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Chapter:1
__________________________________________________________________________
1.
|
Financial assets
represent _____ of total assets of U.S. households.
|
2.
|
Real assets in the
economy include all but which one of the following?
|
3.
|
Net worth represents
_____ of the liabilities and net worth of commercial banks.
|
4.
|
According to the Flow of Funds Accounts of the United
States, the largest single asset of U.S. households is ___.
|
5.
|
According to the Flow of Funds Accounts of the United
States, the largest liability of U.S. households is ________.
|
6.
|
____ is not a derivative security.
A.
|
A share of common
stock
|
D.
|
None of these
options (All of the answers are derivative securities.)
|
|
7.
|
According to the Flow of Funds Accounts of the United
States, the largest financial asset of U.S. households is ____.
|
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
|
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?
B.
|
6-month maturity
certificate of deposit
|
|
11.
|
__________ assets
generate net income to the economy, and __________ assets define allocation
of income among investors.
|
12.
|
Which of the
following are financial assets?
I. Debt securities
II. Equity securities
III. Derivative securities
|
13.
|
__________ are
examples of financial intermediaries.
|
14.
|
Asset allocation refers to
_________.
A.
|
the allocation of
the investment portfolio across broad asset classes
|
B.
|
the analysis of the
value of securities
|
C.
|
the choice of
specific assets within each asset class
|
|
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.
|
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.
|
21.
|
__________ portfolio
construction starts with selecting attractively priced securities.
|
22.
|
In a market economy,
capital resources are primarily allocated by ____________.
|
23.
|
__________ represents
an ownership share in a corporation.
C.
|
A fixed-income
security
|
|
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 _________.
B.
|
focus from their
main line of business to their investment portfolios
|
C.
|
ways of doing
business so that they'll always have positive returns
|
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.
|
27.
|
Financial markets
allow for all but which one of the following?
A.
|
Shift consumption
through time from higher-income periods to 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 low risk
|
|
28.
|
Financial
intermediaries exist because small investors cannot efficiently
_________.
A.
|
diversify their
portfolios
|
C.
|
monitor their
portfolios
|
|
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
|
30.
|
Firms that specialize
in helping companies raise capital by selling securities to the public are
called _________.
|
31.
|
In securities markets,
there should be a risk-return trade-off with higher-risk assets having
_________ expected returns than lower-risk assets.
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.
|
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 the riskless asset
|
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
|
|
35.
|
__________ portfolio
construction starts with asset allocation.
|
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?
|
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
|
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 financial statements
|
C.
|
Required that firms
could no longer employ investment bankers to sell securities to the public
|
D.
|
Required the
creation of a new board to oversee the auditing of public companies
|
|
39.
|
The success of common
stock investments depends on the success of _________.
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
_____.
|
41.
|
The average rate of
return on U.S. Treasury bills since 1926 was _________.
|
42.
|
An example of a real
asset is:
I. A college education
II. Customer goodwill
III. A patent
|
43.
|
The 2002 law designed
to improve corporate governance is titled the _____.
C.
|
Financial Services
Modernization Act
|
|
44.
|
Which of the
following is not a financial
intermediary?
C.
|
a real estate
brokerage firm
|
D.
|
a savings and loan
company
|
|
45.
|
The combined
liabilities of American households represent approximately __________ of
combined assets.
|
46.
|
In 2011 real assets
represented approximately __________ of the total asset holdings of American
households.
|
47.
|
In 2011 mortgages
represented approximately __________ of total liabilities and net worth of
American households.
|
48.
|
Liabilities equal
approximately _____ of total assets for nonfinancial U.S. businesses.
|
49.
|
Which of the
following is not an example of a
financial intermediary?
|
50.
|
Real assets represent
about ____ of total assets for commercial banks.
|
51.
|
Money market
securities are characterized by:
I. Maturity less than 1 year
II. Safety of the principal investment
III. Low rates of return
|
52.
|
After much
investigation, an investor finds that Intel stock is currently underpriced.
This is an example of ______.
C.
|
top-down portfolio
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 _____.
C.
|
top-down portfolio
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 management
strategies are the most appropriate investment strategies
|
B.
|
passive portfolio
management strategies are the most appropriate investment strategies
|
C.
|
either active or
passive strategies may be appropriate, depending on the expected direction
of the market
|
D.
|
a bottom-up
approach is the most appropriate investment strategy
|
|
56.
|
In a perfectly
efficient market the best investment strategy is probably _____.
|
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.
|
59.
|
Venture capital is
_________.
A.
|
frequently used to
expand the businesses of well-established companies
|
B.
|
supplied by venture
capital funds and individuals to start-up companies
|
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
|
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.
|
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?
|
64.
|
Accounting scandals can
often be attributed to a particular concept in the study of finance known as
the _____.
|
65.
|
An intermediary that
pools and manages funds for many investors is called ______.
|
66.
|
Financial
institutions that specialize in assisting corporations in primary market
transactions are called _______.
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, minus a servicing fee
|
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
______.
|
69.
|
The inability of
shareholders to influence the decisions of managers, despite overwhelming
shareholder support, is a breakdown in what process or mechanism?
|
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
|
C.
|
negative analyst
recommendations
|
|
72.
|
In recent years the
greatest dollar amount of securitization occurred for which type of
loan?
|
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
|
|
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?
|
Chapter 2:
___________________________________________________________________________
1.
|
Which of the
following is not a money market
instrument?
|
2.
|
T-bills are issued
with initial maturities of:
I. 4 weeks
II. 16 weeks
III. 26 weeks
IV. 32 weeks
|
3.
|
When computing the
bank discount yield, you would use ____ days in the year.
|
4.
|
A dollar-denominated
deposit at a London bank is called _____.
|
5.
|
Money market
securities are sometimes referred to as cash
equivalents because _____.
A.
|
they are safe and
marketable
|
D.
|
they are
low-denomination
|
|
6.
|
The most marketable
money market security is _____.
C.
|
certificates of
deposit
|
|
7.
|
The minimum tick size, or spread between prices in
the Treasury bond market, is
|
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 received at maturity
|
|
9.
|
______ would not be included in the EAFE
index.
|
10.
|
_____ is considered
to be an emerging market country.
|
11.
|
Which one of the
following is a true statement?
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.
|
|
12.
|
The bid price of a
Treasury bill is _________.
A.
|
the price at which
the dealer in Treasury bills is willing to sell the bill
|
B.
|
the price at which
the dealer in Treasury bills is willing to buy the bill
|
C.
|
greater than the
ask price of the Treasury bill expressed in dollar terms
|
D.
|
the price at which
the investor can buy the Treasury bill
|
|
13.
|
The German stock
market is measured by which market index?
|
14.
|
Deposits of
commercial banks at the Federal Reserve are called _____.
|
15.
|
Which of the
following is not a true statement
regarding municipal bonds?
A.
|
A municipal bond is
a debt obligation issued by state or local governments.
|
B.
|
A municipal bond is
a debt obligation issued by the federal government.
|
C.
|
The interest income
from a municipal bond is exempt from federal income taxation.
|
D.
|
The interest income
from a municipal bond is exempt from state and local taxation in the
issuing state.
|
|
16.
|
Which of the
following is not a characteristic
of a money market instrument?
D.
|
Maturity greater
than 1 year
|
|
17.
|
An individual who
goes short in a futures position _____.
A.
|
commits to
delivering the underlying commodity at contract maturity
|
B.
|
commits to
purchasing the underlying commodity at contract maturity
|
C.
|
has the right to
deliver the underlying commodity at contract maturity
|
D.
|
has the right to
purchase the underlying commodity at contract maturity
|
|
18.
|
Which of the
following is not a nickname for an
agency associated with the mortgage markets?
|
19.
|
Commercial paper is a
short-term security issued by __________ to raise funds.
B.
|
the New York Stock
Exchange
|
C.
|
large well-known
companies
|
|
20.
|
The maximum maturity
on commercial paper is _____.
|
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 the New York Stock
Exchange.
|
D.
|
It is a
value-weighted average of all stocks traded on the New York Stock Exchange.
|
|
22.
|
Treasury bills are
financial instruments issued by __________ to raise funds.
B.
|
the federal
government
|
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.
|
24.
|
A bond that has no
collateral is called a _________.
|
25.
|
A __________ gives
its holder the right to sell an asset for a specified exercise price on or
before a specified expiration date.
|
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 _____.
|
27.
|
Which one of the
following is a true statement regarding corporate bonds?
A.
|
A corporate
callable bond gives its holder the right to exchange it for a specified
number of the company's common shares.
|
B.
|
A corporate
debenture is a secured bond.
|
C.
|
A corporate
convertible bond gives its holder the right to exchange it for a specified
number of the company's common shares.
|
D.
|
Holders of
corporate bonds have voting rights in the company.
|
|
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
|
|
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 _____.
|
31.
|
The U.K. stock index
is the _________.
|
32.
|
A __________ gives
its holder the right to buy an asset for a specified exercise price on or
before a specified expiration date.
|
33.
|
Which one of the
following provides the best example of securitization?
C.
|
Mortgage
pass-through security
|
|
34.
|
Which of the
following indexes are market value-weighted?
I. The NYSE Composite
II. The S&P 500
III. The Wilshire 5000
|
35.
|
The interest rate
charged by large banks in London to lend money among themselves is called
_________.
C.
|
the federal funds
rate
|
|
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
|
|
37.
|
Currently, the Dow
Jones Industrial Average is computed by _________.
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
|
|
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,
_____.
|
39.
|
If a Treasury note
has a bid price of $996.25, the quoted bid price in the Wall Street Journal would be _________.
|
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 _________.
|
42.
|
The Dow Jones
Industrial Average is _________.
A.
|
a price-weighted
average
|
B.
|
a value weight and
average
|
C.
|
an equally weighted
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 investment period
|
B.
|
inflation is higher
than anticipated over the investment period
|
C.
|
the U.S. dollar
increases in value against the euro
|
D.
|
the spread between
commercial paper and Treasury securities remains low
|
|
44.
|
Preferred stock is
like long-term debt in that ___________.
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
|
|
45.
|
Which of the
following does not approximate the
performance of a buy-and-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 situation.)
|
|
46.
|
In calculating the
Dow Jones Industrial Average, the adjustment for a stock split occurs
_________.
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 given.
|
|
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
_________.
|
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.
|
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 ______.
|
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.
|
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.
|
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.
D.
|
The answer cannot
be determined without more information.
|
|
55.
|
Which of the
following types of bonds are excluded from most bond indexes?
|
56.
|
The Hang Seng index
reflects market performance on which of the following major stock
markets?
|
57.
|
The Standard &
Poor's 500 is __________ weighted index.
|
58.
|
A firm that fails to
pay dividends on its preferred stock is said to be _________.
|
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
|
|
60.
|
Which of the following
is most like a short-term collateralized loan?
A.
|
Certificate of
deposit
|
|
61.
|
Eurodollars are
_________.
A.
|
dollar-denominated
deposits at any foreign bank or foreign branch of an American bank
|
B.
|
dollar-denominated
bonds issued by firms outside their home market
|
C.
|
currency issued by
Euro Disney and traded in France
|
D.
|
dollars that wind
up in banks as a result of money-laundering activities
|
|
62.
|
Which of the
following is used to back international sales of goods and services?
A.
|
Certificate of
deposit
|
|
63.
|
Treasury notes have
initial maturities between ________ years.
|
64.
|
Which of the
following is not a characteristic
of common stock ownership?
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
|
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
|
|
67.
|
What are business
firms most likely to use derivative securities for?
C.
|
Doing calculus
problems
|
|
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 crisis
|
C.
|
Decrease, as the
spread usually decreases in response to a crisis
|
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.
|
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?
|
71.
|
Which of the
following is not considered a money
market investment?
|
72.
|
The Federal Reserve
Board of Governors directly controls which of the following interest
rates?
|
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 value-weighted
index
|
B.
|
an equally weighted
index
|
C.
|
a price-weighted
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.
B.
|
equally weighted
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 _______.
|
76.
|
All but which one of
the following indices is value weighted?
|
77.
|
What is the tax
exempt equivalent yield on a 9% bond yield given a marginal tax rate of
28%?
|
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?
|
79.
|
An index computed
from a simple average of returns is a/an _____.
|
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?
|
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?
|
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?
|
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?
|
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?
|
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 be protected.
|
|
86.
|
The TED spread refers
to
A.
|
the difference between
the Treasury bond rate and the Treasury bill rate.
|
B.
|
the difference
between the Treasury note rate and the Treasury bill rate.
|
C.
|
the difference
between the LIBOR rate and the Treasury bill rate.
|
D.
|
the difference
between the LIBOR rate and the Treasury bond rate.
|
|
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