A 10-year government zero coupon bond is currently yielding 6.4%. If in 10 years, you expect a two year government zero coupon bond to provide a yield of 10.7%, what must the yield be on a 12-year zero coupon bond today in order for you to be indifferent between the 10-year bond and the 12-year bond?

• A.7.1%
• B.7.7%
• C.8.4%

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According to the matching principle

• A.a firm's operating performance is measured properly when revenues and expenses related to one another in a given time period are taken into account.
• B.a firm should match the value of its assets and liabilities on the balance sheet.
• C.a firm should match its depreciation accounting for tax and reporting purposes.

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Under the semi-strong form of the EMH, a company announcing stronger-than-expected earnings would present most investors with what type of abnormal profit opportunity?

• A.no profit opportunity, because prices will adjust rapidly to the information
• B.no profit opportunity for small investors but the potential for modest profit for large, sophisticated investors such as mutual funds
• C.the potential for a modest profit as long as the investor acts within one or two hours

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Which of the following combinations would not be a likely outcome by combining an interest rate swap with a currency swap?

• A.A floating rate in the U.S. dollar swapped for fixing rate in foreign currency.
• B.A fixed rate in the U.S. dollar swapped for floating rate in U.S. dollar.
• C.A fixed rate in the U.S. dollar swapped for floating rate in a foreign currency.

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The Board of Governors of the Nottingham Share Exchange wishes to publish an index using all three issues currently listed. They want to know how index performance might be affected by the choice of a price-weighted, a value-weighted or an unweighted index. Advise them how the index would have changed on February 18, a day when no splits occurred, based upon the following data:

• A.Price-Weighted and Value-Weighted Indices Up, Unweighted Index Unchanged.
• B.Price-Weighted Index Up, Value-Weighted and Unweighted Indices Down.
• C.Price-Weighted Index Up, Value-Weighted Index Down, Unweighted Index Up.

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