1) If a firm repurchases bonds at a discount, the difference between the principal
amount and the purchase price produces taxable income.
2) A portfolio manager with a position in many stocks may hedge the portfolio by
purchasing a stock index call option.
3) Mortgage bonds are secured by property.
4) Selling a call and purchasing a treasury bill produces the same returns as buying a
stock.
5) The adaptive market hypothesis suggests that investors lack the ability to adapt and
continue to repeat mistakes.
6) The shares of hedge funds are often included in an individual investors IRAs.
7) If a stock is quoted 2020.50, an investor can buy the stock for 20.50.
8) If an investor buys stock on the exdividend date, that individual will not receive the
dividend.
9) Most bonds pay interest semi-annually.
10) Futures contracts are bought and sold in organized markets such as the Chicago
Board of Trade.
11) Investors are insured against loss from brokerage firm failure by the SEC.
12) The efficient market hypothesis says that no one can outperform the market.
13) If financial markets are efficient, that negates the importance of financial planning.
14) If a mutual fund portfolio manager earns a return that exceeds the return on the S&P
500 stock index, that investor outperformed the market on a risk-adjusted basis.
15) Calls tend to sell for a time premium that exceeds the stock’s price.
16) If accounts receivable are collected more rapidly, the average collection period
(days sales outstanding) is reduced.
17) If an investor believes that financial markets are inefficient, that argues for the
individual to pursue a more active portfolio strategy and purchase exchange-traded
funds instead of individual stocks.
18) If technical analysis cannot be demonstrated to produce higher returns, that is
evidence supporting efficient markets.
19) The Federal Reserve is the central bank of the United States.