Question 1

Preferred stock is like long-term debt in that ___________.

Accepted Answer

A)  it gives the holder voting power regarding the firm's management 
B)  it promises to pay to its holder a fixed stream of income each year 
C)  the preferred dividend is a tax-deductible expense for the firm 
D)  in the event of bankruptcy preferred stock has equal status with debt 
A)  it gives the holder voting power regarding the firm's management 
B)  it promises to pay to its holder a fixed stream of income each year 
C)  the preferred dividend is a tax-deductible expense for the firm 
D)  in the event of bankruptcy preferred stock has equal status with debt

Question 2

The maximum maturity on commercial paper is

Accepted Answer

A)  270 days 
B)  180 days 
C)  90 days 
D)  30 days 
A)  270 days 
B)  180 days 
C)  90 days 
D)  30 days

Question 3

When computing the bank discount yield you would use ____ days in the year.

Accepted Answer

A)  260 
B)  360 
C)  365 
D)  366 
A)  260 
B)  360 
C)  365 
D)  366

Question 4

Which of the following does not approximate the performance of a buy and hold portfolio strategy?

Accepted Answer

A)  An equally weighted index 
B)  A price weighted index 
C)  A value weighted index 
D)  Weights are not a factor in this situation 
A)  An equally weighted index 
B)  A price weighted index 
C)  A value weighted index 
D)  Weights are not a factor in this situation

Question 5

June call and put options on King Books Inc are available with exercise prices of $30,$35 and $40.Among the different exercise prices,the call option with the _____ exercise price and the put option with the _____ exercise price will have the greatest value.

Accepted Answer

A)  $40; $30 
B)  $30; $40 
C)  $35; $35 
D)  $40; $40 
A)  $40; $30 
B)  $30; $40 
C)  $35; $35 
D)  $40; $40

Question 6

An index computed from a simple average of returns is a/an _____.

Accepted Answer

A)  equal weighted index 
B)  value weighted index 
C)  price weighted index 
D)  share weighted index 
A)  equal weighted index 
B)  value weighted index 
C)  price weighted index 
D)  share weighted index

Question 7

__________ is not a money market instrument.

Accepted Answer

A)  A certificate of deposit 
B)  A treasury bill 
C)  A treasury bond 
D)  Commercial paper 
A)  A certificate of deposit 
B)  A treasury bill 
C)  A treasury bond 
D)  Commercial paper

Question 8

A firm that has large securities holdings that wishes to raise money for a short length of time may be able to find the cheapest financing from which of the following?

Accepted Answer

A)  Reverse repurchase agreement 
B)  Banker's acceptance 
C)  Commercial paper 
D)  Repurchase agreement 
A)  Reverse repurchase agreement 
B)  Banker's acceptance 
C)  Commercial paper 
D)  Repurchase agreement

Question 9

You decide to purchase an equal number of shares of stocks of firms to create a portfolio.If you wished to construct an index to track your portfolio performance your best match for your portfolio would be to construct a/an ______.

Accepted Answer

A)  value weighted index 
B)  equal weighted index 
C)  price weighted index 
D)  bond price index 
A)  value weighted index 
B)  equal weighted index 
C)  price weighted index 
D)  bond price index

Question 10

A typical bond price quote includes all but which one of the following?

Accepted Answer

A)  Daily high price for the bond 
B)  Closing bond price 
C)  Yield to maturity 
D)  Dividend yield 
A)  Daily high price for the bond 
B)  Closing bond price 
C)  Yield to maturity 
D)  Dividend yield

Question 11

If you thought prices of stock would be rising over the next few months you may wish to __________________ on the stock.

Accepted Answer

A)  purchase a call option 
B)  purchase a put option 
C)  sell a futures contract 
D)  place a short sale order 
A)  purchase a call option 
B)  purchase a put option 
C)  sell a futures contract 
D)  place a short sale order

Question 12

Currently the Dow Jones Industrial Average is computed by _________.

Accepted Answer

A)  adding the prices of 30 large "blue-chip" stocks and dividing by 30 
B)  calculating the total market value of the 30 firms in the index and dividing by 30 
C)  measuring the current total market value of the 30 stocks in the index relative to the total value on the previous day 
D)  adding the prices of 30 large "blue-chip" stocks and dividing by a divisor adjusted for stock splits and large stock dividends 
A)  adding the prices of 30 large "blue-chip" stocks and dividing by 30 
B)  calculating the total market value of the 30 firms in the index and dividing by 30 
C)  measuring the current total market value of the 30 stocks in the index relative to the total value on the previous day 
D)  adding the prices of 30 large "blue-chip" stocks and dividing by a divisor adjusted for stock splits and large stock dividends

Question 13

Which of the following is not a money market instrument?

Accepted Answer

A)  Treasury bill 
B)  Commercial paper 
C)  Preferred stock 
D)  Banker's acceptance 
A)  Treasury bill 
B)  Commercial paper 
C)  Preferred stock 
D)  Banker's acceptance

Question 14

Which of the following mortgage scenarios will benefit the homeowner the most?

Accepted Answer

A)  Adjustable rate mortgage when interest rate increases. 
B)  Fixed rate mortgage when interest rates falls. 
C)  Fixed rare mortgage when interest rate rises. 
D)  None of the above, as banker's interest will always be protected. 
A)  Adjustable rate mortgage when interest rate increases. 
B)  Fixed rate mortgage when interest rates falls. 
C)  Fixed rare mortgage when interest rate rises. 
D)  None of the above, as banker's interest will always be protected.

Question 15

Ownership of a put option entitles the owner to the __________ to ___________ a specific stock,on or before a specific date,at a specific price.

Accepted Answer

A)  right, buy 
B)  right, sell 
C)  obligation, buy 
D)  obligation, sell 
A)  right, buy 
B)  right, sell 
C)  obligation, buy 
D)  obligation, sell

Question 16

The price quotations of treasury bonds in the Wall Street Journal show a bid price of 102:12 and an ask price of 102:14.If you sold the bond you expect to receive _________.

Accepted Answer

A)  $1,024.75 
B)  $1,024.38 
C)  $1,023.75 
D)  $1,022.50 
A)  $1,024.75 
B)  $1,024.38 
C)  $1,023.75 
D)  $1,022.50

Question 17

A stock quote indicates a stock price of $60 and a dividend yield of 3%.The latest quarterly dividend received by stock investors must have been ______ per share.

Accepted Answer

A)  $0.55 
B)  $1.80 
C)  $0.45 
D)  $1.25 
A)  $0.55 
B)  $1.80 
C)  $0.45 
D)  $1.25

Question 18

A tax free municipal bond provides a yield of 2.34%.What is the equivalent taxable yield on the bond given a 28% tax bracket?

Accepted Answer

A)  2.34% 
B)  2.68% 
C)  3.25% 
D)  4.92% 
A)  2.34% 
B)  2.68% 
C)  3.25% 
D)  4.92%

Question 19

The interest rate charged by large banks in London to lend money among themselves is called _________.

Accepted Answer

A)  the prime rate 
B)  the discount rate 
C)  the federal funds rate 
D)  LIBOR 
A)  the prime rate 
B)  the discount rate 
C)  the federal funds rate 
D)  LIBOR

Question 20

The Chompers Index is a price weighted stock index based on the 3 largest fast food chains.The stock prices for the three stocks are $54,$23,and $44.What is the price weighted index value of the Chompers Index?

Accepted Answer

A)  23.43 
B)  35.36 
C)  40.33 
D)  49.58 
A)  23.43 
B)  35.36 
C)  40.33 
D)  49.58

Exam 2: Asset Classes and Financial Instruments

Preferred stock is like long-term debt in that ___________.

The maximum maturity on commercial paper is

When computing the bank discount yield you would use ____ days in the year.

Which of the following does not approximate the performance of a buy and hold portfolio strategy?

June call and put options on King Books Inc are available with exercise prices of $30,$35 and $40.Among the different exercise prices,the call option with the _____ exercise price and the put option with the _____ exercise price will have the greatest value.

An index computed from a simple average of returns is a/an _____.

__________ is not a money market instrument.

A firm that has large securities holdings that wishes to raise money for a short length of time may be able to find the cheapest financing from which of the following?

You decide to purchase an equal number of shares of stocks of firms to create a portfolio.If you wished to construct an index to track your portfolio performance your best match for your portfolio would be to construct a/an ______.

A typical bond price quote includes all but which one of the following?

If you thought prices of stock would be rising over the next few months you may wish to __________________ on the stock.

Currently the Dow Jones Industrial Average is computed by _________.

Which of the following is not a money market instrument?

Which of the following mortgage scenarios will benefit the homeowner the most?

Ownership of a put option entitles the owner to the __________ to ___________ a specific stock,on or before a specific date,at a specific price.

The price quotations of treasury bonds in the Wall Street Journal show a bid price of 102:12 and an ask price of 102:14.If you sold the bond you expect to receive _________.

A stock quote indicates a stock price of $60 and a dividend yield of 3%.The latest quarterly dividend received by stock investors must have been ______ per share.

A tax free municipal bond provides a yield of 2.34%.What is the equivalent taxable yield on the bond given a 28% tax bracket?

The interest rate charged by large banks in London to lend money among themselves is called _________.

The Chompers Index is a price weighted stock index based on the 3 largest fast food chains.The stock prices for the three stocks are $54,$23,and $44.What is the price weighted index value of the Chompers Index?

Investments: Background and Issues

Securities Markets

Mutual Funds and Other Investment Companies

Risk and Return: Past and Prologue

Efficient Diversification

Capital Asset Pricing and Arbitrage Pricing Theory

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Bond Prices and Yields

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation

Financial Statement Analysis

Options Markets

Option Valuation

Futures Markets and Risk Management

Portfolio Performance Evaluation

Globalization and International Investing

Hedge Funds

Taxes,inflation,and Investment Strategy

Investors and the Investment Process

Filters

June call and put options on King Books Inc are available with exercise prices of $30,$35 and $40.Among the different exercise prices,the call option with the _ exercise price and the put option with the _ exercise price will have the greatest value.

Ownership of a put option entitles the owner to the to _ a specific stock,on or before a specific date,at a specific price.