The interest and dividends that a mutual fund earns on its investments are paid out to
shareholders as capital gains distributions.
True
False
A fairly priced bond with a coupon less than the expected return must sell at a discount
from par.
The buyer of a call option on stock benefits if the underlying stock price rises or if the
volatility of the stock’s price increases.
Suppose two bonds of equivalent risk and maturity have different prices such that one is
a premium bond and one is a discount bond. The premium bond must have a greater
expected return than the discount bond.
Arvi, a college teaching assistant, received a raise of $800 from $18,000 to $18,800 this
year. If inflation was 3 percent over the same period, which of the following is true?
a.Arvi’s increase in real income was $800.
b.Arvi’s increase in real income was 4.4 percent.
c.Arvi’s increase in real income was $252.
d.Arvi’s decrease in real income was $252 percent.
Checking accounts that pay no interest are called NOW accounts.
a.True
b.False
An annual payment bond with a $1,000 par has a 5 percent quoted coupon rate, a 6
percent promised YTM, and six years to maturity. What is the bond’s duration?
£[(t*CFt/(1.06)t)]/$950.83
A.5.31 years
B.5.25 years
C.4.76 years
D.4.16 years
E.3.19 years
A U.S. exporter sells $150,000 of furniture to a Latin American importer. The exporter
requires the importer to obtain a letter of credit. When the bank accepts the draft, the
exporter discounts the 120-day note at a 5.25 percent discount. What is the exporter’s
true effective annual financing cost?
150,000 * [1-(0.0525 * 120/360)] = 147,375; (150,000/147,375)365/120 -1 =
5.52%A.5.52 percent
B.5.42 percent
C.5.34 percent
D.5.29 percent
E.5.25 percent
The bank’s asset utilization ratio is
A.58.04 percent.
B.6.12 percent.
C.5.46 percent.
D.4.29 percent.
E.6.81 percent.
The health insurance premium tax credit can help anyone defray the cost of health
insurance.
a.True
b.False
Calculate the amount of monthly payment for principal and interest for a $195,000, 8
percent, 25-year loan. The payment per $1,000 debt under these terms is $7.7182.
a.$933
b.$1,214
c.$1,300
d.$1,505
Which of the following is primarily intended for those workers who select the
high-deductible health plan (HDHP) offered by their employer?
a.Flexible spending account (FSA)
b.Cafeteria plan
c.Health savings account (HSA)
d.Tax-deferred plan
The Fed increases bank reserves in the system by $75 million. If there are no drains, the
expected change in bank deposits is (1/0.10) X $75 million
A.$82.5 million.
B.$945 million.
C.$750 million.
D.$1,500 million.
E.$655 million.
A bank lender is concerned about the creditworthiness of one of its major borrowers.
The bank is considering using a swap to reduce its credit exposure to this customer.
Which type of swap would best meet this need?
A.Interest rate swap
B.Currency swap
C.Equity linked swap
D.Credit default swap
E.DIF swap
A(n) ____ refers to treatment preferences and the designation of a surrogate decision
maker in the event that a person should become unable to make decisions on her or his
own behalf as a result of coma, dementia, brain tumor or other serious medical
condition.
a.living will
b.advance medical directive
c.medical consignment
d.executor
If interest rates increase, the value of a fixed income contract decreases and vice versa.
Which of the following plans, often provided to workers by their employer, allows the
employee to choose among a listing both tax-sheltered and non-tax-sheltered benefits?
a.Cafeteria plan
b.Flexible spending accounts
c.Employer-sponsored qualified retirement plans
d.Health savings account
Both individual retirement accounts (IRAs) and non-residential real estate property are
investment assets.
a.True
b.False