Trading Basics Coursera Quiz Answers

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Trading Basics Week 01 Quiz Answers

Quiz 1 Quiz Answers

Q1. Cash from operating activities includes __

all cash receipts and cash disbursements for routine sales and payments made in the course of doing business
all cash receipts and all cash disbursements for long-term business assets
all cash receipts and all cash disbursements for loans, contributions from owners, and distributions to owners
detailed estimates of the sources of cash and uses of cash

Q2. Stock that has been sold and then repurchased by the issuing corporation is called __ stock.

issued
treasury
outstanding
authorized

Q3. Harry & Co purchased books in July. The books were sold to customers in August. Harry & Co. received the final cash payments in September. According to the revenue recognition principle, when should revenue be recorded?

both August and September
September
July
August

Q4. Fishy & Co had revenues of $2,000, cost of goods sold of $780, advertising expense
of $100, and interest expense of $25. Net income was __.

$1,095
$1,120
$1,220
$1,195

Q5. The number of shares of stock a corporation may issue when a corporation is formed
is called __ shares.

treasury
issued
outstanding
authorized

Q6. Depreciation is __.

an increase in an asset’s value over time or usage
the revenue earned by a long-term asset over its useful life
the loss in market value of an asset
the allocation of a long-term asset’s cost to an expense account over the asset’s life

Q7. Accounts payable represents __.

expenses
amounts owed to the company by customers
shareholders’ equity
amounts owed by the company to suppliers

Q8. An accrual is __.

a transaction in which the exchange of dollars comes before the action takes place
a transaction in which the action comes before the exchange of cash
another term for a deferral
recorded when cash is paid in advance of receiving the service.

Trading Basics Week 02 Quiz Answers

Quiz 1

Q1. Use the information provided to analyze the profitability of SDHS Co using the
following ratios: return on assets

Sales	$ 350,000
Gross profit	206,500
Net income	115,000
Interest expense	2,875
Average total assets	875,000
Average total shareholders’ equity	500,000
Weighted-average common shares outstanding	25,000

The return on assets is

14%
13%
13.5%
14.5%

Q2. Use the information provided to analyze the profitability of SDHS Co using the following ratios: return on equity

Sales	$ 350,000
Gross profit	206,500
Net income	115,000
Interest expense	2,875
Average total assets	875,000
Average total shareholders’ equity	500,000
Weighted-average common shares outstanding	25,000

The return on equity is

23.0%
21%
35%
27%

Q3. Use the information provided to analyze the profitability of SDHS Co using the following ratios: gross profit ratio

Sales	$ 350,000
Gross profit	206,500
Net income	115,000
Interest expense	2,875
Average total assets	875,000
Average total shareholders’ equity	500,000
Weighted-average common shares outstanding	25,000

The gross profit ratio is

65%
45%
59%
50%

Q4. Use the information provided to analyze the profitability of SDHS Co using the following ratios: earnings per share. SDHS Co has no preferred stock.

Sales	$ 350,000
Gross profit	206,500
Net income	115,000
Interest expense	2,875
Average total assets	875,000
Average total shareholders’ equity	500,000
Weighted-average common shares outstanding	25,000

The earnings per share is

$3.60
$5.60
$4.60
$6.60

Q5. Analyze the liquidity of BooZara, a dog food manufacturer, using the current ratio, inventory turnover ratio, and accounts receivable turnover ratio.

All data are in millions

Cash = $ 961

Average net accounts receivable = 1,236

Average inventory = 2,092

Total current assets = 4,503

Total current liabilities = 3,847

Net credit sales = 19,050

Cost of goods sold = 14,954

The current ratio is

1.2
3.2
4.2
2.2

Q6. Analyze the liquidity of BooZara, a dog food manufacturer, using the current ratio, inventory turnover ratio, and accounts receivable turnover ratio.

All data are in millions

Cash = $ 961

Average net accounts receivable = 1,236

Average inventory = 2,092

Total current assets = 4,503

Total current liabilities = 3,847

Net credit sales = 19,050

Cost of goods sold = 14,954

The inventory turnover ratio is

7.1
8.1
9.1
10.1

Q7. Analyze the liquidity of BooZara, a dog food manufacturer, using the current ratio, inventory turnover ratio, and accounts receivable turnover ratio.

All data are in millions

Cash = $ 961

Average net accounts receivable = 1,236

Average inventory = 2,092

Total current assets = 4,503

Total current liabilities = 3,847

Net credit sales = 19,050

Cost of goods sold = 14,954

The accounts receivable turnover ratio is

15.4
14.4
13.4
16.4

Q8. The following selected information is from Cloudy’s annual report for the years ended December 31:

2012	2011	2010
Sales	$ 44,000	$ 29,300	$ 23,200
Interest expense	1,000	300	200
Net income	12,000	8,000	6,000
Total assets	46,500	26,000	16,000

Refer to the annual report above. Calculate the asset turnover ratio for 2010.

1.45 times
1.10 times
The answer cannot be determined from the information given
0.375 times

Q9. The following selected information is from Cloudy’s annual report for the years ended December 31:

2012	2011	2010
Sales	$ 44,000	$ 29,300	$ 23,200
Interest expense	1,000	300	200
Net income	12,000	8,000	6,000
Total assets	46,500	26,000	16,000

Refer to the annual report above. Calculate the asset turnover ratio for 2011

1.4 times
0.375 times
The answer cannot be determined from the information given.
1.1 times

Q10. The following selected information is from Cloudy’s annual report for the years ended December 31:

2012	2011	2010
Sales	$ 44,000	$ 29,300	$ 23,200
Interest expense	1,000	300	200
Net income	12,000	8,000	6,000
Total assets	46,500	26,000	16,000

Refer to the Acme annual report above. Which of the following statements is TRUE
about the asset turnover ratio for 2011 and 2012?

The asset turnover ratio increased in 2012 because management was using the
company’s assets less efficiently
The asset turnover ratio decreased in 2012 because management was using the company’s assets less efficiently
The asset turnover ratio decreased in 2012 because management was using the
company’s assets more efficiently
The asset turnover ratio increased in 2012 because management was using the company’s assets more efficiently

Q11.

Assets		Liabilities & shareholders’ equity
Cash	$ 10,000	Accounts payable	$ 20,750
Accounts receivable	2,030	Wages payable	1, 220
Supplies	180	Notes payable (due in 2 years)	8,000
Prepaid insurance	2,000
Equipment	25,000	Common stock	100,000
Building	110,000	Retained earnings	19,240

Calculate the current ratio

0.65
1.5
1.15
2.15

Q12. Liquidity __.

measures how easily a company can turn its long-term assets into cash
represents the amount of financial risk a company assumes
measures how easily a company can pay its debts as they come due
is always higher for large companies than for small companies

Trading Basics Week 03 Quiz Answers

Quiz 1

Q1. The one-year return distribution of GEM Inc stock is given below. Calculate the Expected Return.

2.75%
10%
0%
7.5%

Q2. The one-year return distribution of GEM Inc stock is given below. Calculate the volatility or standard deviation.

11.245%
10.256%
12.453 %
9.549 %

Q3.

Stock 1	Stock 2
Beta	1.2	0.4
Idiosyncratic Risk	0.05	0.07

What is the systematic risk of stock 1, under the single factor model?

Systematic Risk = 0.1296
Systematic Risk = 0.1926
Systematic Risk = 0.1392
Systematic Risk = 0.1475

Q4. The following are the details of three stocks

X	Y	Z
Mean Return	15%	?	25%
Beta	1	3	2

What should be the mean return of stock Y so that there are no arbitrage opportunities in the market?

30%
40%
45%
35%

Q5. The arbitrage price portfolio is assumed to have

only unique risk
only market risk
an expected return of 0
no risk

Q6. Pure factor portfolios have _ sensitivity to the factor

unit
increasing
zero
pure

Q7. Consider the multi-factor APT model with two factors. The risk premium on factor 1 and 2 portfolios are 8% and 3% respectively. Stock A has a beta of 1.3 on factor 1 and a beta of 0.7 on factor 2. The expected return on Stock A is 14%. If no arbitrage opportunities exist, the risk-free rate is

3.5%
14%
2.5%
1.5%

Trading Basics Week 04 Quiz Answers

Quiz 1

Q1. The market opens at 9:30 AM, at which point 15,000 shares of ABC stock trade at $35.66 a share.

• You decide to trade to buy 1,800 shares of ABC at 10:50 AM. The best bid and ask prices at this time are $36.05 and $36.08, respectively.

• Another trader’s order executes at 11:25 AM at a price of $36.20 for 850 shares. The best bid and ask prices at this time are $36.20 and $36.22, respectively.

• At 11:59 AM, 690 shares of your order gets executed at a price of $36.05. The best bid and ask prices at this time are $36.20 and $36.05, respectively.

• Another trader’s order for 3,000 shares is executed at 2:16 PM at a price of $36.15.

• At 3:50 PM, another 795 shares of yours are executed at $36.03. The best bid and ask prices at this time are $35.99 and $36.03, respectively.

• Finally the market closes at 4 PM, when the best bid and ask prices are $35.91 and $35.94, respectively.

• Assume that there are no other transactions in ABC stock during the day.

Calculate the TWAP benchmark.

32.324
39.895
30.028
36.018

Q2. The market opens at 9:30 AM, at which point 15,000 shares of ABC stock trade at $35.66 a share.

• You decide to trade to buy 1,800 shares of ABC at 10:50 AM. The best bid and ask prices at this time are $36.05 and $36.08, respectively.

• Another trader’s order executes at 11:25 AM at a price of $36.20 for 850 shares. The best bid and ask prices at this time are $36.20 and $36.22, respectively.

• At 11:59 AM, 690 shares of your order gets executed at a price of $36.05. The best bid and ask prices at this time are $36.20 and $36.05, respectively.

• Another trader’s order for 3,000 shares is executed at 2:16 PM at a price of $36.15.

• At 3:50 PM, another 795 shares of yours are executed at $36.03. The best bid and ask prices at this time are $35.99 and $36.03, respectively.

• Finally the market closes at 4 PM, when the best bid and ask prices are $35.91 and $35.94, respectively.

• Assume that there are no other transactions in ABC stock during the day.

What is the transaction cost according to the TWAP benchmark?

21.62
51.62
31.62
41.62

Q3. The market opens at 9:30 AM, at which point 15,000 shares of ABC stock trade at $35.66 a share.

• You decide to trade to buy 1,800 shares of ABC at 10:50 AM. The best bid and ask prices at this time are $36.05 and $36.08, respectively.

• Another trader’s order executes at 11:25 AM at a price of $36.20 for 850 shares. The best bid and ask prices at this time are $36.20 and $36.22, respectively.

• At 11:59 AM, 690 shares of your order gets executed at a price of $36.05. The best bid and ask prices at this time are $36.20 and $36.05, respectively.

• Another trader’s order for 3,000 shares is executed at 2:16 PM at a price of $36.15.

• At 3:50 PM, another 795 shares of yours are executed at $36.03. The best bid and ask prices at this time are $35.99 and $36.03, respectively.

• Finally the market closes at 4 PM, when the best bid and ask prices are $35.91 and $35.94, respectively.

• Assume that there are no other transactions in ABC stock during the day.

Calculate the VWAP benchmark.

25.782
45.782
55.782
35.782

Q4. The market opens at 9:30 AM, at which point 15,000 shares of ABC stock trade at $35.66 a share.

• You decide to trade to buy 1,800 shares of ABC at 10:50 AM. The best bid and ask prices at this time are $36.05 and $36.08, respectively.

• Another trader’s order executes at 11:25 AM at a price of $36.20 for 850 shares. The best bid and ask prices at this time are $36.20 and $36.22, respectively.

• At 11:59 AM, 690 shares of your order gets executed at a price of $36.05. The best bid and ask prices at this time are $36.20 and $36.05, respectively.

• Another trader’s order for 3,000 shares is executed at 2:16 PM at a price of $36.15.

• At 3:50 PM, another 795 shares of yours are executed at $36.03. The best bid and ask prices at this time are $35.99 and $36.03, respectively.

• Finally the market closes at 4 PM, when the best bid and ask prices are $35.91 and $35.94, respectively.

• Assume that there are no other transactions in ABC stock during the day.

What is the transaction cost according to the VWAP benchmark?

381.25
401.25
411.25
391.25

Q5. The market opens at 9:30 AM, at which point 15,000 shares of ABC stock trade at $35.66 a share.

• You decide to trade to buy 1,800 shares of ABC at 10:50 AM. The best bid and ask prices at this time are $36.05 and $36.08, respectively.

• Another trader’s order executes at 11:25 AM at a price of $36.20 for 850 shares. The best bid and ask prices at this time are $36.20 and $36.22, respectively.

• At 11:59 AM, 690 shares of your order gets executed at a price of $36.05. The best bid and ask prices at this time are $36.20 and $36.05, respectively.

• Another trader’s order for 3,000 shares is executed at 2:16 PM at a price of $36.15.

• At 3:50 PM, another 795 shares of yours are executed at $36.03. The best bid and ask prices at this time are $35.99 and $36.03, respectively.

• Finally the market closes at 4 PM, when the best bid and ask prices are $35.91 and $35.94, respectively.

• Assume that there are no other transactions in ABC stock during the day.

Calculate the ‘decision time bid ask mid-point’ benchmark.

35.035
36.165
36.065
35.165

Q6.

• The market opens at 9:30 AM, at which point 15,000 shares of ABC stock trade at $35.66 a share.

• You decide to trade to buy 1,800 shares of ABC at 10:50 AM. The best bid and ask prices at this time are $36.05 and $36.08, respectively.

• Another trader’s order executes at 11:25 AM at a price of $36.20 for 850 shares. The best bid and ask prices at this time are $36.20 and $36.22, respectively.

• At 11:59 AM, 690 shares of your order gets executed at a price of $36.05. The best bid and ask prices at this time are $36.20 and $36.05, respectively.

• Another trader’s order for 3,000 shares is executed at 2:16 PM at a price of $36.15.

• At 3:50 PM, another 795 shares of yours are executed at $36.03. The best bid and ask prices at this time are $35.99 and $36.03, respectively.

• Finally the market closes at 4 PM, when the best bid and ask prices are $35.91 and $35.94, respectively.

• Assume that there are no other transactions in ABC stock during the day.

What is the transaction cost as per the implementation shortfall method?

-49.20
39.20
49.20
-39.20

Q7.