FIN 320 Week 2 Quiz – Strayer Click on the Link Below to Purchase A+ Graded Course Material http://www.hwgala.com/FIN-320-Week-2-Quiz-Strayer-391.htm Chapter:1 __________________________________________________________________________ 1.
Financial assets represent _____ of total assets of U.S. households. A.
over 60%
B. over 90% C. under 10% D. about 30% 2.
Real assets in the economy include all but which one of the following? A. Lan d B. Buildings C. Consumer durables D. Common stock
3.
Net worth represents _____ of the liabilities and net worth of commercial banks. A.
about 51%
B. about 91% C. about 11% D. about 31% 4.
According to the Flow of Funds Accounts of the United States, the largest single asset of U.S. households is ___.
A.
mutual fund shares
B. real estate C. pension reserves D. corporate equity 5.
According to the Flow of Funds Accounts of the United States, the largest liability of U.S. households is ________. A.
mortg ages
B. consumer credit C. bank loans D. gambling debts 6.
____ is not a derivative security. A.
A share of common stock
B. A call option C. A futures contract
D. None of these options (All of the answers are derivative secu 7.
According to the Flow of Funds Accounts of the United States, the largest financial asset of U.S. households is ____. A.
mutual fund shares
B. corporate equity C. pension reserves
D. personal trusts 8.
Active trading in markets and competition among securities analysts helps ensure that: I. Security prices approach informational efficiency II. Riskier securities are priced to offer higher potential returns III. Investors are unlikely to be able to consistently find under- or overvalued securities A. I only B. I and II only C. II and III only D. I, II, and III
9.
The material wealth of society is determined by the economy's _________, which is a function of the economy's _________. A.
investment bankers; financial assets
B. investment bankers; real assets C. productive capacity; financial assets D. productive capacity; real assets 10.
Which of the following is not a money market security? A.
U.S. Treasury bill
B. 6-month maturity certificate of deposit C. Common stock D. Bankers' acceptance
11.
__________ assets generate net income to the economy, and __________ assets define allocation of income among investors. A.
Financial, financial
B. Financial, real C. Real, financial D. Real, real 12.
Which of the following are financial assets? I. Debt securities II. Equity securities III. Derivative securities A. I only B. I and II only C. II and III only D. I, II, and III
13.
__________ are examples of financial intermediaries. A.
Commerci al banks
B. Insurance companies C. Investment companies D. All of these options 14.
Asset allocation refers to _________. A.
the allocation of the investme portfolio across broad asset c
B. the analysis of the value of securities
C. the choice of specific assets within each asset class D. none of these options 15.
Which one of the following best describes the purpose of derivatives markets? A.
Transferring risk from one party to another
B. Investing for a short time period to earn a small rate of return C. Investing for retirement D. Earning interest income 16.
More than _____________ of currency is traded each day in the market for foreign exchange. A.
$300 million
B. $1 billion C. $30 billion D. $1 trillion 17.
Security selection refers to the ________. A.
allocation of the investment portfolio across broad asset classes
B. analysis of the value of securities C. choice of specific securities within each asset class D. top-down method of investing 18.
Which of the following is an example of an agency problem? A.
Managers engage in empire building.
B. Managers protect their jobs by avoiding risky projects.
C. Managers over consume luxuries such as corporate jets. D. All of these options are examples of agency problems. 19.
_____ is a mechanism for mitigating potential agency problems. A.
Tying income of managers to success of the firm
B. Directors defending top management C. Antitakeover strategies D. The straight voting method of electing the board of directors 20.
__________ is (are) real assets. A. Bon ds B. Production equipment C. Stocks D. Commercial paper
21.
__________ portfolio construction starts with selecting attractively priced securities. A.
Botto m-up
B. Top-down C. Upside-down D. Side-to-side 22.
In a market economy, capital resources are primarily allocated by ____________. A.
govern ments
B. the SEC
C. financial markets D. investment bankers 23.
__________ represents an ownership share in a corporation. A.
A call option
B. Common stock C. A fixed-income security D. Preferred stock 24.
The value of a derivative security _________. A.
depends on the value of another related security
B. affects the value of a related security C. is unrelated to the value of a related security D. can be integrated only by calculus professors 25.
Commodity and derivative markets allow firms to adjust their _________. A.
manageme nt styles
B. focus from their main line of business to their investment por
C. ways of doing business so that they'll always have positive re D. exposure to various business risks 26.
__________ portfolio management calls for holding diversified portfolios without spending effort or resources attempting to improve investment performance through security analysis. A. Acti ve
B. Momentum C. Passive D. Market-timing 27.
Financial markets allow for all but which one of the following? A.
Shift consumption through t from higher-income periods lower
B. Price securities according to their riskiness C. Channel funds from lenders of funds to borrowers of funds
D. Allow most participants to routinely earn high returns with lo 28.
Financial intermediaries exist because small investors cannot efficiently _________. A.
diversify their portfolios
B. gather information C. monitor their portfolios D. all of these options 29.
Methods of encouraging managers to act in shareholders' best interest include: I. Threat of takeover II. Proxy fights for control of the board of directors III. Tying managers' compensation to stock price performance A. I only B. I and II only C. II and III only
D. I, II, and III 30.
Firms that specialize in helping companies raise capital by selling securities to the public are called _________. A.
pension funds
B. investment banks C. savings banks D. REITs 31.
In securities markets, there should be a risk-return trade-off with higher-risk assets having _________ expected returns than lower-risk assets. A. high er B. lower C. the same
D. The answer cannot be determined from the information given 32.
When the market is more optimistic about a firm, its share price will ______; as a result, it will need to issue _______ shares to raise funds that are needed. A.
rise; fewer
B. fall; fewer C. rise; more D. fall; more 33.
Security selection refers to _________. A.
choosing specific securities within each asset class
B. deciding how much to invest in each asset class
C. deciding how much to invest in the market portfolio versus th D. deciding how much to hedge 34.
An example of a derivative security is _________. A.
a common share of General Motors
B. a call option on Intel stock C. a Ford bond D. a U.S. Treasury bond 35.
__________ portfolio construction starts with asset allocation. A.
Botto m-up
B. Top-down C. Upside-down D. Side-to-side 36.
Which one of the following firms falsely claimed to have a $4.8 billion bank account at Bank of America and vastly understated its debts, eventually resulting in the firm's bankruptcy? A.
World Com
B. Enron C. Parmalat D. Global Crossing 37.
Debt securities promise: I. A fixed stream of income II. A stream of income that is determined according to a specific formula III. A share in the profits of the issuing entity
A. I only B. I or II only C. I and III only D. II or III only 38.
The Sarbanes-Oxley Act tightened corporate governance rules by requiring all but which one of the following? A.
Required that corporations have more independent directors
B. Required that the CFO personally vouch for the corporation's
C. Required that firms could no longer employ investment bank D. Required the creation of a new board to oversee the auditing 39.
The success of common stock investments depends on the success of _________. A.
derivative securities
B. fixed-income securities C. the firm and its real assets D. government methods of allocating capital 40.
The historical average rate of return on large company stocks since 1926 has been _____. A. 5 % B. 8% C. 12% D. 20%
41.
The average rate of return on U.S. Treasury bills since 1926 was _________. A.
less than 1%
B. less than 3% C. less than 4% D. less than 7% 42.
An example of a real asset is: I. A college education II. Customer goodwill III. A patent A. I only B. II only C. I and III only D. I, II, and III
43.
The 2002 law designed to improve corporate governance is titled the _____. A.
Pension Reform Act
B. ERISA C. Financial Services Modernization Act D. Sarbanes-Oxley Act 44.
Which of the following is not a financial intermediary? A.
a mutual fund
B. an insurance company C. a real estate brokerage firm D. a savings and loan company 45.
The combined liabilities of American households represent approximately __________ of combined assets. A. 11 % B. 19% C. 25% D. 33%
46.
In 2011 real assets represented approximately __________ of the total asset holdings of American households. A. 32 % B. 42% C. 48% D. 55%
47.
In 2011 mortgages represented approximately __________ of total liabilities and net worth of American households. A. 12 % B. 14% C. 28% D. 42%
48.
Liabilities equal approximately _____ of total assets for nonfinancial U.S. businesses.
A. 10 % B. 25% C. 48% D. 75% 49.
Which of the following is not an example of a financial intermediary? A.
Goldman Sachs
B. Allstate Insurance C. First Interstate Bank D. IBM 50.
Real assets represent about ____ of total assets for commercial banks. A. 1 % B. 15% C. 25% D. 40%
51.
Money market securities are characterized by: I. Maturity less than 1 year II. Safety of the principal investment III. Low rates of return A. I only B. I and II only C. I and III only D. I, II, and III
52.
After much investigation, an investor finds that Intel stock is currently underpriced. This is an example of ______. A.
asset allocatio n
B. security analysis C. top-down portfolio management D. passive management 53.
After considering current market conditions, an investor decides to place 60% of her funds in equities and the rest in bonds. This is an example of _____. A.
asset allocatio n
B. security analysis C. top-down portfolio management D. passive management 54.
Suppose an investor is considering one of two investments that are identical in all respects except for risk. If the investor anticipates a fair return for the risk of the security he invests in, he can expect to _____. A.
earn no more than the Treasury-bill rate on either security.
B. pay less for the security that has higher risk. C. pay less for the security that has lower risk. D. earn more if interest rates are lower. 55.
The efficient market hypothesis suggests that _______. A.
active portfolio man the most appropriate
B. passive portfolio management strategies are the most appropr
C. either active or passive strategies may be appropriate, depend
D. a bottom-up approach is the most appropriate investment stra 56.
In a perfectly efficient market the best investment strategy is probably _____. A.
an active strategy.
B. a passive strategy. C. asset allocation. D. market timing. 57.
Market signals will help to allocate capital efficiently only if investors are acting _____. A.
on the basis of their individual hunches.
B. as directed by financial experts. C. as dominant forces in the economy. D. on accurate information. 58.
Which of the following is (are) true about hedge funds? I. They are open to institutional investors. II. They are open to wealthy individuals. III. They are more likely than mutual funds to pursue simple strategies. A.
I and II only
B. I and III only C. II and III only D. I, II, and III
59.
Venture capital is _________. A.
frequently used to expand businesses of well-establis companies
B. supplied by venture capital funds and individuals to start-up c C. illegal under current U.S. laws D. most frequently issued with the help of investment bankers 60.
Individuals may find it more advantageous to purchase claims from a financial intermediary rather than directly purchasing claims in capital markets because: I. Intermediaries are better diversified than most individuals II. Intermediaries can exploit economies of scale in investing that individual investors cannot III. Intermediated investments usually offer higher rates of return than direct capital market claims A. I only B. I and II only C. II and III only D. I, II, and III
61.
Surf City Software Company develops new surf forecasting software. It sells the software to Microsoft in exchange for 1,000 shares of Microsoft common stock. Surf City Software has exchanged a _____ asset for a _____ asset in this transaction. A.
real; real
B. financial; financial C. real; financial D. financial; real
62.
Stone Harbor Products takes out a bank loan. It receives $100,000 and signs a promissory note to pay back the loan over 5 years. In this transaction, _____. A.
a new financial asset was created
B. a financial asset was traded for a real asset C. a financial asset was destroyed D. a real asset was created 63.
Which of the following firms was not engaged in a major accounting scandal between 2000 and 2005? A.
General Electric
B. Parmalat C. Enron D. WorldCom 64.
Accounting scandals can often be attributed to a particular concept in the study of finance known as the _____. A.
agency problem
B. risk-return trade-off C. allocation of risk D. securitization 65.
An intermediary that pools and manages funds for many investors is called ______. A.
an investment company
B. a savings and loan C. an investment banker
D. a commercial bank 66.
Financial institutions that specialize in assisting corporations in primary market transactions are called _______. A.
mutual funds
B. investment bankers C. pension funds D. globalization specialists 67.
When a pass-through mortgage security is issued, what does the issuing agency expect to receive? A.
The amount of the original loan plus a servicing fee
B. The principal and interest that are paid by the homeowner
C. The principal and interest that are paid by the homeowner, m D. The interest paid by the homeowner, plus a servicing fee 68.
In 2008 the largest corporate bankruptcy in U.S. history involved the investment banking firm of ______. A.
Goldman Sachs
B. Lehman Brothers C. Morgan Stanley D. Merrill Lynch 69.
The inability of shareholders to influence the decisions of managers, despite overwhelming shareholder support, is a breakdown in what process or mechanism? A.
Audit ing
B. Public finance C. Corporate governance D. Public reporting 70.
Real assets are ______. A.
assets used to produce goods and services
B. always the same as financial assets C. always equal to liabilities D. claims on a company's income 71.
A major cause of mortgage market meltdown in 2007 and 2008 was linked to ________. A.
private equity investments
B. securitization C. negative analyst recommendations D. online trading 72.
In recent years the greatest dollar amount of securitization occurred for which type of loan? A.
Home mortgage s
B. Credit card debt C. Automobile loans D. Equipment leasing 73.
Which of the following is (are) true about nonconforming mortgage loans? A.
They are also known as subprime loans.
B. They have higher default risk than conforming loans. C. They were able to be offered without due diligence. D. All of these options are true. 74.
The systemic risk that led to the financial crisis of 2008 was increased by _____. A.
collateralized debt obligations
B. subprime mortgages C. credit default swaps D. all of the options 75.
An investment adviser has decided to purchase gold, real estate, stocks, and bonds in equal amounts. This decision reflects which part of the investment process? A.
Asset allocatio n
B. Investment analysis C. Portfolio analysis D. Security selection
Chapter 2: _____________________________________________________________________ ______ 1.
Which of the following is not a money market instrument? A.
Treasur y bill
B. Commercial paper C. Preferred stock D. Bankers' acceptance 2.
T-bills are issued with initial maturities of: I. 4 weeks II. 16 weeks III. 26 weeks IV. 32 weeks A.
I and II only
B. I and III only C. I, II, and III only D. I, II, III, and IV 3.
When computing the bank discount yield, you would use ____ days in the year. A. 26 0 B. 36 0
C. 36 5 D. 36 6 4.
A dollar-denominated deposit at a London bank is called _____. A.
eurodo llars
B. LIBOR C. fed funds D. bankers' acceptance 5.
Money market securities are sometimes referred to as cash equivalents because _____. A.
they are safe and marketable
B. they are not liquid C. they are high-risk D. they are low-denomination 6.
The most marketable money market security is _____. A.
Treasur y bills
B. bankers' acceptances C. certificates of deposit D. common stock 7.
The minimum tick size, or spread between prices in the Treasury bond market, is
A.
1/8 of a point.
B. 1/16 of a point. C. 1/32 of a point. D. 1/64 of a point. 8.
An investor in a T-bill earns interest by _________. 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 receiv 9.
______ would not be included in the EAFE index. A.
Austr alia
B. Canada C. Franc e D. Japan 10.
_____ is considered to be an emerging market country. A. Fran ce B. Norway C. Brazil D. Canada
11.
Which one of the following is a true statement? A.
Dividends on preferr deductible to individ to corporate investor
B. Common dividends cannot be paid if preferred dividends ar cumulative preferred stock. C. Preferred stockholders have voting power.
D. Investors can sue managers for nonpayment of preferred di 12.
The bid price of a Treasury bill is _________. A.
the price at which the deal Treasury bills is willing to bill
B. the price at which the dealer in Treasury bills is willing to b
C. greater than the ask price of the Treasury bill expressed in d D. the price at which the investor can buy the Treasury bill 13.
The German stock market is measured by which market index? A. FTS E B. Dow Jones 30 C. DAX D. Nikkei
14.
Deposits of commercial banks at the Federal Reserve are called _____. A.
bankers' acceptances
B. federal funds C. repurchase agreements D. time deposits 15.
Which of the following is not a true statement regarding municipal bonds? A.
A municipal bond is a d issued by state or local
B. A municipal bond is a debt obligation issued by the federal
C. The interest income from a municipal bond is exempt from taxation.
D. The interest income from a municipal bond is exempt from taxation in the issuing state. 16.
Which of the following is not a characteristic of a money market instrument? A.
Liqui dity
B. Marketability C. Low risk D. Maturity greater than 1 year 17.
An individual who goes short in a futures position _____. A.
commits to delivering the underlying commodity at maturity
B. commits to purchasing the underlying commodity at contra
C. has the right to deliver the underlying commodity at contrac
D. has the right to purchase the underlying commodity at contr
18.
Which of the following is not a nickname for an agency associated with the mortgage markets? A.
Fannie Mae
B. Freddie Mac C. Sallie Mae D. Ginnie Mae 19.
Commercial paper is a short-term security issued by __________ to raise funds. A.
the Federal Reserve
B. the New York Stock Exchange C. large well-known companies D. all of these options 20.
The maximum maturity on commercial paper is _____. A.
270 days
B. 180 days C. 90 days D. 30 days 21.
Which one of the following is a true statement regarding the Dow Jones Industrial Average? 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. It is a price-weighted average of 100 large stocks traded on Exchange.
D. It is a value-weighted average of all stocks traded on the Ne Exchange. 22.
Treasury bills are financial instruments issued by __________ to raise funds. A.
commerci al banks
B. the federal government C. large corporations D. state and city governments 23.
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. A. I only B. I and II only C. I and III only D. I, II, and III
24.
A bond that has no collateral is called a _________. A.
callable bond
B. debenture
C. junk bond D. mortgage 25.
A __________ gives its holder the right to sell an asset for a specified exercise price on or before a specified expiration date. A.
call option
B. futures contract C. put option D. interest rate swap 26.
A T-bill quote sheet has 90-day T-bill quotes with a 4.92 bid and a 4.86 ask. If the bill has a $10,000 face value, an investor could buy this bill for _____. A.
$10, 000
B. $9,878.5 0 C. $9,87 7 D. $9,880.1 6 27.
Which one of the following is a true statement regarding corporate bonds? A.
A corporate callable holder the right to ex specified number of common shares.
B. A corporate debenture is a secured bond.
C. A corporate convertible bond gives its holder the right to ex specified number of the company's common shares.
D. Holders of corporate bonds have voting rights in the compa 28.
The yield on tax-exempt bonds is ______. A.
usually less than 50% of the yield on taxable bonds
B. normally about 90% of the yield on taxable bonds C. greater than the yield on taxable bonds D. less than the yield on taxable bonds 29.
__________ is not a money market instrument. A.
A certificate of deposit
B. A Treasury bill C. A Treasury bond D. Commercial paper 30.
An investor buys a T-bill at a bank discount quote of 4.80 with 150 days to maturity. The investor's actual annual rate of return on this investment is _____. A. 4.8 % B. 4.97 % C. 5.47 % D. 5.74 %
31.
The U.K. stock index is the _________. A. DA X
B. FTSE C. GSE D. TSE 32.
A __________ gives its holder the right to buy an asset for a specified exercise price on or before a specified expiration date. A.
call option
B. futures contract C. put option D. interest rate swap 33.
Which one of the following provides the best example of securitization? A.
Convertib le bond
B. Call option C. Mortgage pass-through security D. Preferred stock 34.
Which of the following indexes are market value-weighted? I. The NYSE Composite II. The S&P 500 III. The Wilshire 5000 A.
I and II only
B. II and III only C. I and III only
D. I, II, and III 35.
The interest rate charged by large banks in London to lend money among themselves is called _________. A.
the prime rate
B. the discount rate C. the federal funds rate D. LIBOR 36.
A firm that has large securities holdings and wishes to raise money for a short length of time may be able to find the cheapest financing from which of the following? A.
Reverse repurchase agreement
B. Bankers' acceptance C. Commercial paper D. Repurchase agreement 37.
Currently, the Dow Jones Industrial Average is computed by _________. A.
adding the prices of 30 larg "blue-chip" stocks and divi 30
B. calculating the total market value of the 30 firms in the inde 30
C. measuring the current total market value of the 30 stocks in the total value on the previous day
D. adding the prices of 30 large "blue-chip" stocks and dividin
adjusted for stock splits and large stock dividends 38.
An investor purchases one municipal bond and one corporate bond that pay rates of return of 5% and 6.4%, respectively. If the investor is in the 15% tax bracket, his after-tax rates of return on the municipal and corporate bonds would be, respectively, _____. A.
5% and 6.4%
B. 5% and 5.44% C. 4.25% and 6.4% D. 5.75% and 5.44% 39.
If a Treasury note has a bid price of $996.25, the quoted bid price in the Wall Street Journal would be _________. A. 99: 25 B. 99:63 C. 99:20 D. 99:08
40.
TIPS are ______. 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 41.
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
sell a Treasury bond, you expect to receive _________. A.
$1,02 4.75
B. $1,024.3 8 C. $1,023.7 5 D. $1,022.5 0 42.
The Dow Jones Industrial Average is _________. A.
a priceweighted average
B. a value weight and average C. an equally weighted average D. an unweighted average 43.
Investors will earn higher rates of returns on TIPS than on equivalent default-risk standard bonds if _______________. A.
inflation is lower than anticipated over the investmen period
B. inflation is higher than anticipated over the investment peri C. the U.S. dollar increases in value against the euro
D. the spread between commercial paper and Treasury securiti 44.
Preferred stock is like long-term debt in that ___________. A.
it gives the holder voting po
regarding the firm's manage
B. it promises to pay to its holder a fixed stream of income eac
C. the preferred dividend is a tax-deductible expense for the fi
D. in the event of bankruptcy preferred stock has equal status w 45.
Which of the following does not approximate the performance of a buyand-hold portfolio strategy? A.
An equally weighted index
B. A price-weighted index C. A value-weighted index
D. All of these options (Weights are not a factor in this situatio 46.
In calculating the Dow Jones Industrial Average, the adjustment for a stock split occurs _________. A.
automat ically
B. by adjusting the divisor C. by adjusting the numerator D. by adjusting the market value weights 47.
Suppose the market prices of the 30 stocks in the Dow Jones Industrial Average all change by the same dollar amount on a given day. Assuming there are no stock splits, which stock will have the greatest impact on the average? A.
The one with the highest price
B. The one with the lowest price
C. All 30 stocks will have the same impact.
D. The answer cannot be determined from the information giv 48.
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. 4.5 % B. 7.25 % C. 8.68 % D. none of these options
49.
The purchase of a futures contract gives the buyer _________. 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 50.
Ownership of a put option entitles the owner to the __________ to ___________ a specific stock, on or before a specific date, at a specific price. A.
right; buy
B. right; sell C. obligation; buy D. obligation; sell
51.
An investor in a 28% tax bracket is trying to decide whether to invest in a municipal bond or a corporate bond. She looks up municipal bond yields (rm) but wishes to calculate the taxable equivalent yield r. The formula she should use is given by ______. A.
r = rm Ă— (1 - 28%)
B. r = rm/(1 - 72%) C. r = rm Ă— (1 - 72%) D. r = rm/(1 - 28%) 52.
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. A.
$40; $30
B. $30; $40 C. $35; $35 D. $40; $40 53.
Ownership of a call option entitles the owner to the __________ to __________ a specific stock, on or before a specific date, at a specific price. A.
right; buy
B. right; sell C. obligation; buy
D. obligation; sell 54.
The ________ the ratio of municipal bond yields to corporate bond yields, the _________ the cutoff tax bracket at which more individuals will prefer to hold municipal debt. A.
higher; lower
B. lower; lower C. higher; higher
D. The answer cannot be determined without more information 55.
Which of the following types of bonds are excluded from most bond indexes? A.
Corporat e bonds
B. Junk bonds C. Municipal bonds D. None of these options 56.
The Hang Seng index reflects market performance on which of the following major stock markets? A. Jap an B. Singapore C. Taiwan D. Hong Kong
57.
The Standard & Poor's 500 is __________ weighted index.
A.
an equall y
B. a priceC. a valueD. a share58.
A firm that fails to pay dividends on its preferred stock is said to be _________. A.
insolv ent
B. in arrears C. insufferable D. delinquent 59.
Large well-known companies often issue their own short-term unsecured debt notes directly to the public, rather than borrowing from banks; their notes are called _________. A.
certificates of deposit
B. repurchase agreements C. bankers' acceptances D. commercial paper 60.
Which of the following is most like a short-term collateralized loan? A.
Certificate of deposit
B. Repurchase agreement C. Bankers' acceptance
D. Commercial paper 61.
Eurodollars are _________. A.
dollar-denominated d foreign bank or forei American bank
B. dollar-denominated bonds issued by firms outside their hom C. currency issued by Euro Disney and traded in France
D. dollars that wind up in banks as a result of money-launderin 62.
Which of the following is used to back international sales of goods and services? A.
Certificate of deposit
B. Bankers' acceptance C. Eurodollar deposits D. Commercial paper 63.
Treasury notes have initial maturities between ________ years. A.
2 and 4
B. 5 and 10 C. 10 and 30 D. 1 and 10 64.
Which of the following is not a characteristic of common stock ownership? A.
Residual claimant
B. Unlimited liability C. Voting rights D. Limited life of the security 65.
If you thought prices of stock would be rising over the next few months, you might want to __________________ on the stock. A.
purchase a call option
B. purchase a put option C. sell a futures contract D. place a short-sale order 66.
A typical bond price quote includes all but which one of the following? A.
Daily high price for the bond
B. Closing bond price C. Yield to maturity D. Dividend yield 67.
What are business firms most likely to use derivative securities for? A.
Hedg ing
B. Speculating C. Doing calculus problems D. Market making 68.
What would you expect to have happened to the spread between yields on
commercial paper and Treasury bills immediately after September 11, 2001? A.
No change, as both yields will remain the same
B. Increase, as the spread usually increases in response to a cri
C. Decrease, as the spread usually decreases in response to a c D. No change, as both yields will move in the same direction 69.
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. $0. 55 B. $1.8 0 C. $0.4 5 D. $1.25
70.
Three stocks have share prices of $12, $75, and $30 with total market values of $400 million, $350 million, and $150 million, respectively. If you were to construct a price-weighted index of the three stocks, what would be the index value? A. 30 0 B. 3 9 C. 4 3
D. 3 0 71.
Which of the following is not considered a money market investment? A.
Bankers' acceptance
B. Eurodollar C. Repurchase agreement D. Treasury note 72.
The Federal Reserve Board of Governors directly controls which of the following interest rates? A.
Bankers' acceptances
B. Brokers' calls C. Federal funds D. LIBOR 73.
You decide to purchase an equal number of shares of stocks of firms to create a portfolio. If you wanted to construct an index to track your portfolio performance, your best match for your portfolio would be to construct ______. A.
a valueweighted index
B. an equally weighted index C. a price-weighted index D. a bond price index 74.
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. A.
valueweighted index
B. equally weighted index C. price-weighted index D. bond price index 75.
A corporation in a 34% tax bracket invests in the preferred stock of another company and earns a 6% pretax rate of return. An individual investor in a 15% tax bracket invests in the same preferred stock and earns the same pretax return. The after-tax return to the corporation is _______, and the after-tax return to the individual investor is _______. A.
3.96%; 5.1%
B. 5.39%; 5.1% C. 6%; 6% D. 3.96%; 6% 76.
All but which one of the following indices is value weighted? A.
NASDAQ Composite
B. S&P 500 C. Wilshire 5000 D. DJI A 77.
What is the tax exempt equivalent yield on a 9% bond yield given a marginal tax rate
of 28%? A. 6.48 % B. 7.25 % C. 8.02 % D. 9% 78.
A tax free municipal bond provides a yield of 3.2%. What is the equivalent taxable yield on the bond given a 35% tax bracket? A. 3.2 % B. 3.68 % C. 4.92 % D. 5%
79.
An index computed from a simple average of returns is a/an _____. A.
equal weighted index
B. value weighted index C. price weighted index D. share weighted index 80.
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?
A. 2.34 % B. 2.68 % C. 3.25 % D. 4.92 % 81.
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? A. 23. 43 B. 35.3 6 C. 40.3 3 D. 49.58
82.
The Hydro Index is a price weighted stock index based on the 5 largest boat manufacturers in the nation. The stock prices for the five stocks are $10, $20, $80, $50 and $40. The price of the last stock was just split 2 for 1 and the stock price was halved from $40 to $20. What is the new divisor for a price weighted index? A. 5.0 0 B. 4.8 5 C. 4.5
0 D. 4.7 5 83.
A benchmark index has three stocks priced at $23, $43, and $56. The number of outstanding shares for each is 350,000 shares, 405,000 shares, and 553,000 shares, respectively. If the market value weighted index was 970 yesterday and the prices changed to $23, $41, and $58, what is the new index value? A. 96 0 B. 97 0 C. 97 5 D. 98 5
84.
A benchmark market value index is comprised of three stocks. Yesterday the three stocks were priced at $12, $20, and $60. The number of outstanding shares for each is 600,000 shares, 500,000 shares, and 200,000 shares, respectively. If the stock prices changed to $16, $18, and $62 today respectively, what is the 1-day rate of return on the index? A. 5.78 % B. 4.35 % C. 6.16 % D. 7.42 %
85.
Which of the following mortgage scenarios will benefit the homeowner the most? 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 b 86.
The TED spread refers to A.
the difference between th bond rate and the Treasu
B. the difference between the Treasury note rate and the Treasu
C. the difference between the LIBOR rate and the Treasury bil
D. the difference between the LIBOR rate and the Treasury bo