Question 1

Unsecured bonds are called ____________.

Accepted Answer

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

Question 2

The largest component of the money market is ____________.

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 3

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

Question 4

The largest component of the bond market is

Accepted Answer

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

Question 5

The smallest component of the bond market is

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

Question 6

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 7

You purchased a futures contract on oats at a futures price of 233.75 and at the time of expiration the price was 261.25.What was your profit or loss?

Accepted Answer

A) $1375.00 
B) -$1375.00 
C) -$27.50 
D) $27.50 
E) None of the above 
A) $1375.00 
B) -$1375.00 
C) -$27.50 
D) $27.50 
E) None of the above

Question 8

Treasury Inflation-Protected Securities (TIPS)

Accepted Answer

A) pay a fixed interest rate for life. 
B) pay a variable interest rate that is indexed to inflation. 
C) provide a constant stream of income in real (inflation-adjusted) dollars. 
D) have their principal adjusted in proportion to the Consumer Price Index. 
E) C and D 
A) pay a fixed interest rate for life. 
B) pay a variable interest rate that is indexed to inflation. 
C) provide a constant stream of income in real (inflation-adjusted) dollars. 
D) have their principal adjusted in proportion to the Consumer Price Index. 
E) C and D

Question 9

The type of municipal bond that is used to finance commercial enterprises such as the construction of a new building for a corporation is called

Accepted Answer

A) a corporate courtesy bond. 
B) a revenue bond. 
C) a general obligation bond. 
D) a tax anticipation note. 
E) an industrial development bond. 
A) a corporate courtesy bond. 
B) a revenue bond. 
C) a general obligation bond. 
D) a tax anticipation note. 
E) an industrial development bond.

Question 10

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

Accepted Answer

A) DAX 
B) FTSE 
C) Nikkei 
D) Hang Seng 
E) None of the above 
A) DAX 
B) FTSE 
C) Nikkei 
D) Hang Seng 
E) None of the above

Question 11

Which of the following is true of the Dow Jones Industrial Average?

Accepted Answer

A) It is a value-weighted average of 30 large industrial stocks. 
B) It is a price-weighted average of 30 large industrial stocks. 
C) The divisor must be adjusted for stock splits. 
D) A and C. 
E) B and C. 
A) It is a value-weighted average of 30 large industrial stocks. 
B) It is a price-weighted average of 30 large industrial stocks. 
C) The divisor must be adjusted for stock splits. 
D) A and C. 
E) B and C.

Question 12

You sold a futures contract on oats at a futures price of 233.75 and at the time of expiration the price was 261.25.What was your profit or loss?

Accepted Answer

A) $1375.00 
B) -$1375.00 
C) -$27.50 
D) $27.50 
E) None of the above 
A) $1375.00 
B) -$1375.00 
C) -$27.50 
D) $27.50 
E) None of the above

Question 13

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

Accepted Answer

A) DAX 
B) FTSE 
C) Nikkei 
D) Hang Seng 
E) None of the above 
A) DAX 
B) FTSE 
C) Nikkei 
D) Hang Seng 
E) None of the above

Question 14

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) A and B are equally likely 
E) B and C are equally likely 
A) revenue bond 
B) general obligation bond 
C) industrial development bond 
D) A and B are equally likely 
E) B and C are equally likely

Question 15

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% 
E) Cannot tell from the information given 
A) 22.6% 
B) 21.4% 
C) 26.2% 
D) 19.8% 
E) Cannot tell from the information given

Question 16

The price quotations of Treasury bonds in the Wall Street Journal show an ask price of 104: 08 and a bid price of 104:
04)As a buyer of the bond what is the dollar price you expect to pay?

Accepted Answer

A) $1,048.00 
B) $1,042.50 
C) $1,044.00 
D) $1,041.25 
E) $1,040.40 
A) $1,048.00 
B) $1,042.50 
C) $1,044.00 
D) $1,041.25 
E) $1,040.40

Question 17

A put option allows the holder to

Accepted Answer

A) buy the underlying asset at the strike price on or before the expiration date. 
B) sell the underlying asset at the strike price on or before the expiration date. 
C) sell the option in the open market prior to expiration. 
D) B and C. 
E) A and C. 
A) buy the underlying asset at the strike price on or before the expiration date. 
B) sell the underlying asset at the strike price on or before the expiration date. 
C) sell the option in the open market prior to expiration. 
D) B and C. 
E) A and C.

Question 18

Deposits of commercial banks at the Federal Reserve Bank are called __________.

Accepted Answer

A) bankers' acceptances 
B) repurchase agreements 
C) time deposits 
D) federal funds 
E) reserve requirements 
A) bankers' acceptances 
B) repurchase agreements 
C) time deposits 
D) federal funds 
E) reserve requirements

Question 19

-Based on the information given for the three stocks,calculate the first-period rates of return (from t = 0 to t = 1)on
a.a market-value-weighted index.
b.an equally-weighted index.

Accepted Answer

A. The total market value at time 0 is $

Question 20

Distinguish between U.S.Treasury debt and U.S Agency debt.

Accepted Answer

Debt issued by the U.S. Treasury is back

Exam 2: Asset Classes and Financial Instruments

Unsecured bonds are called ____________.

The largest component of the money market is ____________.

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

The largest component of the bond market is

The smallest component of the bond market is

Which of the following statements is true regarding a corporate bond?

You purchased a futures contract on oats at a futures price of 233.75 and at the time of expiration the price was 261.25.What was your profit or loss?

Treasury Inflation-Protected Securities (TIPS)

The type of municipal bond that is used to finance commercial enterprises such as the construction of a new building for a corporation is called

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

Which of the following is true of the Dow Jones Industrial Average?

You sold a futures contract on oats at a futures price of 233.75 and at the time of expiration the price was 261.25.What was your profit or loss?

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

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

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?

The price quotations of Treasury bonds in the Wall Street Journal show an ask price of 104: 08 and a bid price of 104: 04)As a buyer of the bond what is the dollar price you expect to pay?

A put option allows the holder to

Deposits of commercial banks at the Federal Reserve Bank are called __________.

-Based on the information given for the three stocks,calculate the first-period rates of return (from t = 0 to t = 1)on a.a market-value-weighted index. b.an equally-weighted index.

Distinguish between U.S.Treasury debt and U.S Agency debt.

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

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