Question 1

All U. S. government securities are considered marketable securities.

Accepted Answer

A) True 
 B)False

Question 2

Treasury STRIPS are most similar to which type of corporate security?

Accepted Answer

A)  preferred stock 
B)  premium bond 
C)  high-yield bond 
D)  zero-coupon bond 
A)  preferred stock 
B)  premium bond 
C)  high-yield bond 
D)  zero-coupon bond

Question 3

If a bond has a coupon greater than the current market yield, it should be selling at a premium.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following would not be considered a capital market security?

Accepted Answer

A)  a 20-year corporate bond 
B)  a common stock 
C)  a 6-month Treasury bill 
D)  a mutual fund share 
A)  a 20-year corporate bond 
B)  a common stock 
C)  a 6-month Treasury bill 
D)  a mutual fund share

Question 5

Marketable securities all fall into the category of capital market securities.

Accepted Answer

A) True 
 B)False

Question 6

What is the biggest difference between an option and a futures contract?

Accepted Answer

A)  Options are traded on exchanges whereas futures are not 
B)  Options give investors a way to manage portfolio risk while futures do not 
C)  Options can be used by speculators to profit from price fluctuations while futures cannot 
D)  Options give their holders the right to buy or sell whereas futures contract are obligations to buy or sell 
A)  Options are traded on exchanges whereas futures are not 
B)  Options give investors a way to manage portfolio risk while futures do not 
C)  Options can be used by speculators to profit from price fluctuations while futures cannot 
D)  Options give their holders the right to buy or sell whereas futures contract are obligations to buy or sell

Question 7

Direct investing involves trades made by directly purchasing shares of a financial intermediary.

Accepted Answer

A) True 
 B)False

Question 8

Distinguish between direct and indirect investing.

Accepted Answer

Direct investing - buy bonds a

Question 9

LEAPS have maturities dates up to 10 years.

Accepted Answer

A) True 
 B)False

Question 10

Each point on a bond quote represents:

Accepted Answer

A)  $100 
B)  1 percent of $100 
C)  1 percent of $1000 
D)  $1000 
A)  $100 
B)  1 percent of $100 
C)  1 percent of $1000 
D)  $1000

Question 11

Which of the following statements regarding common stocks is true?

Accepted Answer

A)  The par value of common stock is usually $100 
B)  The market value of common stock is equal to its book value 
C)  Dividends on common stock are at the discretion of the company 
D)  Common stock has a senior claim on company assets 
A)  The par value of common stock is usually $100 
B)  The market value of common stock is equal to its book value 
C)  Dividends on common stock are at the discretion of the company 
D)  Common stock has a senior claim on company assets

Question 12

Which of the following is not one of the characteristics of the primary nonmarketable financial assets owned by most individuals?

Accepted Answer

A)  high liquidity 
B)  high return 
C)  often issued by the U.S. government 
D)  low risk 
A)  high liquidity 
B)  high return 
C)  often issued by the U.S. government 
D)  low risk

Question 13

The major bond rating service is Dun & Bradstreet.

Accepted Answer

A) True 
 B)False

Question 14

Which of the U.S. Treasury securities is always sold at a discount?

Accepted Answer

A)  Treasury bills 
B)  Treasury notes 
C)  Treasury bonds 
D)  Treasury inflation protected securities (TIPS) 
A)  Treasury bills 
B)  Treasury notes 
C)  Treasury bonds 
D)  Treasury inflation protected securities (TIPS)

Question 15

How is the total book value of equity affected by stock splits?

Accepted Answer

Stock splits do not affect tot

Question 16

Term bonds have a single maturity.

Accepted Answer

A) True 
 B)False

Question 17

Nonmarketable financial assets that protect against inflation include:

Accepted Answer

A)  Nonnegotiable certificates of deposit (CDs) 
B)  Money market deposit accounts (MMDAs) 
C)  Series EE US government savings bonds 
D)  US government savings bonds, I bonds 
A)  Nonnegotiable certificates of deposit (CDs) 
B)  Money market deposit accounts (MMDAs) 
C)  Series EE US government savings bonds 
D)  US government savings bonds, I bonds

Question 18

The par value of Blaze, Inc. common stock is $0.50, the earnings per share is $4, the market price is $60, the dividend per share is $1. Calculate the payout ratio.

Accepted Answer

Payout rat

Question 19

Which of the following statements is true regarding an investment in mortgage-backed securities?

Accepted Answer

A)  There is little default risk. 
B)  The stated maturity is generally 10 years. 
C)  They receive a fixed payment per month. 
D)  They are not subject to prepayment. 
A)  There is little default risk. 
B)  The stated maturity is generally 10 years. 
C)  They receive a fixed payment per month. 
D)  They are not subject to prepayment.

Question 20

The coupon rate is another name for the:

Accepted Answer

A)  market interest rate. 
B)  current yield. 
C)  stated interest rate. 
D)  yield to maturity 
A)  market interest rate. 
B)  current yield. 
C)  stated interest rate. 
D)  yield to maturity

Exam 2: Investment Alternatives: Generic Principles All Investors Must Know

All U. S. government securities are considered marketable securities.

Treasury STRIPS are most similar to which type of corporate security?

If a bond has a coupon greater than the current market yield, it should be selling at a premium.

Which of the following would not be considered a capital market security?

Marketable securities all fall into the category of capital market securities.

What is the biggest difference between an option and a futures contract?

Direct investing involves trades made by directly purchasing shares of a financial intermediary.

Distinguish between direct and indirect investing.

LEAPS have maturities dates up to 10 years.

Each point on a bond quote represents:

Which of the following statements regarding common stocks is true?

Which of the following is not one of the characteristics of the primary nonmarketable financial assets owned by most individuals?

The major bond rating service is Dun & Bradstreet.

Which of the U.S. Treasury securities is always sold at a discount?

How is the total book value of equity affected by stock splits?

Term bonds have a single maturity.

Nonmarketable financial assets that protect against inflation include:

The par value of Blaze, Inc. common stock is $0.50, the earnings per share is $4, the market price is $60, the dividend per share is $1. Calculate the payout ratio.

Which of the following statements is true regarding an investment in mortgage-backed securities?

The coupon rate is another name for the:

Investing Is an Important Activity Worldwide

Indirect Investing: a Global Activity

Securities Markets Matter to All Investors

All Financial Markets Have Regulations and Trading Practices

Return and Risk: the Foundation of Investing Worldwide

Portfolio Theory Is Universal

Portfolio Selection for All Investors

Asset Pricing Principles

Common Stock Valuation Lessons for All Investors

Managing a Stock Portfolio: a Worldwide Issue

What Happens If Markets Are Efficient or Not?

Economy/ market Analysis Must Be Considered by All Investor

Sector/ industry Analysis

Company Analysis

Technical Analysis

Fixed Income Securities Are Available Worldwide

Managing Bond Portfolios: Some Issues Affect All Investors

Understanding Derivative Securities: Options

Understanding Derivative Securities: Futures

All Investors Must Consider Portfolio Management

Evaluation of Investment Performance: a Global Concept

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