1) If a bank pays 2 percent compounded daily, the true
rate of interest is greater than 2 percent.
2) Distributions from a closed-end investment are subject to federal income taxation.
3) A call feature is an option while a sinking fund requires a mandatory payment by the
firm.
4) Interest accrues on a zero coupon bond but not on a term bond.
5) Stockholders in a publicly held corporation have limited liability.
6) If investors expect interest rates to rise, they should sell preferred stock and buy
bonds.
7) If a closed-end investment company specializes in the securities of one sector of the
economy, systematic risk is reduced.
8) Funds that perform well in one year tend to earn consistently higher returns in
subsequent years.
9) Bonds pay a flow of income called interest.
10) A split coupon bond combines a zero coupon bond with a regular coupon bond.
11) The current yield exceeds the yield to maturity if interest rates fall.
12) Over time, holding period returns tend to overstate the true annualized rate of
return.
13) The per share net asset value of a mutual fund depends on the difference between
the fund’s assets and liabilities and the number of shares outstanding.