Question 1

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

Accepted Answer

A) Non-investment grade 
B) Investment grade 
C) Speculative grade 
D) Junk or high-yield 
A) Non-investment grade 
B) Investment grade 
C) Speculative grade 
D) Junk or high-yield

Question 2

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 3

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 4

Most futures contracts are not exercised.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) Options are traded on exchanges,whereas futures are not. 
B) Options give investors a way to manage portfolio risk,while futures do not. 
C) Options can be used by speculators to profit from price fluctuations,while futures cannot. 
D) Options give their holders the right to buy or sell,whereas futures contracts are obligations to buy or sell. 
A) Options are traded on exchanges,whereas futures are not. 
B) Options give investors a way to manage portfolio risk,while futures do not. 
C) Options can be used by speculators to profit from price fluctuations,while futures cannot. 
D) Options give their holders the right to buy or sell,whereas futures contracts are obligations to buy or sell.

Question 7

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

Accepted Answer

A) Treasury bills 
B) Treasury notes 
C) Treasury bonds 
D) Treasury inflation protected securities (TIPS) 
A) Treasury bills 
B) Treasury notes 
C) Treasury bonds 
D) Treasury inflation protected securities (TIPS)

Question 8

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 9

The earnings retention rate is calculated as 1 - dividend yield.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements regarding money market instruments isnot true?

Accepted Answer

A) They tend to be highly marketable. 
B) They have maturities from 1 to 3 years. 
C) They tend to have a low probability of default. 
D) Their rates tend to move together. 
A) They tend to be highly marketable. 
B) They have maturities from 1 to 3 years. 
C) They tend to have a low probability of default. 
D) Their rates tend to move together.

Question 12

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 13

Distinguish between direct and indirect investing.

Accepted Answer

Direct investing - buy bonds a

Question 14

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 15

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 (

Question 16

An example of indirect investing would be buying shares in a mutual fund.

Accepted Answer

A) True 
 B)False

Question 17

Term bonds have a single maturity.

Accepted Answer

A) True 
 B)False

Question 18

Rank (lowest to highest)the following securities in terms of the risk-expected return tradeoff from the investors' viewpoint:common stock,corporate bonds,
U.S.Treasury bonds,preferred stock.

Accepted Answer

U.S.Treasury bonds,c

Question 19

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 payout ratio.

Accepted Answer

Payout rat

Question 20

Who benefits from a futures contract,a call contract,and a put contract,if prices fall?

Accepted Answer

The seller of the futures cont

Exam 2: Investment Alternatives

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

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

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

Most futures contracts are not exercised.

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

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

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

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

The earnings retention rate is calculated as 1 - dividend yield.

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

Which of the following statements regarding money market instruments isnot true?

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?

Distinguish between direct and indirect investing.

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?

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?

An example of indirect investing would be buying shares in a mutual fund.

Term bonds have a single maturity.

Rank (lowest to highest)the following securities in terms of the risk-expected return tradeoff from the investors' viewpoint:common stock,corporate bonds, U.S.Treasury bonds,preferred stock.

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 payout ratio.

Who benefits from a futures contract,a call contract,and a put contract,if prices fall?

Understanding Investments

Indirect Investing

Securities Markets and Market Indexes

How Securities Are Traded

The Risks and Returns From Investing

Portfolio Theory

Portfolio Selection

Asset Pricing Models

Common Stock Valuation

Common Stocks: Analysis and Strategy

Market Efficiency

Economy Market Analysis

Industry Analysis

Company Analysis

Technical Analysis

Bond Yields

Bonds: Analysis and Strategy

Options

Futures

Portfolio Management

Evaluation of Investment Performance

Filters