Question 1

Generally, the coupon rate on a bond is ____ and the current yield is ____.

Accepted Answer

A)  Fixed; fixed 
B)  Fixed; fluctuating 
C)  Fluctuating; fixed 
D)  Fluctuating; fluctuating 
E)  Fixed; equal to the coupon rate 
A)  Fixed; fixed 
B)  Fixed; fluctuating 
C)  Fluctuating; fixed 
D)  Fluctuating; fluctuating 
E)  Fixed; equal to the coupon rate

Question 2

$\begin{array}{|l|r|r|r|r|r|rr|r} 
\hline & & & & & & {\quad\quad\text { Lifetime }} && \text { Open } \
\hline & \text { Open } & \text { High } & \text { Low } & \text { Settle } & \text { Chg } & \text { High } & \text { Low } & \text { Int } \
\hline \text { Dee } & 107.97 & 108.97 & 107.88 & 108.72 & 0.72 & 121.56 & 102.44 & 432,512 \
\hline \text { Mar } & 106.91 & 107.50 & 106.47 & 107.31 & 0.81 & 116.72 & 101.16 & 19,531 \
\hline
\end{array}$
-Suppose you sold 8 of the March Treasury bond futures at the lifetime high and closed your position at the closing price this day. What was your profit on this transaction?

Accepted Answer

A)  $67,140 
B)  $70,030 
C)  $72,320 
D)  $68,460 
E)  $75,280 
A)  $67,140 
B)  $70,030 
C)  $72,320 
D)  $68,460 
E)  $75,280

Question 3

AA Company: Price 35.20

Calls:

$\begin{array}{|r|r|r|r|r|r|r|r|}
\hline \text { Strike } & \text { Symbol } & \text { Last } & \text { Change } & \text { Bid } & \text { Ask } & \text { Volume } & \text { Open Int. } \
\hline 27.50 & \text { AAEY } & 7.70 & +0.28 & 7.70 & 7.80 & 2 & 289 \
\hline 30.00 & \text { AAEF } & 5.20 & +0.36 & 5.20 & 5.30 & 453 & 1,306 \
\hline 32.50 & \text { AAEZ } & 2.80 & +0.30 & 2.75 & 2.80 & 520 & 3,609 \
\hline 35.00 & \text { AAEG } & 0.45 & +0.20 & 0.40 & 0.50 & 656 & 5,372 \
\hline
\end{array}$

Puts:

$\begin{array}{|r|l|r|r|r|r|r|r|}
\hline \text { Strike } & \text { Symbol } & \text { Last } & \text { Change } & \text { Bid } & \text { Ask } & \text { Volume } & \text { Open Int. } \
\hline 35.00 & \text { AAQG } & 0.30 & -0.20 & 0.25 & 0.30 & 19 & 1.607 \
\hline 37.50 & \mathrm{AAQS} & 2.35 & -1.30 & 2.30 & 2.40 & 11 & 114 \
\hline 40.00 & \mathrm{AAQH} & 4.80 & -0.10 & 4.80 & 4.90 & 2 & 13 \
\hline
\end{array}$
-You would like to have the right to purchase 500 shares of AA stock at a price of $35 a share. How much will it cost you to buy options to meets this objective?

Accepted Answer

A)  $125 
B)  $150 
C)  $200 
D)  $250 
E)  $300 
A)  $125 
B)  $150 
C)  $200 
D)  $250 
E)  $300

Question 4

Which of the following is true regarding fixed-income securities?

Accepted Answer

A)  Treasury bonds are subject to default risk 
B)  Corporate bonds are always very liquid 
C)  Bond prices rise when interest rates increase 
D)  A premium bond sells for less than its face value 
E)  The default risk varies with the bond issuer 
A)  Treasury bonds are subject to default risk 
B)  Corporate bonds are always very liquid 
C)  Bond prices rise when interest rates increase 
D)  A premium bond sells for less than its face value 
E)  The default risk varies with the bond issuer

Question 5

A bond's _______ sets the dollar amount of its annual interest payments.

Accepted Answer

A)  yield to maturity 
B)  current yield 
C)  par value 
D)  coupon rate 
E)  market rate 
A)  yield to maturity 
B)  current yield 
C)  par value 
D)  coupon rate 
E)  market rate

Question 6

$\begin{array}{|r|}
\hline\$ 5.67 \
\hline \$ 9.99 \
\hline \$ 10.11 \
\hline \$ 2.56 \
\hline \$ 5.33\
\hline
\end{array}$
-You are told that the prices in the table above are from yesterday's price quote for LOL. They represent the daily high, daily low, close, 52 week high and 52 week low but are mixed-up and out of order. Which one MUST be yesterday's high price?

Accepted Answer

A)  $5.67 
B)  $9.99 
C)  $10.11 
D)  $2.56 
E)  $5.33 
A)  $5.67 
B)  $9.99 
C)  $10.11 
D)  $2.56 
E)  $5.33

Question 7

You own 400 shares of ABC stock. You think the market price will continue to rise buy would like to ensure that you can get at least $35 a share when you decide to sell your shares. The 35 call option has a quoted price of $1.10 and the 35 put option is quoted at $0.10. How much will it cost you to ensure that you can sell all of your shares for at least $35 each?

Accepted Answer

A)  $4 
B)  $40 
C)  $360 
D)  $400 
E)  $440 
A)  $4 
B)  $40 
C)  $360 
D)  $400 
E)  $440

Question 8

Gold (CMX) 100 troy oz.; $ per troy oz.

$\begin{array}{|l|r|r|r|r|r|r|r|r|}
\hline & \text { Open } & \text { High } & \text { Low } & \text { Settle } & \text { \$Chg } & \text { Sea. Hi } & \text { Sea. Lo } & \text { Op. Int. } \
\hline \text { December } & 384.00 & 389.50 & 382.20 & 384.60 & 0.20 & 394.80 & 280.00 & 183.612 \
\hline \text { April } & 385.00 & 391.00 & 385.00 & 387.10 & 0.15 & 395.70 & 287.00 & 10,167 \
\hline
\end{array}$

-What is the dollar value of the April gold futures contract based on the closing price of the day?

Accepted Answer

A)  $38.71 
B)  $387.10 
C)  $3,871.00 
D)  $38,710.00 
E)  $387,100.00 
A)  $38.71 
B)  $387.10 
C)  $3,871.00 
D)  $38,710.00 
E)  $387,100.00

Question 9

Assume that a face value of $1,000 for each type of bond. Yields are calculated to full maturity with semi-annual compounding. Yield change is the change in ask yield from the previous close.

$\begin{array}{|l|r|l|r|r|r|r|r|}
\hline \text { Issuer } & \text { Coupon } & \begin{array}{l}
\text { Maturity } \
\text { Date }
\end{array} & \begin{array}{r}
\text { Bid } \
\text { Price }
\end{array} & \begin{array}{r}
\text { Ask } \
\text { Price }
\end{array} & \begin{array}{r}
\text { Bid } \
\text { Yield }
\end{array} & \begin{array}{r}
\text { Ask } \
\text { Yield }
\end{array} & \begin{array}{r}
\text { Yield } \
\text { Change }
\end{array} \
\hline \text { Pipa Co. } & 7.500 & 2012-\text { Aug-24 } & 120.92 & 121.02 & 5.41 & 5.37 & +0.011 \
\hline \text { Harolds Inc. } & 8.000 & 2025 \text {-Jan-10 } & 84.33 & 84.63 & 5.02 & 4.88 & +0.003 \
\hline \text { Willie Ltd. } & 6.250 & 2018-O c t-1 & 89.47 & 89.89 & 5.19 & 4.97 & -0.016 \
\hline \text { Kat Enterprise } & 8.250 & 2013-M a r-13 & 109.09 & 109.49 & 5.34 & 5.28 & -0.009 \
\hline
\end{array}$

-When does the Harolds bond mature?

Accepted Answer

A)  2012 
B)  2013 
C)  2025 
D)  2029 
E)  2016 
A)  2012 
B)  2013 
C)  2025 
D)  2029 
E)  2016

Question 10

AA Company: Price 35.20

Calls:

$\begin{array}{|r|r|r|r|r|r|r|r|}
\hline \text { Strike } & \text { Symbol } & \text { Last } & \text { Change } & \text { Bid } & \text { Ask } & \text { Volume } & \text { Open Int. } \
\hline 27.50 & \text { AAEY } & 7.70 & +0.28 & 7.70 & 7.80 & 2 & 289 \
\hline 30.00 & \text { AAEF } & 5.20 & +0.36 & 5.20 & 5.30 & 453 & 1,306 \
\hline 32.50 & \text { AAEZ } & 2.80 & +0.30 & 2.75 & 2.80 & 520 & 3,609 \
\hline 35.00 & \text { AAEG } & 0.45 & +0.20 & 0.40 & 0.50 & 656 & 5,372 \
\hline
\end{array}$

Puts:

$\begin{array}{|r|l|r|r|r|r|r|r|}
\hline \text { Strike } & \text { Symbol } & \text { Last } & \text { Change } & \text { Bid } & \text { Ask } & \text { Volume } & \text { Open Int. } \
\hline 35.00 & \text { AAQG } & 0.30 & -0.20 & 0.25 & 0.30 & 19 & 1.607 \
\hline 37.50 & \mathrm{AAQS} & 2.35 & -1.30 & 2.30 & 2.40 & 11 & 114 \
\hline 40.00 & \mathrm{AAQH} & 4.80 & -0.10 & 4.80 & 4.90 & 2 & 13 \
\hline
\end{array}$
-You want to sell 5 put option contracts on AA stock at a strike price of $40 a share. How much will you receive in option premium if you place this order today?

Accepted Answer

A)  $2,300 
B)  $2,350 
C)  2,400 
D)  $2,450 
E)  $2,500 
A)  $2,300 
B)  $2,350 
C)  2,400 
D)  $2,450 
E)  $2,500

Question 11

Which of the following is always sold on a discount basis?

Accepted Answer

A)  Stocks. 
B)  Treasury bills. 
C)  Futures. 
D)  Treasury bonds. 
E)  Options. 
A)  Stocks. 
B)  Treasury bills. 
C)  Futures. 
D)  Treasury bonds. 
E)  Options.

Question 12

If higher returns are associated with higher risk explain why the dividends of preferred shares typically are higher than those from common shares of the same company.

Accepted Answer

Even though the preferred shares have th

Question 13

Assume that a face value of $1,000 for each type of bond. Yields are calculated to full maturity with semi-annual compounding. Yield change is the change in ask yield from the previous close.

$\begin{array}{|l|r|l|r|r|r|r|r|}
\hline \text { Issuer } & \text { Coupon } & \begin{array}{l}
\text { Maturity } \
\text { Date }
\end{array} & \begin{array}{r}
\text { Bid } \
\text { Price }
\end{array} & \begin{array}{r}
\text { Ask } \
\text { Price }
\end{array} & \begin{array}{r}
\text { Bid } \
\text { Yield }
\end{array} & \begin{array}{r}
\text { Ask } \
\text { Yield }
\end{array} & \begin{array}{r}
\text { Yield } \
\text { Change }
\end{array} \
\hline \text { Pipa Co. } & 7.500 & 2012-\text { Aug-24 } & 120.92 & 121.02 & 5.41 & 5.37 & +0.011 \
\hline \text { Harolds Inc. } & 8.000 & 2025 \text {-Jan-10 } & 84.33 & 84.63 & 5.02 & 4.88 & +0.003 \
\hline \text { Willie Ltd. } & 6.250 & 2018-O c t-1 & 89.47 & 89.89 & 5.19 & 4.97 & -0.016 \
\hline \text { Kat Enterprise } & 8.250 & 2013-M a r-13 & 109.09 & 109.49 & 5.34 & 5.28 & -0.009 \
\hline
\end{array}$

-Suppose you purchase 5 Harolds bonds on this day. How much would you pay?

Accepted Answer

A)  $4,623.00 
B)  $4,232.00 
C)  $5,000.00 
D)  $3,864.00 
E)  $423.20 
A)  $4,623.00 
B)  $4,232.00 
C)  $5,000.00 
D)  $3,864.00 
E)  $423.20

Question 14

$\begin{array}{|r|r|c|c|r|r|r|r|r|r}
\hline \begin{array}{r}
52-\text { Week } \
\text { High }
\end{array} & \begin{array}{r}
52-\text { Week } \
\text { Low }
\end{array} & \text { Stock } & \text { SYM } & \text { DIV } & \text { CLOSE } & \begin{array}{r}
\text { Net } \
\text { CHG }
\end{array} & \begin{array}{r}
\text { VOL. } \
100 \mathrm{~s}
\end{array} & \begin{array}{r}
\text { YLD } \
\%
\end{array} & \begin{array}{r}
\text { P/E } \
\text { Ratio }
\end{array} \
\hline 34.17 & 24.10 & \text { Laughing } & \text { LOL } & 2.34 & 32.68 & 0.03 & 214 & ? & 19 \
\hline 82.63 & 61.18 & \text { Distracted } & \text { BRB } & 0.80 & ? & 0.12 & 719 & 2.1 & 24 \
\hline 52.63 & 26.02 & \text { Hoppy } & \text { BZZR } & 0.10 & 48.16 & -0.41 & 984 & ? & 36 \
\hline
\end{array}$
-You purchased 50 round lots of Laughing stock at the closing price. What was the cost of this purchase? Ignore trading costs.

Accepted Answer

A)  $16,340 
B)  $17,085 
C)  $163,400 
D)  $170,850 
E)  $185,500 
A)  $16,340 
B)  $17,085 
C)  $163,400 
D)  $170,850 
E)  $185,500

Question 15

Which of the following financial assets has the longest time to maturity?

Accepted Answer

A)  Treasury bonds. 
B)  Fixed income securities. 
C)  Preferred stock. 
D)  Put options. 
E)  Futures. 
A)  Treasury bonds. 
B)  Fixed income securities. 
C)  Preferred stock. 
D)  Put options. 
E)  Futures.

Question 16

Explain what a call option is and describe the circumstances under which you will exercise that option.

Accepted Answer

A call option is the right, no

Question 17

A ______ option gives the owner the right, but not the obligation, to sell an asset at a specified price.

Accepted Answer

A)  European 
B)  Put 
C)  Call 
D)  American 
E)  Bermudan 
A)  European 
B)  Put 
C)  Call 
D)  American 
E)  Bermudan

Question 18

The price specified in an options contract at which the underlying asset can be bought or sold is the _____, which is also known as ______ price.

Accepted Answer

A)  call price; invoice 
B)  Premium; dirty 
C)  conversion value; tender 
D)  strike price; exercise 
E)  market price; clean 
A)  call price; invoice 
B)  Premium; dirty 
C)  conversion value; tender 
D)  strike price; exercise 
E)  market price; clean

Question 19

The unit of ownership in a corporation when purchasing common shares is called a ______.

Accepted Answer

A)  coupon 
B)  put 
C)  share 
D)  option 
E)  contract 
A)  coupon 
B)  put 
C)  share 
D)  option 
E)  contract

Question 20

Which of the following is NOT classified as a fixed income security?

Accepted Answer

A)  3-month bank certificate of deposit 
B)  Treasury bill 
C)  2-year Canada bond 
D)  Common stock paying regular quarterly dividends 
E)  None of the above 
A)  3-month bank certificate of deposit 
B)  Treasury bill 
C)  2-year Canada bond 
D)  Common stock paying regular quarterly dividends 
E)  None of the above

Generally, the coupon rate on a bond is and the current yield is .

Which of the following is true regarding fixed-income securities?

A bond's _______ sets the dollar amount of its annual interest payments.

\ 5.67 \ 9.99 \ 10.11 \ 2.56 \ 5.33 -You are told that the prices in the table above are from yesterday's price quote for LOL. They represent the daily high, daily low, close, 52 week high and 52 week low but are mixed-up and out of order. Which one MUST be yesterday's high price?

Which of the following is always sold on a discount basis?

If higher returns are associated with higher risk explain why the dividends of preferred shares typically are higher than those from common shares of the same company.

Which of the following financial assets has the longest time to maturity?

Explain what a call option is and describe the circumstances under which you will exercise that option.

A ______ option gives the owner the right, but not the obligation, to sell an asset at a specified price.

The price specified in an options contract at which the underlying asset can be bought or sold is the _, which is also known as __ price.

The unit of ownership in a corporation when purchasing common shares is called a ______.

Which of the following is NOT classified as a fixed income security?

A Brief History of Risk and Return

Diversification and Risky Asset Allocation

The Investment Process

Mutual Funds

The Stock Market

Common Stock Valuation

Stock Price Behaviour and Market Efficiency

Behavioural Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Return, Risk and Security Management

Performance Evaluation and Risk Management

Options

Option Valuation

Futures Contracts

Projecting Cash Flow and Earnings

Corporate Bonds

Government Bonds and Mortgaged-Backed Securities

International Portfolio Investment

Filters

Exam 4: Overview of Security Types

Generally, the coupon rate on a bond is ____ and the current yield is ____.

Which of the following is true regarding fixed-income securities?

A bond's _______ sets the dollar amount of its annual interest payments.

\ 5.67 \ 9.99 \ 10.11 \ 2.56 \ 5.33 -You are told that the prices in the table above are from yesterday's price quote for LOL. They represent the daily high, daily low, close, 52 week high and 52 week low but are mixed-up and out of order. Which one MUST be yesterday's high price?

Which of the following is always sold on a discount basis?

If higher returns are associated with higher risk explain why the dividends of preferred shares typically are higher than those from common shares of the same company.

Which of the following financial assets has the longest time to maturity?

Explain what a call option is and describe the circumstances under which you will exercise that option.

A ______ option gives the owner the right, but not the obligation, to sell an asset at a specified price.

The price specified in an options contract at which the underlying asset can be bought or sold is the _____, which is also known as ______ price.

The unit of ownership in a corporation when purchasing common shares is called a ______.

Which of the following is NOT classified as a fixed income security?

A Brief History of Risk and Return

Diversification and Risky Asset Allocation

The Investment Process

Mutual Funds

The Stock Market

Common Stock Valuation

Stock Price Behaviour and Market Efficiency

Behavioural Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Return, Risk and Security Management

Performance Evaluation and Risk Management

Options

Option Valuation

Futures Contracts

Projecting Cash Flow and Earnings

Corporate Bonds

Government Bonds and Mortgaged-Backed Securities

International Portfolio Investment

Filters

Generally, the coupon rate on a bond is and the current yield is .

The price specified in an options contract at which the underlying asset can be bought or sold is the _, which is also known as __ price.