With TIPS, the security’s coupon rate is changed every six months by the inflation rate
as measured by the CPI.
Like all tax-sheltered retirement accounts, an IRA is not an investment but rather a
tax-sheltered account in which to make and hold investments.
True
False
Money markets are the markets for securities with an original maturity of one year or
less.
At equilibrium, a security’s required rate of return will be less than its expected rate of
return.
Earning a 5 percent interest rate with annual compounding is better than earning a 4.95
percent interest rate with semiannual compounding.
About 34 percent of all U.S. banks are members of the Federal Reserve System.
In a futures contract, if funds in the margin account fall below the maintenance margin
requirement, a margin call is issued.
The risk that a security cannot be sold at a predictable price with low transaction costs
at short notice is called liquidity risk.
Simple interest calculations assume that interest earned is never reinvested.
The FHA charges the homeowner __________________ to insure an FHA mortgage.
A.nothing
B.0.5 percent of the loan amount
C.$500
D.1 percent of the loan amount
E.$1,500
Refer to Figure 12-1. Using the needs approach, how much additional life insurance is
needed on Antonio’s life using his former income? a. $528,875
b. $453,875
c. $421,478
d. $321,478
Which one of the following is the definition of the NIM?
A.(Net interest income – Net noninterest income)/Earning assets
B.Net interest income/Interest-bearing liabilities
C.(Interest income – Interest expense)/Earning assets
D.(Interest income – Interest expense)/Interest-bearing liabilities
E.(Interest income/Earning assets) – (Interest expense/Interest-bearing liabilities)
A mentor is an experienced person, such as a senior coworker, who offers friendly
career-related advice, guidance, and coaching to a less experiences worker.
a.True
b.False
Which type of insurance provides reimbursement for costs associated with custodial
care in a nursing facility or at home?
a.Medicare
b.Disability income insurance
c.HMOs
d.Long-term care insurance
What is the average share price for the dollar-cost averaging strategy shown below?
a.$34.20
b.$37.14
c.$33.66
d.$36.55
Which of the following statements about Eurobonds is/are true?
I. The issuer chooses the currency of denomination.
II. Spreads on firm commitment offers are lower for Eurobonds than for U.S. bonds.
III. Eurobonds typically have denomination of $5,000 and $10,000.
IV. Eurobonds are bearer bonds.
A.I and II only
B.I, III, and IV only
C.II, III, and IV only
D.II and III only
E.I, II, III, and IV are true
Secondary markets help support primary markets because secondary markets
I. offer primary market purchasers liquidity for their holdings.
II. update the price or value of the primary market claims.
III. reduce the cost of trading the primary market claims.
A.I only
B.II only
C.I and II only
D.II and III only
E.I, II, and III
Refer to Figure 14-1. What are the earnings per share for Rosa’s?
Figure 14-1
Rosa’s is a small chain of Mexican food restaurants that features five delicious varieties
of salsa. The business has grown over the past ten years from a hobby to a small
corporation with 200,000 shares of common stock outstanding. The corporation has not
issued any preferred stock. The following is Rosa’s latest financial data:
NARREND
a.$2.00
b.$2.34
c.$3.50
d.$3.75
To be most successful in negotiating, one must be willing to walk away from the deal if
it does not fit your expectations and desires.
a.True
b.False
A short-term unsecured promissory note issued by a company is
A.commercial paper.
B.a T-bill.
C.arepurchase agreement.
D.a negotiable CD.
E.a banker’s acceptance.
Refer to Figure 4-1. Tony and Liz have just inherited $25,000. Which of the following
statements is true?
a.The $25,000 will be taxable income in the year received.
b.The $25,000 is an exclusion for federal income taxes.
c.They should invest this money in corporate bonds to save on taxes.
d.The $25,000 will be taxable income in the year received, and they should invest this
money in corporate bonds to save on taxes.
Rosa Corporation’s board of directors is concerned about the market price of each share
of stock. They believe that the shares would be more marketable if the market price was
closer to $18 a share. They shoultwo-for-one stockd initiate a ____ split.
a.two-for-one stock
b.three-for-one stock
c.two-for-one reverse stock
d.three-for-one reverse stock
How can a person transfer money out of his or her checking account?
a.Write a check.
b.Use a debit card.
c.Make electronic funds transfers.
d.All of these.
The primary purpose of the Employee Retirement Income Security Act (ERISA) is to
a.regulate employer-sponsored pension plans.
b.regulate employer-sponsored pension plans.
c.collect taxes on retirement benefits.
d.regulate employer-sponsored pension plans and require employer-sponsored pension
plans for large companies.
What do bond rating agencies look at in setting a bond’s rating?
You are a corporate treasurer seeking to raise funds for your firm. What are some
advantages of raising funds via a financial intermediary (FI) rather than by selling
securities to the public?
Explain each term of the following pass-through quote:
What are the four major functions of the Federal Reserve System?
What determines the price of financial instruments? Which are riskier, capital market
instruments or money market instruments? Why?
What have been the major factors contributing to growth in the foreign financial
markets?