If a security’s realized return is negative, it must have been true that the expected return
was greater than the required return.
Treasury notes and bonds and municipal bonds are default risk free.
The real risk-free rate is the increment to purchasing power that the lender earns in
order to induce him or her to forego current consumption.
The New York Stock Exchange (NYSE) is an example of a secondary market.
A mutual fund is an investment company that pools funds obtained by selling shares to
investors and makes investments to achieve the financial goal of income or growth, or
both.
True
False
A 10-year maturity zero coupon bond will have lower price volatility than a 10-year
bond with a 10 percent coupon.
Stock splits change the divisor in a price-weighted index but do not result in any net
change in the divisor of a value-weighted index.
If you earn 0.5 percent a month in your bank account, this would be the same as earning
a 6 percent annual interest rate with annual compounding.
The process of selecting a mutual fund begins with determining whether you want to
invest in a load or no-load fund.
True
False
Money market securities exhibit which of the following?
I. Large denomination
II. Maturity greater than one year
III. Low default risk
IV. Contractually determined cash flows
A.I, II, and III
B.I, III, and IV
C.II, III, and IV
D.II and IV
E.I, II, III, and IV
Of the following sources of information to investors, which is the least helpful in terms
of solid, objective information?Of the following sources of information to investors,
which is the least helpful in terms of solid, objective information?
a.Prospectus
b.10-K
c.Annual report
d.SEC filings
The real rate of return on a tax-free investment yielding 7 percent annually would be
____ percent if the investor were in the 35 percent marginal tax bracket and inflation
were 4 percent.
a.€0.55 percent
b.0.55 percent
c.3.00 percent
d.4.48 percent
An investment pays $400 in one year, X amount of dollars in two years, and $500 in
three years. The total present value of all the cash flows (including X) is equal to
$1,500. If i is 6 percent, what is X?
X = [1500 – (400/1.06) – (500/1.063)]*1.062
A.$749.67
B.$789.70
C.$600.00
D.$822.41
E.$702.83
As of 2013, which one of the following derivatives instruments had the greatest amount
of notional principal outstanding?
A.Futures
B.Swaps
C.Options
D.Bonds
E.Forwards
There are approximately ____ mutual fund families in the United States.
a.400
b.2,800
c.3,678
d.13,000
Home sellers must be upfront with potential buyers about the condition of the home by
providing a
a.good-faith estimate.
b.warranty deed.
c.listing agreement.
d.defect disclosure form.
Core deposits typically include all except which one of the following?
A.Demand deposits
B.NOW accounts
C.MMDAs
D.Eurodollar deposits
E.Passbook savings accounts
NYSE listing has traditionally benefited a firm by
A.improving the stock’s price.
B.generating increased publicity for the firm.
C.providing easier access to primary market capital.
D.generating increased publicity for the firm and providing easier access to primary
market capital.
E.improving the stock€s price, generating increased publicity for the firm, and
providing easier access to primary market capital.
You purchase a $1,000 face value convertible bond for $975. The bond can be
converted into 150 shares of stock. The stock is currently priced at $5.25. At what
minimum stock price would you be willing to convert?
A.$4.50
B.$5.26
C.$6.50
D.$7.10
E.$7.25
In general, ____ charges are more costly in the short run, and ____ charges are more
costly in the long run.
a.front-end; up-front
b.front-end; annual
c.annual; up-front
d.annual; front-end
The ________________ measures the net flows of imports and exports of goods,
services, income payments, and unilateral transfers.
A.current account
B.capital account
C.change in official reserves
D.statistical discrepancy
E.basic balance account
Bill and Leslie are a married couple. Leslie is an account executive earning $75,000,
and Bill is currently working on an advanced degree as well as taking care of their
two-year-old son. Bill and Leslie want to make the maximum legal contribution to their
IRA accounts. An appropriate contribution might be ____ in Bill’s IRA and ____ in
Leslie’s IRA.
a.$5,500; $5,500
b.$11,000; $0
c.$5,000; $5,000
d.$250; $5,500
Long-term capital gain tax rates for investors in tax brackets higher than 15 percent is
a.0 percent.
b.10 percent.
c.15 percent.
d.25 percent.
John and Sarah bought a home last year and paid the following housing expenses
during the year:
Mortgage interest$14,500
Mortgage principal$1,235
Property taxes$4,250
Homeowner’s insurance$2,740
Maintenance$2,150
Utilities$3,900
Assuming they are in the 28 percent marginal tax bracket, their standard deduction for
the year is $11,600 and they have no additional expenses that they can itemize, how
much more did they save in taxes from home ownership?
a.$7,150
b.$5,194
c.$5,148
d.$2,002
Interest-bearing retail accounts with limited checking features designed to compete with
money market mutual fund investments are called ________________.
A.NOWs
B.retail CDs
C.MMDAs
D.special savings deposits
E.negotiable CDs
How does a futures or option clearinghouse assist traders?
What is the difference between net charge-offs (sometimes called write-offs) and the
provision for loan loss? What is the purpose of the provision for loan loss account?
When would an option hedge be better than a futures or forward hedge?
How does GNMA improve mortgage marketability?