Question 1

Unsecured bonds are called

Accepted Answer

A) junk bonds. 
B) debentures. 
C) indentures. 
D) subordinated debentures. 
E) either debentures or subordinated debentures. 
A) junk bonds. 
B) debentures. 
C) indentures. 
D) subordinated debentures. 
E) either debentures or subordinated debentures.

Question 2

The yield to maturity reported in the financial pages for Treasury securities

Accepted Answer

A) is calculated by compounding the semiannual yield. 
B) is calculated by doubling the semiannual yield. 
C) is also called the bond equivalent yield. 
D) is calculated as the yield-to-call for premium bonds. 
E) is calculated by doubling the semiannual yield and is also called the bond equivalent yield. 
A) is calculated by compounding the semiannual yield. 
B) is calculated by doubling the semiannual yield. 
C) is also called the bond equivalent yield. 
D) is calculated as the yield-to-call for premium bonds. 
E) is calculated by doubling the semiannual yield and is also called the bond equivalent yield.

Question 3

The ____ is an example of a U.S.index of small firms.

Accepted Answer

A) S&P 500 
B) DJIA 
C) DAX 
D) Russell 2000 
E) All of the options 
A) S&P 500 
B) DJIA 
C) DAX 
D) Russell 2000 
E) All of the options

Question 4

An investor purchases one municipal and one corporate bond that pay rates of return of 6% and 8%, respectively.If the investor is in the 25% marginal tax bracket, his or her after-tax rates of return on the municipal and corporate bonds would be ________ and ______, respectively.

Accepted Answer

A) 6% and 8% 
B) 4.5% and 6% 
C) 4.5% and 8% 
D) 6% and 6% 
A) 6% and 8% 
B) 4.5% and 6% 
C) 4.5% and 8% 
D) 6% and 6%

Question 5

What does the term negotiable mean with regard to negotiable certificates of deposit

Accepted Answer

A) The CD can be sold to another investor if the owner needs to cash it in before its maturity date. 
B) The rate of interest on the CD is subject to negotiation. 
C) The CD is automatically reinvested at its maturity date. 
D) The CD has staggered maturity dates built in. 
E) The interest rate paid on the CD will vary with a designated market rate. 
A) The CD can be sold to another investor if the owner needs to cash it in before its maturity date. 
B) The rate of interest on the CD is subject to negotiation. 
C) The CD is automatically reinvested at its maturity date. 
D) The CD has staggered maturity dates built in. 
E) The interest rate paid on the CD will vary with a designated market rate.

Question 6

The ____ index represents the performance of the U.K.stock market.

Accepted Answer

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

Question 7

An investor purchases one municipal and one corporate bond that pay rates of return of 7.2% and 9.1%, respectively.If the investor is in the 15% marginal tax bracket, his or her after-tax rates of return on the municipal and corporate bonds would be ________ and ______, respectively.

Accepted Answer

A) 7.2% and 9.1% 
B) 7.2% and 7.735% 
C) 6.12% and 7.735% 
D) 8.471% and 9.1% 
A) 7.2% and 9.1% 
B) 7.2% and 7.735% 
C) 6.12% and 7.735% 
D) 8.471% and 9.1%

Question 8

You purchased a futures contract on corn at a futures price of 331, and at the time of expiration the price was 343.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 9

Certificates of deposit are insured by the

Accepted Answer

A) SPIC. 
B) CFTC. 
C) Lloyds of London. 
D) FDIC. 
E) All of the options 
A) SPIC. 
B) CFTC. 
C) Lloyds of London. 
D) FDIC. 
E) All of the options

Question 10

The bid price of a T-bill in the secondary market is

Accepted Answer

A) the price at which the dealer in T-bills is willing to sell the bill. 
B) the price at which the dealer in T-bills is willing to buy the bill. 
C) greater than the asked price of the T-bill. 
D) the price at which the investor can buy the T-bill. 
E) never quoted in the financial press. 
A) the price at which the dealer in T-bills is willing to sell the bill. 
B) the price at which the dealer in T-bills is willing to buy the bill. 
C) greater than the asked price of the T-bill. 
D) the price at which the investor can buy the T-bill. 
E) never quoted in the financial press.

Question 11

You sold a futures contract on corn at a futures price of 331 and at the time of expiration the price was 343.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 12

Which of the following statements is true regarding a corporate bond

Accepted Answer

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

Question 13

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

Accepted Answer

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

Question 14

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. 
E) 99:32. 
A) 99:50. 
B) 99:16. 
C) 99:80. 
D) 99:24. 
E) 99:32.

Question 15

A bond that can be retired prior to maturity by the issuer is a(an) ____________ bond.

Accepted Answer

A) convertible 
B) secured 
C) unsecured 
D) callable 
E) Yankee 
A) convertible 
B) secured 
C) unsecured 
D) callable 
E) Yankee

Question 16

The ____ index represents the performance of the Hong Kong stock market.

Accepted Answer

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

Question 17

A municipal bond issued to finance an airport, hospital, turnpike, or port authority is typically a

Accepted Answer

A) revenue bond. 
B) general obligation bond. 
C) industrial development bond. 
D) revenue bond or general obligation bond. 
A) revenue bond. 
B) general obligation bond. 
C) industrial development bond. 
D) revenue bond or general obligation bond.

Question 18

Commercial paper is a short-term security issued by ________ to raise funds.

Accepted Answer

A) the Federal Reserve Bank 
B) commercial banks 
C) large, well-known companies 
D) the New York Stock Exchange 
E) state and local governments 
A) the Federal Reserve Bank 
B) commercial banks 
C) large, well-known companies 
D) the New York Stock Exchange 
E) state and local governments

Question 19

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% 
E) 12.4% 
A) 15.4% 
B) 23.7% 
C) 39.5% 
D) 17.3% 
E) 12.4%

Question 20

The smallest component of the bond market is _______ debt.

Accepted Answer

A) Treasury 
B) other asset-backed 
C) corporate 
D) tax-exempt 
E) mortgage-backed 
A) Treasury 
B) other asset-backed 
C) corporate 
D) tax-exempt 
E) mortgage-backed

Exam 2: Asset Classes and Financial Instruments

Unsecured bonds are called

The yield to maturity reported in the financial pages for Treasury securities

The ____ is an example of a U.S.index of small firms.

An investor purchases one municipal and one corporate bond that pay rates of return of 6% and 8%, respectively.If the investor is in the 25% marginal tax bracket, his or her after-tax rates of return on the municipal and corporate bonds would be ________ and ______, respectively.

What does the term negotiable mean with regard to negotiable certificates of deposit

The ____ index represents the performance of the U.K.stock market.

An investor purchases one municipal and one corporate bond that pay rates of return of 7.2% and 9.1%, respectively.If the investor is in the 15% marginal tax bracket, his or her after-tax rates of return on the municipal and corporate bonds would be ________ and ______, respectively.

You purchased a futures contract on corn at a futures price of 331, and at the time of expiration the price was 343.What was your profit or loss

Certificates of deposit are insured by the

The bid price of a T-bill in the secondary market is

You sold a futures contract on corn at a futures price of 331 and at the time of expiration the price was 343.What was your profit or loss

Which of the following statements is true regarding a corporate bond

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

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

A bond that can be retired prior to maturity by the issuer is a(an) ____________ bond.

The ____ index represents the performance of the Hong Kong stock market.

A municipal bond issued to finance an airport, hospital, turnpike, or port authority is typically a

Commercial paper is a short-term security issued by ________ to raise funds.

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

The smallest component of the bond market is _______ debt.

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

Behavioral 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

Filters

An investor purchases one municipal and one corporate bond that pay rates of return of 6% and 8%, respectively.If the investor is in the 25% marginal tax bracket, his or her after-tax rates of return on the municipal and corporate bonds would be __ and , respectively.

An investor purchases one municipal and one corporate bond that pay rates of return of 7.2% and 9.1%, respectively.If the investor is in the 15% marginal tax bracket, his or her after-tax rates of return on the municipal and corporate bonds would be __ and , respectively.