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1) which one of the following exploits differences between actual future prices and their
theoretically correct parity values?
a.index arbitrage
b.marking to market
c.reversing trades
d.settlement transactions
2) the duration of a perpetuity varies _______ with interest rates.
a.directly
b.inversely
c.convexly
d.randomly
3) assume you purchased 500 shares of xyz common stock on margin at $40 per share
from your broker. if the initial margin is 60%, the amount you borrowed from the
broker is _________.
a.$20,000
b.$12,000
c.$8,000
d.$15,000
4) mutual funds that hold both equities and fixed-income securities in relatively stable
proportions are called ____________________.
a.income funds
b.balanced funds
c.asset allocation funds
d.index funds
5) if the quote for a treasury bond is listed in the newspaper as 98:09 bid, 98:13 ask, the
actual price at which you can purchase this bond given a $10,000 par value is
_____________.
a.$9,828.12
b.$9,809.38
c.$9,840.62
d.$9,813.42
6) an investor who is in the 35% federal tax bracket and the 5% state bracket buys a
6.5% yield corporate bond. what is his after-tax yield? (assume that federal taxes are not
deductible against state taxes and vice versa).
a.3.9%
b.4.75%
c.6.5%
d.9.9%
7) real gdp is preferred to nominal gdp as a measure of economic performance because:
a.nominal gdp uses current prices and thus may over- or understate true changes in
output.
b.nominal gdp only includes goods and excludes services.
c.nominal gdp is not adjusted for population changes.
d.real gdp accounts for changes in the quality of goods and services produced.
8) which of the following is not a true statement regarding municipal bonds?
a.a municipal bond is a debt obligation issued by state or local governments.
b.a municipal bond is a debt obligation issued by the federal government.
c.the interest income from a municipal bond is exempt from federal income taxation.
d.the interest income from a municipal bond is exempt from state and local taxation in
the issuing state.
9) consider two bonds, a and b. both bonds presently are selling at their par value of
$1,000. each pays interest of $120 annually. bond a will mature in 5 years, while bond b
will mature in 6 years. if the yields to maturity on the two bonds change from 12% to
14%, _________.
a.both bonds will increase in value but bond a will increase more than bond b
b.both bonds will increase in value but bond b will increase more than bond a
c.both bonds will decrease in value but bond a will decrease more than bond b
d.both bonds will decrease in value but bond b will decrease more than bond a
10) yields on municipal bonds are generally lower than yields on similar corporate
bonds because of differences in _________.
a.marketability
b.risk
c.taxation
d.call protection
11) the nyse hybrid market allows _____.
a.individuals to send orders directly to a specialist
b.individuals to send orders directly to an electronic system
c.brokers to send orders directly to a specialist
d.brokers to send orders either to an electronic system or to a specialist
12) a moving average of stock prices _________________.
a.always lies above the most recent price
b.always lies below the most recent price
c.is less volatile than the actual prices
d.is more volatile than the actual prices
13) attempting to forecast future earnings and dividends is consistent with which of the
following approaches to securities analysis?
a.technical analysis
b.fundamental analysis
c.both technical analysis and fundamental analysis
d.indexing
14) in ________ markets, participants post bid and ask prices at which they are willing
to trade, but orders are not automatically executed by computer. ____________ execute
trades for people other than themselves, and in _______________ markets a computer
matches orders with an existing limit order book and executes the trades automatically.
a.electronic; dealers; brokers
b.dealer; brokers; electronic
c.direct search; brokers; electronic
d.brokered; dealers; direct search
15) the inability of shareholders to influence the decisions of managers, despite
overwhelming shareholder support, is a breakdown in what process or mechanism?
a.auditing
b.public finance
c.corporate governance
d.public reporting
16) which of the following would an economist consider to be investment?
a.boeing building a new factory
b.oprah buying a $10 million home from a fellow celebrity
c.a stockbroker buying 1000 shares of starbucks stock
d.all of the above
17) low-load mutual funds have front-end loads of no more than _____.
a.2%
b.3%
c.4%
d.5%
18) a high amount of short interest is typically considered as a __________ signal, and
contrarians may consider it as a _________ signal.
a.bearish; bullish
b.bullish; bearish
c.bearish; false
d.bullish; false
