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FINA 3315 PRACTICE EXAM 2 2026
ACTUAL QUESTIONS WITH VERIFIED
ANSWERS.
Matt owns 500 shares of IKM stock. The market price of IKM is
$51.74. Matt just sold five calls on IKM with a strike price of
$50. This is known as - correct answer-writing a covered call.
Mutual funds often report returns as the growth of $10,000 over
a period of time. These returns assume that - correct answer-all
dividends and capital gains are reinvested
Beta is the slope of the best fit line for the points with
coordinates representing the ________ and the ________ for
each one of several years. - correct answer-market rate of
return; security's rate of return
Beta can be defined as the slope of the line that explains the
relationship between - correct answer-the return on a security
and the return on the market.
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Consider the following statements about a futures
clearinghouse:
Statement 1: "A clearinghouse in futures contracts allows for
the offsetting of contracts prior to delivery."
Statement 2: "A clearing house in futures contracts collects
initial margin (performance bonds) from both the long and
short sides in the contract."
Are the statements most likely correct or incorrect? - correct
answer-B. Both statements are correct.
In January, JB stock was selling for $50 per share. When the
calls and the puts with a strike price of $45 expired on
March 20, JB was selling at $46. Which investors made a
profit?
I. the writer of the call
II. the buyer of the call
III. the writer of the put
IV. the buyer of the put - correct answer-D. II and III
The dividend valuation model (DVM) cannot accommodate
which of the following assumptions? - correct answer-a
constant growth rate of dividends greater than the required rate
of return
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Which one of the following statements concerning financial
futures is correct? - correct answer-Except for short term
securities, interest rate futures are quoted based on a
percentage of the par value of the underlying debt security.
The major advantages of futures options over futures contracts
include
I. positions can be hedged with a smaller commitment of
capital.
II. potential losses are limited to the size of the contract.
III. greater leverage and the potential for higher percentage
returns.
IV. a greater variety of commodities is available for speculating
or hedging purposes. - correct answer-B. I, II and III only
Which of the following statements concerning put options are
correct? - correct answer-B. The writer of a put profits if the
price of the underlying stock rises
Which of the following methods might be used to protect a profit
on a diversified portfolio of stocks?
A. Buy put options on a S & P 500 based ETF.
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B. Write S&P 500 Index put options.
C. Buy S&P 500 Index put options.
D. Either A or B, but not C - correct answer-D. Either A or B, but
not C
Which one of the following statements is correct?
A. The market responds immediately to reflect the information
contained in quarterly earnings
reports.
B. Low P/E stocks tend to outperform high P/E stocks on a risk
− adjusted basis.
C. The weekend effect states that security prices tend to rise
between Friday afternoon and
Monday morning.
D. The market fully anticipates the information contained in an
earnings announcement prior to
the actual announcement. - correct answer-B. Low P/E stocks
tend to outperform high P/E stocks on a risk − adjusted basis.
Which of the following characteristics apply to exchange −
traded funds (ETFs)?
I. unlimited number of outstanding shares
II. typically track the performance of some index
III. market prices reflect demand for the fund rather than NAV.
FINA 3315 PRACTICE EXAM 2 2026
ACTUAL QUESTIONS WITH VERIFIED
ANSWERS.
Matt owns 500 shares of IKM stock. The market price of IKM is
$51.74. Matt just sold five calls on IKM with a strike price of
$50. This is known as - correct answer-writing a covered call.
Mutual funds often report returns as the growth of $10,000 over
a period of time. These returns assume that - correct answer-all
dividends and capital gains are reinvested
Beta is the slope of the best fit line for the points with
coordinates representing the ________ and the ________ for
each one of several years. - correct answer-market rate of
return; security's rate of return
Beta can be defined as the slope of the line that explains the
relationship between - correct answer-the return on a security
and the return on the market.
, Page | 2
Consider the following statements about a futures
clearinghouse:
Statement 1: "A clearinghouse in futures contracts allows for
the offsetting of contracts prior to delivery."
Statement 2: "A clearing house in futures contracts collects
initial margin (performance bonds) from both the long and
short sides in the contract."
Are the statements most likely correct or incorrect? - correct
answer-B. Both statements are correct.
In January, JB stock was selling for $50 per share. When the
calls and the puts with a strike price of $45 expired on
March 20, JB was selling at $46. Which investors made a
profit?
I. the writer of the call
II. the buyer of the call
III. the writer of the put
IV. the buyer of the put - correct answer-D. II and III
The dividend valuation model (DVM) cannot accommodate
which of the following assumptions? - correct answer-a
constant growth rate of dividends greater than the required rate
of return
, Page | 3
Which one of the following statements concerning financial
futures is correct? - correct answer-Except for short term
securities, interest rate futures are quoted based on a
percentage of the par value of the underlying debt security.
The major advantages of futures options over futures contracts
include
I. positions can be hedged with a smaller commitment of
capital.
II. potential losses are limited to the size of the contract.
III. greater leverage and the potential for higher percentage
returns.
IV. a greater variety of commodities is available for speculating
or hedging purposes. - correct answer-B. I, II and III only
Which of the following statements concerning put options are
correct? - correct answer-B. The writer of a put profits if the
price of the underlying stock rises
Which of the following methods might be used to protect a profit
on a diversified portfolio of stocks?
A. Buy put options on a S & P 500 based ETF.
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B. Write S&P 500 Index put options.
C. Buy S&P 500 Index put options.
D. Either A or B, but not C - correct answer-D. Either A or B, but
not C
Which one of the following statements is correct?
A. The market responds immediately to reflect the information
contained in quarterly earnings
reports.
B. Low P/E stocks tend to outperform high P/E stocks on a risk
− adjusted basis.
C. The weekend effect states that security prices tend to rise
between Friday afternoon and
Monday morning.
D. The market fully anticipates the information contained in an
earnings announcement prior to
the actual announcement. - correct answer-B. Low P/E stocks
tend to outperform high P/E stocks on a risk − adjusted basis.
Which of the following characteristics apply to exchange −
traded funds (ETFs)?
I. unlimited number of outstanding shares
II. typically track the performance of some index
III. market prices reflect demand for the fund rather than NAV.
