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The term “hedge fund” was first used to describe: a. The private investment fund of Alfred Winslow Jones. b. The Quantum Group of Funds managed by George Soros. c. The offshore investment corporation of the United Kingdom’s Financial Services Authority. […]

If actual reserves exceed required reserves, the difference is referred to as: a. Spread income. b. Secondary reserves. c. Excess reserves. d. Total reserves. e. None of the above. The higher the beta, the higher the expected return. a. True. […]

Options on interest rate caps are called: a. Swaptions. b. Captions. c. Flotions. d. Collars. e. None of the above. A rating of Ba3 means that a bond is: a. Very high grade, very high quality. b. Lower medium grade. […]

Continual bank borrowing at the Fed for long periods and in large amounts is viewed as a sign of: a. A bank’s financial weakness. b. Exploitation of the interest differential for profit. c. Financial health due to increased loan demand […]

Leasing is a way by which tax benefits can be transferred from the lessee to the lessor. a. True. b. False. The relationship between price and yield for any option-free bond is: a. Linear. b. Convex. c. Concave. d. Curvilinear. […]

If the price of a security reflects all information, whether or not it is publicly available, the market is said to be: a. Weak form efficient. b. Semi-strong form efficient. c. Strong form efficient. d. Operationally efficient. e. None of […]

The value of an interest rate swap is the: a. Present value of all expected future cash benefits. b. Difference between the present value of the cash flow of the two sides of the swap. c. Discounted value of the […]

Which of the following terms are associated with insurance companies? a. Premiums. b. Risk bearers. c. Underwriting process. d. a and b only. e. All of the above. The difference between the cash price and the futures price is called: […]

Municipal bonds may be retired with a: a. Serial maturity structure. b. Term maturity structure. c. Combination of the serial and term maturity structures. d. None of the above. e. All of the above. Past-due interest bonds are less frequently […]

A security’s return can be decomposed into the following two parts: a. Systematic return. b. Unsystematic return. c. Historical return. d. a and b only. e. b and c only. Liquidity-generating innovations: a. Increase the liquidity of the market. b. […]

Conditional orders include: a. Market orders. b. Limit orders. c. Stop orders. d. b and c only. e. All of the above. Which of the following statements is false? a. Default is a prepayment. b. Nonamortizing assets have no prepayment. […]

Which of the following is most correct? a. Stock trading by individuals has increased significantly during the last decade. b. Stock trading commissions have increased both for institutions and individuals. c. Discount brokers and online brokers offer less service to […]

Collateral trust bonds pledge real property or personal property to offer security beyond that of the general credit standing of the issuer. a. True. b. False. The basic economic function of futures markets is to provide an opportunity for market […]

The market for lease financing is a segment of the larger market for: a. Agency securities. b. Equities. c. Equipment financing. d. Municipal securities. e. None of the above. Financial assets that are bought and sold amongst investors are traded […]

Which of the following statements is most correct? a. The NYSE is called a membership organization. b. NYSE’s owners are its seat holders. c. NASDAQ is owned by the NASD. d. NASDAQ is a for-profit organization. e. All of the […]

Hedging with options by taking a position in the underlying stock allows the investor to lock in: a. The riskless arbitrage profit. b. The abnormal return. c. The riskfree rate. d. Price risk. e. None of the above. Options traded […]

The relationship between yield and maturity is referred to as: a. Yield curve. b. Term structure of interest rates. c. Term to maturity. d. Yield spread. e. None of the above. Most states mandate that general obligation issues be marketed […]

Dollar duration of a bond measures the: a. Dollar price change. b. Percentage price change. c. Average price change. d. Change in yield. e. None of the above. Forward rates exclusively represent the expected future rates according to the: a. […]

All of the following regarding Euro straights are true EXCEPT: a. They make coupon payments semiannually. b. They are referred to as “plain vanilla” bonds. c. They are fixed-rate coupon bonds. d. They are issued on an unsecured basis. e. […]

Arbitraging instruments enable investors and borrowers to take advantage of differences in costs and returns between markets. a. True. b. False. The consumer has several decisions to make regarding: a. How much to invest. b. How much to lend. c. […]

A covered or hedge strategy involves: a. A position in an option. b. Funds invested in a riskfree security. c. A position in the underlying stock. d. a and c only. e. All of the above. The two elements of […]

The bondholder is given the right to sell the issue back to the issuer at the par value on designated dates in a: a. Convertible bond. b. Exchangeable bond. c. Putable bond. d. Warrant. e. None of the above. When […]

In a CMBS transaction, the special servicer is responsible for overseeing the deal, verifying that all servicing agreements are being maintained, and facilitating the timely payment of interest and principal. Fusion or hybrid deals are multiple borrower CMBS deals that […]

Governments of emerging markets issue: a. Eurobonds. b. Brady bonds. c. Global bonds. d. a and b only. e. All of the above. In Germany, the shares of smaller growth companies are traded: a. In the official market. b. In […]

The term structure of interest rates is the relationship between the yields on comparable securities but different: a. Spreads. b. Maturities. c. Credit ratings. d. Provisions. e. None of the above. In the presence of inflation-driven high interest rates, mortgage […]

The buyer of a floor benefits if the designated reference: a. Stays the same. b. Rises above the strike rate. c. Falls below the strike rate. d. None of the above. A cap is equivalent to: a. A package of […]

An investment banking firm will typically put together a group of firms in order to: a. Reduce the risk of capital loss. b. Reduce the risk of default. c. Increase the revenues generated from the underwriting process. d. Reduce the […]