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 the entire principal can be repaid at the maturity date, the debt contract is said to
have a:
a. Maturity.
b. Bullet maturity.
c. Par value.
d. Face value.
e. None of the above.
Stock index options are regulated by:
a. The Commodity Futures Trading Commission.
b. The Securities and Exchange Commission.
c. Stock index options are self-regulated.
d. The clearinghouse.
e. None of the above.
A commitment letter is sent to the applicant:
a. When the lender guarantees the funds.
b. When the lender decides to lend the funds.
c. When the lender has found suitable property for purchase.
d. a and b only.
e. All of the above.
SEC Rule 144A has decreased foreign private placements.
a. True.
b. False.
Which of the below statements is TRUE?
A) The debt-to-service coverage ratio (DSC ratio) is the ratio of a property’s net
operating income (NOI) multiplied by the debt service.
B) The higher the DSC ratio, the more likely it is that the borrower will be able to meet
debt servicing from the property’s cash flow.
C) The NOI is defined as the rental income plus cash operating expenses (adjusted for a
replacement reserve).
D) A ratio less than 1 for DSC means that the cash flow from the property is sufficient
to cover debt servicing.
The federal funds rate:
a. Is determined by the supply and demand for federal funds.
b. Is the rate at which all money market interest rates are anchored.
c. Is often a target of the Fed’s monetary policy.
d. Is higher than the repo rate because federal funds are borrowed on an unsecured
basis.
e. All of the above.
The criticism of futures contracts that their introduction will increase the price volatility
of the underlying asset in the cash market is referred to as:
a. Asset volatility hypothesis.
b. Speculation.
c. Destabilization hypothesis.
d. Hedging.
e. None of the above.
Secondary markets outside the U.S. are located in:
a. London.
b. Paris.
c. Frankfurt.
d. Osaka.
e. All of the above.
The highest expected return for all feasible portfolios with the same risk is called:
a. Feasible portfolios.
b. Markowitz efficient portfolios.
c. Mean-variance efficient portfolios.
d. b and c only.
e. All of the above.
According to the McCarran Ferguson Act of 1954, the insurance industry is regulated
by:
a. The individual states.
b. The federal government.
c. The Securities and Exchange Commission.
d. a and b only.
e. None of the above.
In which of the following markets are Treasury securities issued when they are traded
prior to the issuance of the Treasury?
a. The primary market.
b. The secondary market.
c. The when-issued market.
d. The wi market.
e. c and d only.
Hedging with futures lets a market participant lock in a price and thereby eliminates:
a. Price risk.
b. Basis risk.
c. Credit risk.
d. Liquidity risk.
e. None of the above.
The Treasury does not issue:
a. Zero-coupon Treasury securities.
b. Bills.
c. Notes.
d. Bonds.
e. All of the above.
Margin calls must be satisfied:
a. In cash.
b. With additional stocks as collateral.
c. With an extension of the credit limit.
d. With commodities.
e. None of the above.
When the theoretical cross rate differs from the actual cross rate quoted by dealers, a
riskless arbitrage opportunity arises called:
a. Index arbitrage.
b. Locational arbitrage.
c. Triangular arbitrage.
d. Credit arbitrage.
e. None of the above.
The investments made by financial intermediaries in loans and/or securities are referred
to as direct investment.
a. True.
b. False.
A short sale involves:
a. Selling securities that are owned at the time of sale.
b. Selling securities that are not owned at the time of sale.
c. Buying the securities, which are subsequently sold.
d. All of the above.
e. None of the above.
The yield of bonds of the same credit quality does not depend on their maturity alone.
a. True.
b. False.
The secondary market is where already-issued financial assets are traded.
a. True.
b. False.
When the asset manager customizes the investment selection to the objectives of the
investor, this is referred to as:
a. A hedge fund.
b. A separately managed account.
c. A private fund.
d. An individual-traded fund.
e. None of the above.
An underwriting arrangement in which the underwriter buys the firm’s unsubscribed
shares is known as:
a. Firm commitment underwriting.
b. Preemptive rights offering.
c. Standby underwriting arrangement.
d. Bought deal.
e. None of the above.
Investors in commercial paper include:
a. Pension funds.
b. Money market mutual funds.
c. Commercial bank trust departments.
d. State and local governments.
e. All of the above.
Municipal securities issued for periods up to three years are considered:
a. Long term.
b. Intermediate term.
c. Short term.
d. All of the above.
e. None of the above.
Dealers in the foreign exchange market realize revenue from:
a. The bid-ask spread.
b. Trading commissions.
c. Trading profits.
d. All of the above.
e. None of the above.
The largest sector of the CMBS market is constituted by ________.
A) securities backed by Ginnie Mae.
B) securities issued by private entities.
C) securities backed by Freddie Mac.
D) securities issued by the two government-sponsored enterprises.
If interest rates in the economy increase because of Fed policy, the price of a bond will:
a. Increase.
b. Decrease.
c. Remain unchanged.
d. Change.
e. None of the above.
Treasury securities are debt obligations that are issued by:
a. Municipal governments.
b. Nonfinancial businesses.
c. Central governments.
d. Financial enterprises.
e. None of the above.
When a trader positions the capital of the investment banking firm to take advantage of
a specific anticipated movement of prices or a spread between two prices, this strategy
is referred to as:
a. Riskless arbitrage.
b. Risk arbitrage.
c. Speculation.
d. Hedging.
e. None of the above.
Depository institutions have obligations that include:
a. Commercial paper.
b. Bankers acceptances.
c. Certificates of deposits.
d. b and c only.
e. All of the above.