Exam 2: Investment Alternatives

Nonmarketable investments would include savings accounts at banks and Treasury bills.

A corporate bond with a rating of BBB- is considered to be which of the following?

With repurchase agreements, both the buying price and selling price are set when the agreement is initiated.

Callable bonds attract investors because they can be redeemed early.

Bonds trade on an accrual interest basis. This means an investor:

The money market rate most often used as a benchmark for the risk-free rate is the money market deposit account rate.

Ted is considering a State of Nebraska bond that pays 3.40% and a comparable risk bond issued by Verizon that pays 5.25%. Ted is in the 37% marginal tax bracket. Relative to the Verizon bond, Ted should conclude that the taxable equivalent yield (TEY) on the Nebraska bond is approximately:

For an investor with a 28% marginal tax rate, what return would a corporate bond have to pay to provide the same after-tax return as a municipal bond paying 5%?

Bond investors typically pay more for a bond than its quoted price.

Distinguish between direct and indirect investing.

Nonmarketable financial assets that protect against inflation include:

What are some advantages of asset-backed securities to investors?

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

How do asset-backed securities improve the flow of funds from savers to borrowers?

The deeper the discount on a zero-coupon bond, the lower the effective return.

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

The money market security that sells with the lowest denomination is a:

What will a bond be worth on the day it matures?

The capital market includes both fixed-income and equity securities.

The par value of Blaze, Inc. common stock is $0.50, the earnings per share is $4, the stock price is $60, and the dividend per share is $1. Calculate the dividend yield and P/E ratio.