Question 1

Ownership of a call 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 A

Question 2

In a ________ index, changes in the value of the stock with the greatest market value will move the index value the most, everything else equal.

Accepted Answer

A)  value-weighted index 
B)  equally weighted index 
C)  price-weighted index 
D)  bond price index 
A)  value-weighted index 
B)  equally weighted index 
C)  price-weighted index 
D)  bond price index A

Question 3

Treasury notes have initial maturities between ________ years.

Accepted Answer

A)  2 and 4 
B)  5 and 10 
C)  10 and 30 
D)  1 and 10 
A)  2 and 4 
B)  5 and 10 
C)  10 and 30 
D)  1 and 10 D

Question 4

A T-bill quote sheet has 90-day T-bill quotes with a 4.92 ask and a 4.86 bid. If the bill has a $10,000 face value, an investor could sell this bill for ________.

Accepted Answer

A)  $10,000 
B)  $9,878.50 
C)  $9,877 
D)  $9,880.16 
A)  $10,000 
B)  $9,878.50 
C)  $9,877 
D)  $9,880.16

Question 5

A bond issued by the state of Alabama is priced to yield 6.25%. If you are in the 28% tax bracket, this bond would provide you with an equivalent taxable yield of ________.

Accepted Answer

A)  4.5% 
B)  7.25% 
C)  8.68% 
D)  none of these options 
A)  4.5% 
B)  7.25% 
C)  8.68% 
D)  none of these options

Question 6

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

Accepted Answer

A)  coupon 
B)  closing bond price 
C)  yield to maturity 
D)  dividend yield 
A)  coupon 
B)  closing bond price 
C)  yield to maturity 
D)  dividend yield

Question 7

Which one of the following is a true statement?

Accepted Answer

A)  Dividends on preferred stocks are tax-deductible to individual investors but not to corporate investors. 
B)  Common dividends cannot be paid if preferred dividends are in arrears on cumulative preferred stock. 
C)  Preferred stockholders have voting power. 
D)  Investors can sue managers for nonpayment of preferred dividends. 
A)  Dividends on preferred stocks are tax-deductible to individual investors but not to corporate investors. 
B)  Common dividends cannot be paid if preferred dividends are in arrears on cumulative preferred stock. 
C)  Preferred stockholders have voting power. 
D)  Investors can sue managers for nonpayment of preferred dividends.

Question 8

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 9

The German stock market is measured by which market index?

Accepted Answer

A)  FTSE 
B)  Dow Jones 30 
C)  DAX 
D)  Nikkei 
A)  FTSE 
B)  Dow Jones 30 
C)  DAX 
D)  Nikkei

Question 10

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 11

The purchase of a futures contract gives the buyer ________.

Accepted Answer

A)  the right to buy an item at a specified price 
B)  the right to sell an item at a specified price 
C)  the obligation to buy an item at a specified price 
D)  the obligation to sell an item at a specified price 
A)  the right to buy an item at a specified price 
B)  the right to sell an item at a specified price 
C)  the obligation to buy an item at a specified price 
D)  the obligation to sell an item at a specified price

Question 12

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 rate mortgage when interest rate rises. 
D)  None of these options, as the 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 rate mortgage when interest rate rises. 
D)  None of these options, as the banker's interest will always be protected.

Question 13

An investor in a T-bill earns interest by ________.

Accepted Answer

A)  receiving interest payments every 90 days 
B)  receiving dividend payments every 30 days 
C)  converting the T-bill at maturity into a higher-valued T-note 
D)  buying the bill at a discount from the face value to be received at maturity 
A)  receiving interest payments every 90 days 
B)  receiving dividend payments every 30 days 
C)  converting the T-bill at maturity into a higher-valued T-note 
D)  buying the bill at a discount from the face value to be received at maturity

Question 14

The Hang Seng index reflects market performance on which of the following major stock markets?

Accepted Answer

A)  Japan 
B)  Singapore 
C)  Taiwan 
D)  Hong Kong 
A)  Japan 
B)  Singapore 
C)  Taiwan 
D)  Hong Kong

Question 15

The Dow Jones Industrial Average is ________.

Accepted Answer

A)  a price-weighted average 
B)  a value weight and average 
C)  an equally weighted average 
D)  an unweighted average 
A)  a price-weighted average 
B)  a value weight and average 
C)  an equally weighted average 
D)  an unweighted average

Question 16

Which of the following indexes are market value-weighted?
I. The NYSE Composite
II. The S&P 500
III.The Wilshire 5000

Accepted Answer

A)  I and II only 
B)  II and III only 
C)  I and III only 
D)  I, II, and III 
A)  I and II only 
B)  II and III only 
C)  I and III only 
D)  I, II, and III

Question 17

Treasury bills are financial instruments issued by ________ to raise funds.

Accepted Answer

A)  commercial banks 
B)  the federal government 
C)  large corporations 
D)  state and city governments 
A)  commercial banks 
B)  the federal government 
C)  large corporations 
D)  state and city governments

Question 18

The most marketable money market security is ________.

Accepted Answer

A)  Treasury bills 
B)  bankers' acceptances 
C)  certificates of deposit 
D)  common stock 
A)  Treasury bills 
B)  bankers' acceptances 
C)  certificates of deposit 
D)  common stock

Question 19

Which of the following are true statements about T-bills?
I. T-bills typically sell in denominations of $10,000.
II. Income earned on T-bills is exempt from all federal taxes.
III. Income earned on T-bills is exempt from state and local taxes.

Accepted Answer

A)  I only 
B)  I and II only 
C)  I and III only 
D)  I, II, and III 
A)  I only 
B)  I and II only 
C)  I and III only 
D)  I, II, and III

Question 20

TIPS are ________.

Accepted Answer

A)  Treasury bonds that pay no interest and are sold at a discount 
B)  U.K. bonds that protect investors from default risk 
C)  securities that trade on the Toronto stock index 
D)  Treasury bonds that protect investors from inflation 
A)  Treasury bonds that pay no interest and are sold at a discount 
B)  U.K. bonds that protect investors from default risk 
C)  securities that trade on the Toronto stock index 
D)  Treasury bonds that protect investors from inflation

Exam 2: Asset Classes and Financial Instruments

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

In a ________ index, changes in the value of the stock with the greatest market value will move the index value the most, everything else equal.

Treasury notes have initial maturities between ________ years.

A T-bill quote sheet has 90-day T-bill quotes with a 4.92 ask and a 4.86 bid. If the bill has a $10,000 face value, an investor could sell this bill for ________.

A bond issued by the state of Alabama is priced to yield 6.25%. If you are in the 28% tax bracket, this bond would provide you with an equivalent taxable yield of ________.

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

Which one of the following is a true statement?

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

The German stock market is measured by which market index?

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 purchase of a futures contract gives the buyer ________.

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

An investor in a T-bill earns interest by ________.

The Hang Seng index reflects market performance on which of the following major stock markets?

The Dow Jones Industrial Average is ________.

Which of the following indexes are market value-weighted? I. The NYSE Composite II. The S&P 500 III.The Wilshire 5000

Treasury bills are financial instruments issued by ________ to raise funds.

The most marketable money market security is ________.

Which of the following are true statements about T-bills? I. T-bills typically sell in denominations of $10,000. II. Income earned on T-bills is exempt from all federal taxes. III. Income earned on T-bills is exempt from state and local taxes.

TIPS are ________.

Investments: Background and Issues

Securities Markets

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

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

Evaluating Investment Performance

International Diversification

Hedge Funds

Taxes, Inflation, and Investment Strategy

Investors and the Investment Process

Filters

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