that a hedged portfolio should consist
of stocks and options in the following proportion

Answer

SelectedAnswer:

long 0.70 shares for each short call.