Exam 10: The Investment Function in Financial-Services Management

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The Johnson National Bank has purchased a bond that has a coupon rate of 5.5% and a face value of $1000.It has 4 years to maturity and is currently selling in the market for $917.The bond makes annual coupon payments.What is the duration of this bond?

(Multiple Choice)

4.9/5

(78)

Question 41

Call risk refers to the right of debt collectors to call in the loans in advance of maturity and get an early repayment.

(True/False)

4.8/5

(77)

Question 42

The yield to maturity is the discount rate that equates a security's purchase price with the stream of income expected until it is sold to another investor.

(True/False)

4.7/5

(79)

Question 43

_____________ is the method by which banks can provide a safeguard for the deposits of governmental units.

(Multiple Choice)

4.8/5

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Question 44

Banks are generally not allowed to invest in speculative grade bonds.What kind of risk is this designed to limit?

(Multiple Choice)

4.8/5

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Question 45

Stripping a security eliminates prepayment risk.

(True/False)

4.8/5

(85)

Question 46

A bond has six years to maturity and has a coupon rate of 7.5 percent.Coupon payments are made annually and the bond has a face value of $1,000.The bond is currently selling in the market for $1,127.What is the yield-to-maturity on this bond?

(Multiple Choice)

5.0/5

(79)

Question 47

A short-term IOU offered by major corporations that is of short maturity (most of these lOUs mature in 90 days or less)is known as a CMO.

(True/False)

5.0/5

(80)

Question 48

One investment maturity strategy popular among smaller institutions is the ladder or spaced-maturity policy.It is popular because it does not take much expertise to implement.

(True/False)

4.9/5

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Question 49

Inflation risk is the possibility that the purchasing power of interest income and repaid principal from a security or loan will be eroded by rising prices for goods and services.

(True/False)

4.8/5

(71)

Question 50

Which of the following is true of Treasury bills?

(Multiple Choice)

4.9/5

(84)

Question 51

An investment maturity strategy which calls for a bank to have all of its investment assets in very short term maturities is called the ________________________.

(Short Answer)

4.8/5

(85)

Question 52

The Johnson National Bank has purchased a bond that has a coupon rate of 5.5% and a face value of $1000.It has 4 years to maturity and is selling in the market for $917.The bond makes annual coupon payments.What is the yield-to-maturity on this bond?

(Multiple Choice)

4.9/5

(70)

Question 53

The Price Perpetual Bank has purchased a bond that has a coupon rate of 5.5% and a face value of $1000.It has 11 years to maturity and is currently selling in the market for $887.52.The bond makes annual coupon payments.What is the yield-to-maturity on this bond?

(Multiple Choice)

4.9/5

(81)

Question 54

The Caldwell National Bank has purchased a bond that pays a coupon rate of 10.5%.It is a little concerned because it believes rates will decrease in the future and they will not be able to reinvest the coupon payments at the same rate.What type of risk are they concerned about?

(Multiple Choice)

4.9/5

(73)

Question 55

Commercial paper is a short-term debt instrument issued by major banks.

(True/False)

4.8/5

(84)

Question 56

A short term debt security issued by major corporations is known as _________________.

(Short Answer)

4.9/5

(80)

Question 57

Treasury notes and bonds are issued by the federal government and are coupon paying instruments.

(True/False)

4.8/5

(74)

Question 58

_________________________ is the risk that the economy of the market area in which a bank service,may take a down turn in the future.

(Short Answer)

4.9/5

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Question 59

An investor's return on a T-bill consists purely of:

(Multiple Choice)

4.8/5

(71)

Question 60

Showing 41 - 60 of 113

The Johnson National Bank has purchased a bond that has a coupon rate of 5.5% and a face value of $1000.It has 4 years to maturity and is currently selling in the market for $917.The bond makes annual coupon payments.What is the duration of this bond?

Call risk refers to the right of debt collectors to call in the loans in advance of maturity and get an early repayment.

The yield to maturity is the discount rate that equates a security's purchase price with the stream of income expected until it is sold to another investor.

_____________ is the method by which banks can provide a safeguard for the deposits of governmental units.

Banks are generally not allowed to invest in speculative grade bonds.What kind of risk is this designed to limit?

Stripping a security eliminates prepayment risk.

A bond has six years to maturity and has a coupon rate of 7.5 percent.Coupon payments are made annually and the bond has a face value of $1,000.The bond is currently selling in the market for $1,127.What is the yield-to-maturity on this bond?

A short-term IOU offered by major corporations that is of short maturity (most of these lOUs mature in 90 days or less)is known as a CMO.

One investment maturity strategy popular among smaller institutions is the ladder or spaced-maturity policy.It is popular because it does not take much expertise to implement.

Inflation risk is the possibility that the purchasing power of interest income and repaid principal from a security or loan will be eroded by rising prices for goods and services.

Which of the following is true of Treasury bills?

An investment maturity strategy which calls for a bank to have all of its investment assets in very short term maturities is called the ________________________.

The Johnson National Bank has purchased a bond that has a coupon rate of 5.5% and a face value of $1000.It has 4 years to maturity and is selling in the market for $917.The bond makes annual coupon payments.What is the yield-to-maturity on this bond?

The Price Perpetual Bank has purchased a bond that has a coupon rate of 5.5% and a face value of $1000.It has 11 years to maturity and is currently selling in the market for $887.52.The bond makes annual coupon payments.What is the yield-to-maturity on this bond?

The Caldwell National Bank has purchased a bond that pays a coupon rate of 10.5%.It is a little concerned because it believes rates will decrease in the future and they will not be able to reinvest the coupon payments at the same rate.What type of risk are they concerned about?

Commercial paper is a short-term debt instrument issued by major banks.

A short term debt security issued by major corporations is known as _________________.

Treasury notes and bonds are issued by the federal government and are coupon paying instruments.

_________________________ is the risk that the economy of the market area in which a bank service,may take a down turn in the future.

An investor's return on a T-bill consists purely of:

An Overview of the Changing Financial-Services Sector

The Impact of Government Policy and Regulation on the Financial-Services Industry

The Organization and Structure of Banking and the Financial-Services Industry

Establishing New Banks, Branches, ATMs, Telephone Services, and Websites

The Financial Statements of Banks and Their Principal Competitors

Measuring and Evaluating the Performance of Banks and Their Principal Competitors

Risk Management for Changing Interest Rates: Asset-Liability Management and Duration Techniques

Investment Banking,Insurance,and Other Sources of Fee Income

Risk Management: Asset-Backed Securities, Loan Sales, Credit Standbys, and Credit Derivatives

Liquidity and Reserves Management: Strategies and Policies

Managing and Pricing Deposit Services

Managing Nondeposit Liabilities

Investment Banking, insurance, and Other Sources of Fee Income

The Management of Capital

Lending Policies and Procedures: Managing Credit Risk

Lending to Business Firms and Pricing Business Loans

Consumer Loans, Credit Cards, and Real Estate Lending

Acquisitions and Mergers in Financial-Services Management

International Banking and the Future of Banking and Financial Services

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