Question 1

Certificates of deposit are insured by the ____________.

Accepted Answer

A) SPIC 
B) CFTC 
C) Lloyds of London 
D) FDIC 
E) all of the above 
A) SPIC 
B) CFTC 
C) Lloyds of London 
D) FDIC 
E) all of the above

Question 2

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

Question 3

With regard to a futures contract,the short position is held by

Accepted Answer

A) the trader who bought the contract at the largest discount. 
B) the trader who has to travel the farthest distance to deliver the commodity. 
C) the trader who plans to hold the contract open for the lengthiest time period. 
D) the trader who commits to purchasing the commodity on the delivery date. 
E) the trader who commits to delivering the commodity on the delivery date. 
A) the trader who bought the contract at the largest discount. 
B) the trader who has to travel the farthest distance to deliver the commodity. 
C) the trader who plans to hold the contract open for the lengthiest time period. 
D) the trader who commits to purchasing the commodity on the delivery date. 
E) the trader who commits to delivering the commodity on the delivery date.

Question 4

With regard to a futures contract,the long position is held by

Accepted Answer

A) the trader who bought the contract at the largest discount. 
B) the trader who has to travel the farthest distance to deliver the commodity. 
C) the trader who plans to hold the contract open for the lengthiest time period. 
D) the trader who commits to purchasing the commodity on the delivery date. 
E) the trader who commits to delivering the commodity on the delivery date. 
A) the trader who bought the contract at the largest discount. 
B) the trader who has to travel the farthest distance to deliver the commodity. 
C) the trader who plans to hold the contract open for the lengthiest time period. 
D) the trader who commits to purchasing the commodity on the delivery date. 
E) the trader who commits to delivering the commodity on the delivery date.

Question 5

In calculating the Standard and Poor's stock price indices,the adjustment for stock split occurs:

Accepted Answer

A) by adjusting the divisor. 
B) automatically. 
C) by adjusting the numerator. 
D) quarterly, on the last trading day of each quarter. 
E) none of the above. 
A) by adjusting the divisor. 
B) automatically. 
C) by adjusting the numerator. 
D) quarterly, on the last trading day of each quarter. 
E) none of the above.

Question 6

In order for you to be indifferent between the after tax returns on a corporate bond paying 9% and a tax-exempt municipal bond paying 7%,what would your tax bracket need to be?

Accepted Answer

A) 17.6% 
B) 27% 
C) 22.2% 
D) 19.8% 
E) Cannot tell from the information given 
A) 17.6% 
B) 27% 
C) 22.2% 
D) 19.8% 
E) Cannot tell from the information given

Question 7

You sold a futures contract on corn at a futures price of 350 and at the time of expiration the price was 352.What was your profit or loss?

Accepted Answer

A) $2.00 
B) -$2.00 
C) $100 
D) -$100 
E) None of the above 
A) $2.00 
B) -$2.00 
C) $100 
D) -$100 
E) None of the above

Question 8

Brokers' calls

Accepted Answer

A) are funds used by individuals who wish to buy stocks on margin. 
B) are funds borrowed by the broker from the bank,with the agreement to repay the bank immediately if requested to do so. 
C) carry a rate that is usually about one percentage point lower than the rate on U.S.T-bills. 
D) A and B. 
E) A and C. 
A) are funds used by individuals who wish to buy stocks on margin. 
B) are funds borrowed by the broker from the bank,with the agreement to repay the bank immediately if requested to do so. 
C) carry a rate that is usually about one percentage point lower than the rate on U.S.T-bills. 
D) A and B. 
E) A and C.

Question 9

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 10

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% 
E) None of the above 
A) 6% and 8% 
B) 4.5% and 6% 
C) 4.5% and 8% 
D) 6% and 6% 
E) None of the above

Question 11

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

Question 12

A US dollar denominated bond that is sold in Singapore is a ____________.

Accepted Answer

A) Eurobond 
B) Yankee bond 
C) Samurai bond 
D) Bulldog bond 
E) none of the above 
A) Eurobond 
B) Yankee bond 
C) Samurai bond 
D) Bulldog bond 
E) none of the above

Question 13

Consider the following three stocks: $\begin{array}{lll}
\underline{\text { Stock }} &\underline{ \text { Price } }&\underline{ \text { Number of shares outstandins} } \
\text { Stock A } & \$ 40 & 200 \
\text { Stock B } & \$ 70 & 500 \
\text { Stock C } & \$ 10 & 600
\end{array}$

-The price-weighted index constructed with the three stocks is

Accepted Answer

A) 30 
B) 40 
C) 50 
D) 60 
E) 70 
A) 30 
B) 40 
C) 50 
D) 60 
E) 70

Question 14

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%. 
E) none of the above. 
A) 6.2%. 
B) 5.27%. 
C) 8.32%. 
D) 7.29%. 
E) none of the above.

Question 15

Which of the following securities is a money market instrument?

Accepted Answer

A) Treasury note. 
B) Treasury bond. 
C) Municipal bond. 
D) Commercial paper. 
E) Mortgage security. 
A) Treasury note. 
B) Treasury bond. 
C) Municipal bond. 
D) Commercial paper. 
E) Mortgage security.

Question 16

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

Accepted Answer

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

Question 17

-Based on the information given,for a price-weighted index of the three stocks calculate:
a.the rate of return for the first period (t = 0 to t = 1).
b.the value of the divisor in the second period (t=2).Assume that Stock A had a 2-1 split during this period.
c.the rate of return for the second period (t = 1 to t = 2).

Accepted Answer

A. The price-weighted index at time 0 is

Question 18

Federally sponsored agency debt

Accepted Answer

A) is legally insured by the U.S.Treasury. 
B) would probably be backed by the U.S.Treasury in the event of a near-default. 
C) has a small positive yield spread relative to U.S.Treasuries. 
D) B and C. 
E) A and C. 
A) is legally insured by the U.S.Treasury. 
B) would probably be backed by the U.S.Treasury in the event of a near-default. 
C) has a small positive yield spread relative to U.S.Treasuries. 
D) B and C. 
E) A and C.

Question 19

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 20

For a taxpayer in the 25% marginal tax bracket,a 20-year municipal bond currently yielding 5.5% would offer an equivalent taxable yield of:

Accepted Answer

A) 7.33%. 
B) 10.75%. 
C) 5.5%. 
D) 4.125%. 
E) none of the above. 
A) 7.33%. 
B) 10.75%. 
C) 5.5%. 
D) 4.125%. 
E) none of the above.

Exam 2: Asset Classes and Financial Instruments

Certificates of deposit are insured by the ____________.

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

With regard to a futures contract,the short position is held by

With regard to a futures contract,the long position is held by

In calculating the Standard and Poor's stock price indices,the adjustment for stock split occurs:

In order for you to be indifferent between the after tax returns on a corporate bond paying 9% and a tax-exempt municipal bond paying 7%,what would your tax bracket need to be?

You sold a futures contract on corn at a futures price of 350 and at the time of expiration the price was 352.What was your profit or loss?

Brokers' calls

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

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.

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

A US dollar denominated bond that is sold in Singapore is a ____________.

Consider the following three stocks: Stock A \ 40 200 Stock B \ 70 500 Stock C \ 10 600 -The price-weighted index constructed with the three stocks is

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:

Which of the following securities is a money market instrument?

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

Federally sponsored agency debt

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

For a taxpayer in the 25% marginal tax bracket,a 20-year municipal bond currently yielding 5.5% would offer an equivalent taxable yield of:

The Investment Environment

How Securities are Traded

Mutual Funds and Other Investment Companies

Introduction to Risk,return,and the Historical Record

Risk Aversion and 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

Options Markets: Introduction

Option Valuation

Futures Markets

Futures, swaps, and Risk Management

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the CFA Institute Appendices

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.