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 in the:
a. Derivatives market.
b. Primary market.
c. Secondary market.
d. Commodities market.
e. None of the above.
Investment banking activities are performed by:
a. Commercial banks.
b. Securities firms.
c. Government agencies.
d. a and b only.
e. All of the above.
When an investment banking firm commits its own funds by either taking an equity
interest or creditor position in companies, this activity is referred to as:
a. Merchant banking.
b. Leveraged buyout.
c. Initial public offering.
d. Private placement.
e. None of the above.
The yield on a corporate debt instrument is made up of:
a. The yield on a similar maturity Treasury issue.
b. Risk premium.
c. A credit spread.
d. a and c only.
e. All of the above.
One explanation for the rapid growth of the swap market is the opportunity for credit
arbitrage, which arises because of:
a. An inverted yield curve.
b. Differences between the quality spread for fixed-rate and floating-rate loans.
c. Market anomalies.
d. Yield differences between different maturity bonds.
e. None of the above.
A statistical index of the sensitivity of an asset’s price change to changes in the value of
the overall market or of assets in general is the:
a. Variance.
b. Standard deviation.
c. Correlation coefficient.
d. Beta.
e. None of the above.
Senior bank loans:
a. Have a priority position over subordinated lenders with respect to interest and
principal.
b. Have first claim to the earnings and assets of the firm.
c. Have a fixed term.
d. a and c only.
e. All of the above.
Which type of bond allows the warrant owner to buy additional bonds from the issuer at
the same price and yield as the host bond?
a. Equity warrant.
b. Debt warrant.
c. Currency warrant.
d. Depreciation warrant.
e. All of the above.
Commercial mortgage loans are for mortgage loans for ________.
A) mortgage-producing properties.
B) income-manufacturing mortgages.
C) income-producing properties.
D) mortgage-manufacturing properties.
An underwriting arrangement whereby an investment banking firm or group of firms
offers a potential issuer of debt securities a firm bid to purchase a specified amount of
the securities with a certain coupon rate and maturity is known as:
a. Firm commitment underwriting.
b. Bought deal.
c. Dutch auction.
d. Underwriting process.
e. None of the above.
Pension equity and floor-offset plans are examples of:
a. Defined contribution plans.
b. Defined benefit plans.
c. Cash balance plans.
d. Hybrid plans.
e. Exchange traded plans.
Investment banking firms have created subsidiaries that manage funds for either
individual or institutional investors.
a. True.
b. False.
As the value of a futures contract is derived from the value of the underlying
instrument, they are commonly called:
a. Commodities.
b. Arbitrage instruments.
c. Derivative instruments.
d. Secondary instruments.
e. None of the above.
The Nikkei 225 Stock Average and the TOPIX are the indexes for the stocks of
established and large companies traded on the:
a. Frankfurt Stock Exchange.
b. London Stock Exchange.
c. Tokyo Stock Exchange.
d. Toronto Stock Exchange.
e. Paris Bourse.
Which of the following are properties of financial assets?
a. Reversibility.
b. Moneyness.
c. Liquidity.
d. Marketability.
e. a, b and c only.
LEAPS are:
a. Short-term options.
b. Long-term options.
c. Nearby options.
d. Perpetual options.
e. None of the above.
A market is price efficient if:
a. It is riskless.
b. It offers investors reasonably priced services related to buying and selling
c. At all times prices fully reflect all available information that is relevant to the
valuation of securities.
d. There are no transactions costs and taxes.
e. None of the above.
Even securities issued by the U.S. government are risky assets, because:
a. The return will depend on the price of the U.S. government bond if it is held to
maturity.
b. The return is unknown if the bond is held for only one year.
c. Changes in interest rates will affect the price of the bond.
d. All of the above.
e. None of the above.
The execution of trades in a large number of different stocks at or near the same time as
possible is called:
a. Block trades.
b. Program trades.
c. Basket trades.
d. b and c only.
e. All of the above.
A corporation can issue new common stock directly to existing stockholders through a:
a. Warrant.
b. Preemptive rights offering.
c. Initial public offering.
d. Leveraged buyout.
e. None of the above.
The maturity of commercial paper is typically less than 270 days because:
a. It does not require registration with the SEC.
b. It avoids the costs associated with registering issues with the SEC.
c. It does not require collateral.
d. a and b only.
e. All of the above.
Investors in municipal bonds whose primary interest is in opportunities to benefit from
leveraged strategies that seek to generate capital gains include:
a. Hedge funds.
b. Arbitrageurs.
c. Mutual funds.
d. a and b only.
e. All of the above.
The standard deviation of portfolio return is a measure of:
a. Systematic risk.
b. Unsystematic risk.
c. Total risk.
d. Statistical risk.
e. None of the above.
Bonds trade with the same degrees of liquidity.
a. True.
b. False.
Loan structures in which no repayment of the principal is made until the maturity date
are referred to as:
a. Balloon payment loans.
b. Term loans.
c. Bullet loans.
d. Performing loans.
e. None of the above.
The futures price will trade at a premium to the cash price if:
a. The yield curve is normal, and the cost of carry is positive.
b. The yield curve is normal, and the cost of carry is negative.
c. The yield curve is inverted, and the cost of carry is negative.
d. The yield curve is flat, and the cost of carry is zero.
e. None of the above.
The maximum amount that an option buyer can lose is:
a. Unlimited.
b. Limited to the option price.
c. The bid-ask spread.
d. The initial margin.
e. None of the above.
The decision on how to divide funds across the major asset classes is referred to as:
a. Dynamic hedging.
b. Insuring the portfolio.
c. Asset allocation decision.
d. Program trading.
e. None of the above.
The difference between the execution price of a security and the price that would have
existed in the absence of the trade is referred to as:
a. The bid-ask spread.
b. The execution cost.
c. The market timing costs.
d. Income spread.
e. None of the above.