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.
d. The public fund overseen by the Board of Governors of the Federal Reserve
e. None of the above.
Which of the following statements is most correct?
a. The largest single-day decline in the history of the U.S. stock market occurred in
October 1987.
b. Rule 80A and 80B are examples of price limits.
c. The S&P 500 is the most comprehensive stock index.
d. a and b only.
e. All of the above.
An investor who wants to speculate that interest rates will rise:
a. Can buy interest rate futures.
b. Can sell interest rate futures.
c. Can simultaneously buy and sell interest rate futures.
d. All of the above.
e. None of the above.
A synthetic put option is created using stock index futures.
a. True.
b. False.
Of the five factors that influence the price of an option:
a. The strike price must be estimated.
b. The stock price is observed.
c. The standard deviation must be estimated.
d. b and c only.
e. All of the above.
In general, the municipal yield curve is:
a. Inverted.
b. Upward sloping.
c. Downward sloping.
d. Flat.
e. None of the above.
Leasing is a form of:
a. Bank borrowing.
b. Syndication.
c. Tax avoidance.
d. Participation.
e. None of the above.
Which of the following statement is most correct?
a. Exchange-traded stock options are for one unit of the designated common stock.
b. Options have standardized expiration dates.
c. The longest time for an option on a stock is six months.
d. b and c only.
e. All of the above.
Swaps, caps, and floors have played a key role in the development of a global financial
market.
a. True.
b. False.
Examples of conditional orders include:
a. Limit order.
b. Stop order.
c. Market order.
d. a and b only.
e. All of the above.
When two parties agree to swap payments based on different currencies, this type of
swap is called:
a. Interest rate swap.
b. Equity swap.
c. Currency swap.
d. Interest rate-equity swap.
e. None of the above.
Currency options traded in the over-the-counter market are:
a. Standardized options.
b. Customized options.
c. Liquid options.
d. Common options.
e. None of the above.
In contrast to corporate debt, medium-term notes (MTNs) are:
a. Distributed to investors on a best efforts basis.
b. Are sold in large offerings.
c. Are sold on an intermittent basis.
d. a and c only.
e. All of the above.
Fallout risk is the risk that:
a. The value of the pipeline will be adversely affected if mortgage rates rise.
b. Applicants will not complete the transaction by purchasing the property with the
funds borrowed from the mortgage originator.
c. Those who were issued commitment letters will not close.
d. b and c only.
e. All of the above.
Portfolio theory deals with:
a. The selection of portfolios that maximize expected returns consistent with
individually acceptable levels of risk.
b. The relationship that should exist between security returns and risk.
c. The effects of investor decisions on security prices.
d. a and b only.
e. All of the above.
Commercial paper provides short-term funds for:
a. Seasonal needs.
b. Working capital needs.
c. Bridge financing.
d. A and b only.
e. All of the above.
Depository institutions acquire the bulk of their funds by offering their liabilities to the
public in the form of deposits. The depository institutions are:
a. Commercial banks.
b. Savings and loan associations.
c. Savings banks.
d. Credit unions.
e. All of the above.
If investors can obtain transaction services as cheaply as possible, the market is said to
be:
a. Price efficient.
b. Operationally efficient.
c. Weak form efficient.
d. Strong form efficient.
e. None of the above.
From the issuing government’s perspective:
a. The ad hoc auction system introduces less market volatility than a regular calendar
auction.
b. The ad hoc auction system offers less flexibility in raising funds than a regular
calendar auction.
c. The ad hoc auction system provides greater stability in scheduling.
d. a and b only.
e. All of the above.
The assets traded in the money market include:
a. Commercial paper.
b. Bankers acceptances.
c. Treasury bills.
d. Corporate bonds.
e. a, b, and c only.
The spread between Treasury securities and non-Treasury securities that are identical in
all respects except for quality is referred to as:
a. Risk premium.
b. Quality spread.
c. Income spread.
d. Credit spread.
e. b and d only.
Effective convexity gives recognition that the cash flows of a bond do change when
yields change.
a. True.
b. False.
When an issuer sells a new financial asset to the public, it is sold in the:
a. Primary market.
b. Intermediate market.
c. Secondary market.
d. Commodities market.
e. None of the above.
Implicit trading costs are invisible and difficult to measure.
a. True.
b. False.
The schedule for the repayment of the principal is called payoff schedule.
a. True.
b. False.
Most corporate bonds are:
a. Term bonds.
b. Bullet bonds.
c. Serial bonds.
d. a and b only.
e. All of the above.
The most popular model that has been developed to determine the theoretical value of
an option is the asset pricing model.
a. True.
b. False.
Credit risk can be reduced if the mortgage is federally or privately insured.
a. True.
b. False.
Which of the below statements is FALSE?
A) A seasoned loan is one that is already residing on the balance sheet of a bank or
insurance company.
B) Responsibilities of the servicer include collecting monthly loan payments, keeping
records relating to payments, and maintaining property escrow for taxes and insurance.
C) Responsibilities of the master servicer include overseeing the deal and verifying that
all servicing agreements are being maintained.
D) Basically the objective of the master service is to maximize the recovery of
defaulted loans.