Question 1

The Standard & Poor's 500 is ________ weighted index.

Accepted Answer

A)   an equally
B)   a price-
C)   a value-
D)   a share-E) A) and B)
F) C) and D)

Question 2

Which of the following reforms were not included in 2014 regulations regarding money market funds?

Accepted Answer

A)   Institutional funds will "float" the prices of their shares.
B)   Funds can limit redemptions or impose a 2% fee if assets fall by more than 30%.
C)   increased disclosure of assets' values and liquidity
D)   All of the options were included.E) A) and B)
F) A) and C)

Question 3

Large well-known companies often issue their own short-term unsecured debt notes directly to the public, rather than borrowing from banks; their notes are called ________.

Accepted Answer

A)   certificates of deposit
B)   repurchase agreements
C)   bankers' acceptances
D)   commercial paperE) A) and C)
F) A) and D)

Question 4

Which one of the following provides the best example of securitization?

Accepted Answer

A)   convertible bond
B)   call option
C)   mortgage pass-through security
D)   preferred stockE) B) and D)
F) B) and C)

Question 5

Which one of the following is a true statement regarding corporate bonds?

Accepted Answer

A)   A corporate callable bond gives its holder the right to exchange it for a specified number of the company's common shares.
B)   A corporate debenture is a secured bond.
C)   A corporate convertible bond gives its holder the right to exchange it for a specified number of the company's common shares.
D)   Holders of corporate bonds have voting rights in the company.E) A) and D)
F) A) and B)

Question 6

Deposits of commercial banks at the Federal Reserve are called ________.

Accepted Answer

A)   bankers' acceptances
B)   federal funds
C)   repurchase agreements
D)   time depositsE) None of the above
F) B) and D)

Question 7

Investors will earn higher rates of returns on TIPS than on equivalent default-risk standard bonds if ________.

Accepted Answer

A)   inflation is lower than anticipated over the investment period
B)   inflation is higher than anticipated over the investment period
C)   the U.S. dollar increases in value against the euro
D)   the spread between commercial paper and Treasury securities remains lowE) A) and D)
F) None of the above

Question 8

If you thought prices of stock would be rising over the next few months, you might want to ________ on the stock.

Accepted Answer

A)   purchase a call option
B)   purchase a put option
C)   sell a futures contract
D)   place a short-sale orderE) All of the above
F) B) and C)

Question 9

A stock quote indicates a stock price of $60 and a dividend yield of 3%. The latest quarterly dividend received by stock investors must have been ________ per share.

Accepted Answer

A)   $0.55
B)   $1.80
C)   $0.45
D)   $1.25E) B) and D)
F) B) and C)

Question 10

The Hydro Index is a price weighted stock index based on the 5 largest boat manufacturers in the nation. The stock prices for the five stocks are $10, $20, $80, $50 and $40. The price of the last stock was just split 2 for 1 and the stock price was halved from $40 to $20. What is the new divisor for a price weighted index?

Accepted Answer

A)   5.00
B)   4.85
C)   4.50
D)   4.75E) C) and D)
F) None of the above

Question 11

A firm that has large securities holdings and wishes to raise money for a short length of time may be able to find the cheapest financing from which of the following?

Accepted Answer

A)   reverse repurchase agreement
B)   bankers' acceptance
C)   commercial paper
D)   repurchase agreementE) A) and D)
F) C) and D)

Question 12

Preferred stock is like long-term debt in that ________.

Accepted Answer

A)   it gives the holder voting power regarding the firm's management
B)   it promises to pay to its holder a fixed stream of income each year
C)   the preferred dividend is a tax-deductible expense for the firm
D)   in the event of bankruptcy preferred stock has equal status with debtE) A) and B)
F) A) and C)

Question 13

A bond that has no collateral is called a ________.

Accepted Answer

A)   callable bond
B)   debenture
C)   junk bond
D)   mortgageE) C) and D)
F) None of the above

Question 14

A tax free municipal bond provides a yield of 3.2%. What is the equivalent taxable yield on the bond given a 35% tax bracket?

Accepted Answer

A)   3.2%
B)   3.68%
C)   4.92%
D)   5%E) B) and D)
F) C) and D)

Question 15

The minimum tick size, or spread between prices in the Treasury bond market, is

Accepted Answer

A)   1/8 of a point.
B)   1/16 of a point.
C)   1/32 of a point.
D)   1/128 of a point.E) All of the above
F) C) and D)

Question 16

An individual who goes short in a futures position ________.

Accepted Answer

A)   commits to delivering the underlying commodity at contract maturity
B)   commits to purchasing the underlying commodity at contract maturity
C)   has the right to deliver the underlying commodity at contract maturity
D)   has the right to purchase the underlying commodity at contract maturityE) A) and D)
F) None of the above

Question 17

The yield on tax-exempt bonds is ________.

Accepted Answer

A)   usually less than 50% of the yield on taxable bonds
B)   normally about 90% of the yield on taxable bonds
C)   greater than the yield on taxable bonds
D)   less than the yield on taxable bondsE) A) and B)
F) A) and C)

Question 18

When computing the bank discount yield, you would use ________ days in the year.

Accepted Answer

A)   260
B)   360
C)   365
D)   366E) B) and C)
F) A) and D)

Question 19

What would you expect to have happened to the spread between yields on commercial paper and Treasury bills immediately after September 11, 2001?

Accepted Answer

A)   no change, as both yields will remain the same
B)   increase, as the spread usually increases in response to a crisis
C)   decrease, as the spread usually decreases in response to a crisis
D)   no change, as both yields will move in the same directionE) B) and C)
F) A) and B)

Question 20

The bid price of a Treasury bill is ________.

Accepted Answer

A)   the price at which the dealer in Treasury bills is willing to sell the bill
B)   the price at which the dealer in Treasury bills is willing to buy the bill
C)   greater than the ask price of the Treasury bill expressed in dollar terms
D)   the price at which the investor can buy the Treasury billE) B) and C)
F) C) and D)

Exam 2: Asset Classes and Financial Instruments

If you thought prices of stock would be rising over the next few months, you might want to ________ on the stock.

Correct Answer
verified

Investors will earn higher rates of returns on TIPS than on equivalent default-risk standard bonds if ________.

Correct Answer
verified

Large well-known companies often issue their own short-term unsecured debt notes directly to the public, rather than borrowing from banks; their notes are called ________.

Correct Answer
verified

An individual who goes short in a futures position ________.

Correct Answer
verified

Deposits of commercial banks at the Federal Reserve are called ________.

Correct Answer
verified

A bond that has no collateral is called a ________.

Correct Answer
verified

Which one of the following is a true statement regarding corporate bonds?

Correct Answer
verified

Correct Answer
verified

Which one of the following provides the best example of securitization?

Correct Answer
verified

A stock quote indicates a stock price of $60 and a dividend yield of 3%. The latest quarterly dividend received by stock investors must have been ________ per share.

Correct Answer
verified

A tax free municipal bond provides a yield of 3.2%. What is the equivalent taxable yield on the bond given a 35% tax bracket?

Correct Answer
verified

The Standard & Poor's 500 is ________ weighted index.

Correct Answer
verified

The yield on tax-exempt bonds is ________.

Correct Answer
verified

Which of the following reforms were not included in 2014 regulations regarding money market funds?

Correct Answer
verified

Preferred stock is like long-term debt in that ________.

Correct Answer
verified

The minimum tick size, or spread between prices in the Treasury bond market, is

Correct Answer
verified

A firm that has large securities holdings and wishes to raise money for a short length of time may be able to find the cheapest financing from which of the following?

Correct Answer
verified

The bid price of a Treasury bill is ________.

Correct Answer
verified

When computing the bank discount yield, you would use ________ days in the year.

Correct Answer
verified

What would you expect to have happened to the spread between yields on commercial paper and Treasury bills immediately after September 11, 2001?

Correct Answer
verified

Exam 2: Asset Classes and Financial Instruments

If you thought prices of stock would be rising over the next few months, you might want to ________ on the stock.

Correct AnswerverifiedShow Answer

Investors will earn higher rates of returns on TIPS than on equivalent default-risk standard bonds if ________.

Correct AnswerverifiedShow Answer

Large well-known companies often issue their own short-term unsecured debt notes directly to the public, rather than borrowing from banks; their notes are called ________.

Correct AnswerverifiedShow Answer

An individual who goes short in a futures position ________.

Correct AnswerverifiedShow Answer

Deposits of commercial banks at the Federal Reserve are called ________.

Correct AnswerverifiedShow Answer

A bond that has no collateral is called a ________.

Correct AnswerverifiedShow Answer

Which one of the following is a true statement regarding corporate bonds?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following provides the best example of securitization?

Correct AnswerverifiedShow Answer

A stock quote indicates a stock price of $60 and a dividend yield of 3%. The latest quarterly dividend received by stock investors must have been ________ per share.

Correct AnswerverifiedShow Answer

A tax free municipal bond provides a yield of 3.2%. What is the equivalent taxable yield on the bond given a 35% tax bracket?

Correct AnswerverifiedShow Answer

The Standard & Poor's 500 is ________ weighted index.

Correct AnswerverifiedShow Answer

The yield on tax-exempt bonds is ________.

Correct AnswerverifiedShow Answer

Which of the following reforms were not included in 2014 regulations regarding money market funds?

Correct AnswerverifiedShow Answer

Preferred stock is like long-term debt in that ________.

Correct AnswerverifiedShow Answer

The minimum tick size, or spread between prices in the Treasury bond market, is

Correct AnswerverifiedShow Answer

A firm that has large securities holdings and wishes to raise money for a short length of time may be able to find the cheapest financing from which of the following?

Correct AnswerverifiedShow Answer

The bid price of a Treasury bill is ________.

Correct AnswerverifiedShow Answer

When computing the bank discount yield, you would use ________ days in the year.

Correct AnswerverifiedShow Answer

What would you expect to have happened to the spread between yields on commercial paper and Treasury bills immediately after September 11, 2001?

Correct AnswerverifiedShow Answer

Correct Answer
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