Question 1

The major bond rating service is Dun & Bradstreet.

Accepted Answer

A) True 
 B)False

Question 2

Most futures contracts are not exercised.

Accepted Answer

A) True 
 B)False

Question 3

Does the options market help stabilize or destabilize the stock market? Explain.

Accepted Answer

Options should be a stabilizin

Question 4

TR Bank is planning to purchase a T-bill with a face value of $100,000. The T-bill is quoted at a bank discount of 2.1% and has 320 days to maturity. Find the T-bill's price, bond equivalent yield (BEY) and equivalent annual yield (EAY).

Accepted Answer

Price: 100,000 x [ 1 - 0.021 x

Question 5

Which of the following is not a characteristic of the primary nonmarketable financial asset 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 6

Each point on a corporate 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 7

Carl purchased a $10,000 T-bill that had 260 days to maturity and was quoted with a bank discount of 1.6%. After holding the T-bill for 200 days, Carl sold the T-bill when it had a quoted bank discount of 2.0%. Find Carl's bond equivalent yield (BEY) and his equivalent annual yield.

Accepted Answer

Buying Price: 10,000 x [ 1 - 0.016 x (26

Question 8

A municipal bond issued to finance a toll bridge would most likely be a:

Accepted Answer

A)  general obligation bond. 
B)  revenue bond. 
C)  special assessment bond. 
D)  zero-coupon bond. 
A)  general obligation bond. 
B)  revenue bond. 
C)  special assessment bond. 
D)  zero-coupon bond.

Question 9

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 10

Which of the following characteristics is true of municipal bonds?

Accepted Answer

A)  They general have higher rates than corporate bonds of equal risk. 
B)  Capital gains on municipal bonds are exempt from federal taxation. 
C)  They pay interest income that is exempt from federal taxation. 
D)  They are default free. 
A)  They general have higher rates than corporate bonds of equal risk. 
B)  Capital gains on municipal bonds are exempt from federal taxation. 
C)  They pay interest income that is exempt from federal taxation. 
D)  They are default free.

Question 11

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

Accepted Answer

Stock splits do not affect tot

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Zero-coupon bonds are similar to Treasury bills in that both are:

Accepted Answer

A)  issued exclusively by the U.S. Treasury. 
B)  money-market securities. 
C)  capital-market securities. 
D)  sold on a discount basis. 
A)  issued exclusively by the U.S. Treasury. 
B)  money-market securities. 
C)  capital-market securities. 
D)  sold on a discount basis.

Question 14

Which of the following is a money market security that pays income that is exempt from state and local income taxes?

Accepted Answer

A)  municipal bond 
B)  repurchase agreement 
C)  banker's acceptance 
D)  T-bill 
A)  municipal bond 
B)  repurchase agreement 
C)  banker's acceptance 
D)  T-bill

Question 15

If an investor states that Intel is overvalued at 20 times, he is referring to Intel's:

Accepted Answer

A)  earnings per share. 
B)  dividend yield. 
C)  book value. 
D)  P/E ratio. 
A)  earnings per share. 
B)  dividend yield. 
C)  book value. 
D)  P/E ratio.

Question 16

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 17

TIPS adjust for inflation by adjusting the rate of interest paid on the bond.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following 10-year bonds would have the lowest yield?

Accepted Answer

A)  AAA-rated corporate bond 
B)  AAA-rated insured municipal bond 
C)  U.S. Treasury bond 
D)  AAA-rated mortgage-backed bond 
A)  AAA-rated corporate bond 
B)  AAA-rated insured municipal bond 
C)  U.S. Treasury bond 
D)  AAA-rated mortgage-backed bond

Question 19

The largest single institutional owner of common stocks is:

Accepted Answer

A)  mutual funds. 
B)  insurance companies. 
C)  pension funds. 
D)  commercial banks. 
A)  mutual funds. 
B)  insurance companies. 
C)  pension funds. 
D)  commercial banks.

Question 20

A corporate investor in the 34% marginal income tax bracket can buy bonds issued by a petroleum exploration company yielding 10.606%. The investor should be willing to buy tax-exempt municipal bonds of similar quality yielding what percent or higher?

Accepted Answer

10.606 x (

Exam 2: Investment Alternatives

The major bond rating service is Dun & Bradstreet.

Most futures contracts are not exercised.

Does the options market help stabilize or destabilize the stock market? Explain.

TR Bank is planning to purchase a T-bill with a face value of $100,000. The T-bill is quoted at a bank discount of 2.1% and has 320 days to maturity. Find the T-bill's price, bond equivalent yield (BEY) and equivalent annual yield (EAY).

Which of the following is not a characteristic of the primary nonmarketable financial asset owned by most individuals?

Each point on a corporate bond quote represents:

Carl purchased a $10,000 T-bill that had 260 days to maturity and was quoted with a bank discount of 1.6%. After holding the T-bill for 200 days, Carl sold the T-bill when it had a quoted bank discount of 2.0%. Find Carl's bond equivalent yield (BEY) and his equivalent annual yield.

A municipal bond issued to finance a toll bridge would most likely be a:

Which of the following statements regarding common stocks is true?

Which of the following characteristics is true of municipal bonds?

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

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

Zero-coupon bonds are similar to Treasury bills in that both are:

Which of the following is a money market security that pays income that is exempt from state and local income taxes?

If an investor states that Intel is overvalued at 20 times, he is referring to Intel's:

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

TIPS adjust for inflation by adjusting the rate of interest paid on the bond.

Which of the following 10-year bonds would have the lowest yield?

The largest single institutional owner of common stocks is:

A corporate investor in the 34% marginal income tax bracket can buy bonds issued by a petroleum exploration company yielding 10.606%. The investor should be willing to buy tax-exempt municipal bonds of similar quality yielding what percent or higher?

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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