Question 1

Money market securities generally carry a low chance of default.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

What is the major difference between municipal bonds and other types of bonds?

Accepted Answer

A)  Municipal bonds are always insured; other bonds are not. 
B)  Unlike other bonds, municipal bonds sell at a discount. 
C)  Municipal bond interest is tax-exempt; interest on other bonds is not. 
D)  There is no brokerage commission on municipal bonds unlike other bonds. 
A)  Municipal bonds are always insured; other bonds are not. 
B)  Unlike other bonds, municipal bonds sell at a discount. 
C)  Municipal bond interest is tax-exempt; interest on other bonds is not. 
D)  There is no brokerage commission on municipal bonds unlike other bonds.

Question 4

Explain how writing option contracts (both puts and calls) can generate income for owners of the underlying stock.

Accepted Answer

The writer keeps the

Question 5

The typical banker's acceptance has a maturity of nine months.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is true regarding asset-backed securities?

Accepted Answer

A)  They offer relatively high yields. 
B)  They have relatively long maturities. 
C)  They generally have low credit ratings. 
D)  Each traunche has the same risk. 
A)  They offer relatively high yields. 
B)  They have relatively long maturities. 
C)  They generally have low credit ratings. 
D)  Each traunche has the same risk.

Question 7

If a preferred stock issue is cumulative, this means that unpaid preferred stock dividends:

Accepted Answer

A)  are paid at the end of the year. 
B)  are legally binding on the corporation. 
C)  must be paid in the future before common stock dividends can be paid. 
D)  are never repaid. 
A)  are paid at the end of the year. 
B)  are legally binding on the corporation. 
C)  must be paid in the future before common stock dividends can be paid. 
D)  are never repaid.

Question 8

Relative to venture capital funds, buyout funds tend to rely:

Accepted Answer

A)  more heavily on debt and they are riskier. 
B)  more heavily on debt and they are less risky. 
C)  less heavily on debt and they are riskier. 
D)  less heavily on debt and they are less risky. 
A)  more heavily on debt and they are riskier. 
B)  more heavily on debt and they are less risky. 
C)  less heavily on debt and they are riskier. 
D)  less heavily on debt and they are less risky.

Question 9

Bonds called in are likely to be:

Accepted Answer

A)  bonds already in default. 
B)  replaced with new bonds that have a lower interest rate. 
C)  replaced with new bonds that have a higher interest rate. 
D)  junk bonds. 
A)  bonds already in default. 
B)  replaced with new bonds that have a lower interest rate. 
C)  replaced with new bonds that have a higher interest rate. 
D)  junk bonds.

Question 10

In bankruptcy, bondholders are paid before preferred or common stockholders.

Accepted Answer

A) True 
 B)False

Question 11

Bond's issued by McDonalds are yielding 6.75%, whereas comparable risk bonds issued by the city of Omaha are yield 4.45%. What Nebraska residents should purchase the Omaha bonds?

Accepted Answer

Find the tax rate that makes the after-t

Question 12

TR Bank is planning to purchase a T-bill with a $100,000 face value. The T-bill is quoted at a bank discount of 2.1% and has 220 days to maturity. What is the T-bill's effective annual yield (EAY)?

Accepted Answer

A)  2.15% 
B)  2.17% 
C)  2.19% 
D)  2.21% 
A)  2.15% 
B)  2.17% 
C)  2.19% 
D)  2.21%

Question 13

American Depositary Receipts (ADRs) are attractive investments for U.S. investors because they:

Accepted Answer

A)  eliminate foreign currency exchange risk. 
B)  are purchased on a U.S. exchange with U.S. dollars. 
C)  pay dividends that are exempt from income taxes. 
D)  are less risky than the typical U.S. stock. 
A)  eliminate foreign currency exchange risk. 
B)  are purchased on a U.S. exchange with U.S. dollars. 
C)  pay dividends that are exempt from income taxes. 
D)  are less risky than the typical U.S. stock.

Question 14

Treasury bonds generally have original maturities of:

Accepted Answer

A)  5 to 15 years. 
B)  5 to 30 years. 
C)  10 to 20 years. 
D)  10 to 30 years. 
A)  5 to 15 years. 
B)  5 to 30 years. 
C)  10 to 20 years. 
D)  10 to 30 years.

Question 15

Which of the following is a security that represents shares of a foreign company, which are held in a bank?

Accepted Answer

A)  Convertible bond 
B)  American Depository Receipt (ADR) 
C)  Asset-backed security 
D)  LEAPS 
A)  Convertible bond 
B)  American Depository Receipt (ADR) 
C)  Asset-backed security 
D)  LEAPS

Question 16

The par value of Inferno, Inc. common stock is $0.50, the earnings per share is $6,
and it trades at a P/E of 15. What is Inferno, Inc.'s stock price?

Accepted Answer

Stock pric

Question 17

Treasury bills are traded in the:

Accepted Answer

A)  money market. 
B)  capital market. 
C)  government market. 
D)  regulated market. 
A)  money market. 
B)  capital market. 
C)  government market. 
D)  regulated market.

Question 18

If a call option has a $10 strike price, and the underlying stock is trading at $11, then the option is considered:

Accepted Answer

A)  in the money. 
B)  at the money. 
C)  out of the money. 
D)  worthless. 
A)  in the money. 
B)  at the money. 
C)  out of the money. 
D)  worthless.

Question 19

What rate would a taxable corporate bond have to pay to be comparable to a municipal bond with a coupon rate of 7 percent if the investor is in the 28 percent tax bracket?

Accepted Answer

Taxable eq

Question 20

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

Exam 2: Investment Alternatives

Money market securities generally carry a low chance of default.

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

What is the major difference between municipal bonds and other types of bonds?

Explain how writing option contracts (both puts and calls) can generate income for owners of the underlying stock.

The typical banker's acceptance has a maturity of nine months.

Which of the following statements is true regarding asset-backed securities?

If a preferred stock issue is cumulative, this means that unpaid preferred stock dividends:

Relative to venture capital funds, buyout funds tend to rely:

Bonds called in are likely to be:

In bankruptcy, bondholders are paid before preferred or common stockholders.

Bond's issued by McDonalds are yielding 6.75%, whereas comparable risk bonds issued by the city of Omaha are yield 4.45%. What Nebraska residents should purchase the Omaha bonds?

TR Bank is planning to purchase a T-bill with a $100,000 face value. The T-bill is quoted at a bank discount of 2.1% and has 220 days to maturity. What is the T-bill's effective annual yield (EAY)?

American Depositary Receipts (ADRs) are attractive investments for U.S. investors because they:

Treasury bonds generally have original maturities of:

Which of the following is a security that represents shares of a foreign company, which are held in a bank?

The par value of Inferno, Inc. common stock is $0.50, the earnings per share is $6, and it trades at a P/E of 15. What is Inferno, Inc.'s stock price?

Treasury bills are traded in the:

If a call option has a $10 strike price, and the underlying stock is trading at $11, then the option is considered:

What rate would a taxable corporate bond have to pay to be comparable to a municipal bond with a coupon rate of 7 percent if the investor is in the 28 percent tax bracket?

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

Understanding Investments

Indirect Investing

Securities Markets and Market Indexes

How Securities Are Traded

The Risk and Return From Investing

Portfolio Theory

Portfolio Selection and Asset Allocation

Capital Market Theory and Asset Pricing Models

Common Stock Valuation

Common Stocks: Analysis and Strategy

Market Efficiency

Economymarket Analysis

Sectorindustry Analysis

Company Analysis

Technical Analysis

Bond Yields and Prices

Bonds: Analysis and Strategy

Options

Futures Contracts

Managing Your Financial Assets

Evaluation of Investment Performance

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