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 regulated market.
c. In the Neuer Market.
d. a and b only.
e. None of the above.
To control portfolio risk, institutional investors us:
a. Naked option strategies.
b. Covered call writing.
c. Protective put buying.
d. All of the above.
e. None of the above.
Commercial paper is:
a. Is issued by corporations with strong credit ratings.
b. A short-term promissory note.
c. Issued on an unsecured basis.
d. B and c only.
e. All of the above.
Grant anticipation notes, revenue anticipation notes, and tax-exempt commercial paper
are examples of short-term municipal securities.
a. True.
b. False.
When a U.S. corporation’s equities are traded in a foreign market, they are typically
issued in the form of:
a. A Global Depository Receipt.
b. An American Depository Receipt.
c. A Depository Receipt.
d. A foreign share.
e. None of the above.
Stock index options are traded on the Chicago Board Options Exchange.
a. True.
b. False.
According to the liquidity theory of the term structure, the forward rate should reflect
both interest rate expectations and:
a. A liquidity premium.
b. A risk premium.
c. A maturity premium.
d. A marketability premium.
e. None of the above.
Medium-term notes (MTNs) are registered with the SEC under the shelf registration
rule.
a. True.
b. False.
As the price of the underlying asset increases, the price of a:
a. Call increase.
b. Put decreases.
c. Call decreases.
d. a and b only.
e. b and c only.
The amount necessary to bring the equity in the account back to its initial margin level
is called the variation margin.
a. True.
b. False.
State and local governments require competitive bidding on all municipal securities.
a. True.
b. False.
An active fund tries to outperform an index and other funds by actively trading the fund
portfolio.
a. True.
b. False.
It has been observed that security prices follow a random walk.
a. True.
b. False.
An insured defined benefit plan is safer than a noninsured plan.
a. True.
b. False.
If the par value relation is equal to one, the bonds sell at par.
a. True.
b. False.
For a tax-exempt municipal security, the higher the marginal tax rate, the less valuable
the tax-exemption feature will be.
a. True.
b. False.
CMBS ________.
A) are backed by seasoned commercial mortgage loans.
B) are backed by newly originated loans.
C) can be backed by a single borrower.
D) All of these
The absolute priority rule is the principle that guarantees the seniority of equity holders
to junior creditors.
a. True.
b. False.
The NAV of a fund valued at $2 million with $500,000 in liabilities and 10,000 shares
outstanding is $250.
a. True.
b. False.
The buyer of a compound option pays a front fee.
a. True.
b. False.
All asset-backed securities are credit enhanced.
a. True.
b. False.
Corporations receive what federal tax exemption on qualified dividends of
preferred stock?
a. 0%.
b. 30%.
c. 50%.
d. 70%.
e. None of the above.
The structure of a CMBS transaction is the same as in a nonagency RMBS ________.
A) in that most structures have a sing bond class (tranch) with the same rating, and
there are regulations for the distribution of interest and principal to the bond class.
B) in that most structures have multiple bond classes (tranches) with the same ratings,
and there are rules for the distribution of interest and principal to the bond classes.
C) in that most structures have multiple bond classes (tranches) with different ratings,
but there are no regulations for the distribution of interest and principal to the bond
classes.
D) in that most structures have multiple bond classes (tranches) with different ratings,
and there are rules for the distribution of interest and principal to the bond classes.
When an investor takes a position in the market by buying a futures contract, the
investor is said to be in a:
a. Long position.
b. Short position.
c. Short futures.
d. Hedge position.
e. None of the above.
Prepayment risk, which is associated with the risk of prepayments, consists of:
a. Default risk.
b. Contraction risk.
c. Extension risk.
d. b and c only.
e. All of the above.
GSE securities are not backed by the full faith and credit of the U.S. government. Thus,
investors purchasing GSEs are exposed to:
a. Credit risk.
b. Currency risk.
c. Political risk.
d. Inflation risk.
e. None of the above.
Financial assets are referred to as debt instruments in the case of:
a. U.S. Treasury bonds.
b. Corporate bonds.
c. Corporate stock.
d. Municipal bonds.
e. a, b, and d only.
The most common forms of internal credit enhancements are:
a. Overcollateralization.
b. Senior structures.
c. A letter of credit from a bank.
d. a and b only.
e. All of the above.
A currency swap is:
a. Simply a package of currency forward contracts.
b. More transactionally efficient than futures or forwards.
c. More suitable for hedging long-dated foreign exchange exposure.
d. All of the above.
e. a and b only.