Question 1

The largest component of the money market is/are

Accepted Answer

A) repurchase agreements. 
B) money market mutual funds. 
C) T-bills. 
D) Eurodollars. 
E) savings deposits. 
A) repurchase agreements. 
B) money market mutual funds. 
C) T-bills. 
D) Eurodollars. 
E) savings deposits.

Question 2

The money market is a subsector of the

Accepted Answer

A) commodity market. 
B) capital market. 
C) derivatives market. 
D) equity market. 
E) None of the options are correct. 
A) commodity market. 
B) capital market. 
C) derivatives market. 
D) equity market. 
E) None of the options are correct.

Question 3

The index that includes the largest number of actively-traded stocks is

Accepted Answer

A) the NASDAQ Composite Index. 
B) the NYSE Composite Index. 
C) the Wilshire 5000 Index. 
D) the Value Line Composite Index. 
A) the NASDAQ Composite Index. 
B) the NYSE Composite Index. 
C) the Wilshire 5000 Index. 
D) the Value Line Composite Index.

Question 4

The ultimate stock index in the U.S.is the

Accepted Answer

A) Wilshire 5000. 
B) DJIA. 
C) S&P 500. 
D) Russell 2000. 
A) Wilshire 5000. 
B) DJIA. 
C) S&P 500. 
D) Russell 2000.

Question 5

If a Treasury note has a bid price of $995, the quoted bid price in the Wall Street Journal would be

Accepted Answer

A) 99:50. 
B) 99:16. 
C) 99:80. 
D) 99:24. 
A) 99:50. 
B) 99:16. 
C) 99:80. 
D) 99:24.

Question 6

Suppose an investor is considering a corporate bond with a 7.17% before-tax yield and a municipal bond with a 5.93% before-tax yield.At what marginal tax rate would the investor be indifferent between investing in the corporate and investing in the muni?

Accepted Answer

A) 15.4% 
B) 23.7% 
C) 39.5% 
D) 17.3% 
A) 15.4% 
B) 23.7% 
C) 39.5% 
D) 17.3%

Question 7

Which of the following is not a characteristic of a money market instrument?

Accepted Answer

A) Liquidity 
B) Marketability 
C) Long maturity 
D) Liquidity premium 
E) Long maturity and liquidity premium 
A) Liquidity 
B) Marketability 
C) Long maturity 
D) Liquidity premium 
E) Long maturity and liquidity premium

Question 8

For a taxpayer in the 15% marginal tax bracket, a 15-year municipal bond currently yielding 6.2% would offer an equivalent taxable yield of

Accepted Answer

A) 6.2%. 
B) 5.27%. 
C) 8.32%. 
D) 7.29%. 
A) 6.2%. 
B) 5.27%. 
C) 8.32%. 
D) 7.29%.

Question 9

In order for you to be indifferent between the after-tax returns on a corporate bond paying 7% and a tax-exempt municipal bond paying 5.5%, what would your tax bracket need to be?

Accepted Answer

A) 22.6% 
B) 21.4% 
C) 26.2% 
D) 19.8% 
A) 22.6% 
B) 21.4% 
C) 26.2% 
D) 19.8%

Question 10

Which of the following is not a component of the money market?

Accepted Answer

A) Repurchase agreements 
B) Eurodollars 
C) Real estate investment trusts 
D) Money market mutual funds 
A) Repurchase agreements 
B) Eurodollars 
C) Real estate investment trusts 
D) Money market mutual funds

Question 11

Consider the following three stocks:   The value-weighted index constructed with the three stocks using a divisor of 100 is

Accepted Answer

A) 1.2. 
B) 1200. 
C) 490. 
D) 4900. 
A) 1.2. 
B) 1200. 
C) 490. 
D) 4900.

Question 12

Which of the following statement(s) is (are) true regarding municipal bonds? I) A municipal bond is a debt obligation issued by state or local governments.
II) A municipal bond is a debt obligation issued by the federal government.
III) The interest income from a municipal bond is exempt from federal income taxation.
IV) The interest income from a municipal bond is exempt from state and local taxation in the issuing state.

Accepted Answer

A) I and II only 
B) I and III only 
C) I, II, and III only 
D) I, III, and IV only 
A) I and II only 
B) I and III only 
C) I, II, and III only 
D) I, III, and IV only

Question 13

Which of the following is not a mortgage-related government or government-sponsored agency?

Accepted Answer

A) The Federal Home Loan Bank 
B) The Federal National Mortgage Association 
C) The U.S.Treasury 
D) Freddie Mac 
A) The Federal Home Loan Bank 
B) The Federal National Mortgage Association 
C) The U.S.Treasury 
D) Freddie Mac

Question 14

Certificates of deposit are insured for up to ____________ in the event of bank insolvency.

Accepted Answer

A) $10,000 
B) $100,000 
C) $250,000 
D) $500,000 
A) $10,000 
B) $100,000 
C) $250,000 
D) $500,000

Question 15

A U.S.dollar-denominated bond that is sold in Singapore is a(n)

Accepted Answer

A) Eurobond. 
B) Yankee bond. 
C) Samurai bond. 
D) Bulldog bond. 
A) Eurobond. 
B) Yankee bond. 
C) Samurai bond. 
D) Bulldog bond.

Question 16

A form of short-term borrowing by dealers in government securities is (are)

Accepted Answer

A) reserve requirements. 
B) repurchase agreements. 
C) bankers' acceptances. 
D) commercial paper. 
A) reserve requirements. 
B) repurchase agreements. 
C) bankers' acceptances. 
D) commercial paper.

Question 17

The ____ index represents the performance of the Japanese stock market.

Accepted Answer

A) DAX 
B) FTSE 
C) Nikkei 
D) Hang Seng 
A) DAX 
B) FTSE 
C) Nikkei 
D) Hang Seng

Question 18

You purchased a futures contract on corn at a futures price of 3.31, and at the time of expiration, the price was 3.43.What was your profit or loss?

Accepted Answer

A) -$12.00 
B) $12.00 
C) -$600 
D) $600 
A) -$12.00 
B) $12.00 
C) -$600 
D) $600

Question 19

Which of the following indices is(are) market-value weighted? I) The New York Stock Exchange Composite Index
II) The S&P/TSX Composite Index
III) The Dow Jones Industrial Average

Accepted Answer

A) I only 
B) I and II only 
C) I and III only 
D) I, II, and III 
A) I only 
B) I and II only 
C) I and III only 
D) I, II, and III

Question 20

Corporations can exclude ____________% of the dividends received from preferred stock from taxes.

Accepted Answer

A) 50 
B) 70 
C) 20 
D) 15 
A) 50 
B) 70 
C) 20 
D) 15

Exam 2: Financial Markets, Asset Classes and Financial Instruments

The largest component of the money market is/are

The money market is a subsector of the

The index that includes the largest number of actively-traded stocks is

The ultimate stock index in the U.S.is the

If a Treasury note has a bid price of $995, the quoted bid price in the Wall Street Journal would be

Suppose an investor is considering a corporate bond with a 7.17% before-tax yield and a municipal bond with a 5.93% before-tax yield.At what marginal tax rate would the investor be indifferent between investing in the corporate and investing in the muni?

Which of the following is not a characteristic of a money market instrument?

For a taxpayer in the 15% marginal tax bracket, a 15-year municipal bond currently yielding 6.2% would offer an equivalent taxable yield of

In order for you to be indifferent between the after-tax returns on a corporate bond paying 7% and a tax-exempt municipal bond paying 5.5%, what would your tax bracket need to be?

Which of the following is not a component of the money market?

Consider the following three stocks: The value-weighted index constructed with the three stocks using a divisor of 100 is

Which of the following is not a mortgage-related government or government-sponsored agency?

Certificates of deposit are insured for up to ____________ in the event of bank insolvency.

A U.S.dollar-denominated bond that is sold in Singapore is a(n)

A form of short-term borrowing by dealers in government securities is (are)

The ____ index represents the performance of the Japanese stock market.

You purchased a futures contract on corn at a futures price of 3.31, and at the time of expiration, the price was 3.43.What was your profit or loss?

Which of the following indices is(are) market-value weighted? I) The New York Stock Exchange Composite Index II) The S&P/TSX Composite Index III) The Dow Jones Industrial Average

Corporations can exclude ____________% of the dividends received from preferred stock from taxes.

The Investment Environment

How Securities Are Traded

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Optimal Risky Portfolios

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioural Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Options Markets: Introduction

Option Valuation

Futures Markets

Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

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