Archives: Quiz

A single individual pays $7,813 on a taxable income of $47,810 and $7,838 on a taxable income of $47,910. What is the marginal tax rate? a.15 percent b.16 percent c.25 percent d.50 percent Answer: c Answer: You buy a stock […]

Upon graduating from college this year, you expect to earn $25,000 per year. If you get your MBA, in one year you can expect to start at $35,000 per year. Over the year, inflation is expected to be 5 percent. […]

The stamp on a prospectus accompanying a new issue that indicates the issue has not yet been approved for sale by the SEC is called the A.green hornet. B.seal of approval. C.red herring. D.eagle stamp. E.Regd FD. A financial planner […]

If the consumer price index was 232 in 2013 and 244 in 2015, how much did prices increase during this time period? a.4.9 percent b.5.2 percent c.6 percent d.12 percent Answer: b The Federal Reserve System is charged with A.regulating […]

At the beginning of the year the exchange rate between the Brazilian real and the U.S. dollar was 2.2 reals per dollar. Over the year, Brazilian inflation was 12 percent and U.S. inflation was 4 percent. If purchasing power parity […]

Based on the option quote, the June put should cost I. more than $477. II. more than $665. III. more than the March and June 60 calls. IV. more than the March 60 call but no more than the June […]

The least used form of mortgage securitization is the ______________________. A.second mortgage B.mortgage-backed bond C.mortgage pass-through D.CMO E.home equity loan Refer to Figure 14-1. What is the price/earnings ratio for Rosa’s? Figure 14-1 Rosa’s is a small chain of Mexican […]

A _____ is one where a worker is expected to represent their employer on call day and night. a.career b.STEM career c.internship d.no-limits job The most diversified type of depository institutions is A.credit unions. B.savings associations. C.commercial banks. D.finance companies. […]

Refer to Figure 4-1. What is Tony and Liz’s taxable income? a.$15,600 b.$28,000 c.$35,000 d.$63,000 A stock has a spot price of $55. Its May options are about to expire. One of its puts is worth $5 and one of […]

Investors who have to depend current income from their investments to supplement their living expenses should invest in ____ stocks. a.income and blue-chip b.income and well-known growth c.blue-chip and lesser-known growth d.well-known growth and speculative Answer: a If the Fed […]

The dollar-amount of benefits under a long-term care insurance plan is on a per-_____ basis. a.day b.week c.month d.year A(n) __________________ is a contra asset account. A.loan commitment B.provision for loan and lease losses C.allowance for loan and lease losses […]

In 2007 the NYSE merged with _________________. A.Nasdaq B.Euronext C.American Exchange D.Chicago Mercantile Exchange E.London Stock Exchange The NASDAQ Composite Index provides a measure of the stock prices in the over-the-counter market. a.True b.False Answer: True If the Fed is […]

U.S. government bonds are debentures. a.True b.False Answer: True A U.S. investor has borrowed pounds, converted them to dollars, and invested the dollars in the United States to take advantage of interest rate differentials. To cover the currency risk, the […]

The preliminary version of a security offer that is circulated to potential buyers before SEC approval (registration) is obtained is called a A.final prospectus. B.shelf registration statement. C.due diligence draft. D.waiting period offer. E.red herring prospectus. Refer to Figure 14-3. […]

An example of inflation is an increase in the price of coffee or gasoline or some other commodity. a.True b.False Today, Stock A is worth $20 and has 1,000 shares outstanding. Stock B costs $30 and has 500 shares outstanding. […]

Buying on margin will prevent losses. a.True b.False For large interest rate increases, duration _____________ the fall in security prices, and for large interest rate decreases, duration ______________ the rise in security prices. A.overpredicts; overpredicts B.overpredicts; underpredicts C.underpredicts; overpredicts D.underpredicts; […]

In the T-bill auction process, the competitive bidder is guaranteed a ______________ and a noncompetitive bidder is guaranteed a _______________. A.minimum price; maximum price B.maximum price; minimum price C.maximum price; given quantity D.minimum price; maximum quantity E.none of the options […]

____ make both secured and unsecured small loans and require repayment on a monthly installment basis. a.Sales finance companies b.Stockbrokers c.Consumer finance companies d.Insurance companies Equity capital at commercial banks in 2013 comprised about ____________ of liabilities and equity. A.25 […]

When faced with an unexpected major expense, you should consider withdrawing money from your retirement plan. a.True b.False Answer: b When interest rates are low, buy bonds. a.True b.False Answer: False Refer to Figure 14-2. What is Sudsy Soap’s dividend […]

Which of the following is not a technique for reducing the risk whenever you conduct banking transactions on-line? a.Avoid using someone else’s computer to manage your account. b.Regularly change your password and keep it to yourself. c.When finished, always hit […]

If you buy the March put and don’t exercise before contract maturity, you will make a profit if the stock price at maturity _______________________ from today’s price. A.increases by more than 9.65 percent B.increases by more than 4.57 percent C.decreases […]

Federal income taxes on annual earnings from mutual funds can be avoided a.systemic risk. b.pure risk. c.market risk. d.random risk. There are approximately ____ open-end mutual funds in the United States. a.2,800 b.3,678 c.8,100 d.13,000 Answer: d Compare the cost […]

The First Bank of the Ozarks generates $0.0155 dollars of net income per dollar of assets and it has a profit margin of 12.25 percent. How much operating income per dollar of total assets does First Bank generate? A.12.50 percent […]

Using the decision-making grid below, calculate the total score for Appliance “D.” a.7.1 b.7.2 c.8.1 d.8.5 The major liability of the Federal Reserve is A.U.S. Treasury securities. B.depository institution reserves. C.currency outside banks. D.vault cash of commercial banks. E.gold and […]

Which of the following is not a benefit of a savings account? a.Account holders must give 30 to 60 days’ notice for withdrawals. b.Account holders are provided with printed receipts to document their account transactions. c.Account holders are provided with […]

Kim was injured in a freak accident in her dorm room and had to spend several days in the hospital. Her covered medical costs totaled $14,000. How much will Kim’s health insurance policy pay for this claim given the following […]

You want to buy a $250,000 house and you will use a conventional mortgage. What is the minimum down payment you have to make to avoid having to purchase mortgage insurance? A.$10,000 B.$20,000 C.$30,000 D.$40,000 E.$50,000 A T-bond with a […]

____ would be a reasonable investment for funds that could be invested less than two years. a.Stocks paying high dividends b.Short-term bonds c.Money market mutual funds d.Balanced mutual funds You can save on life insurance by buying policies through fee-only […]

The largest final expense for most families would be a. food and lodging for mourners. b. travel expenses during a long illness. c. estate taxes. d. funeral and burial expenses. The bank’s profit margin is A.27.27 percent. B.23.08 percent. C.21.31 […]

If the consumer price index was 100 in 1984 and 244 in 2015, how much did prices increase during this period? a.36 percent b.72 percent c.144 percent d.244 percent A current account deficit implies that A.more goods and services are […]

An annuity and an annuity due with the same number of payments have the same future value if r = 10%. Which one has the higher payment? A.An annuity and an annuity due cannot have the same future value. B.There […]

Which of the following is/are money market instrument(s)? A.Negotiable CDs B.Common stock C.T-bonds D.4-year maturity corporate bond E.Negotiable CDs, common stock, and T-bonds Refer to Figure 14-1. What is the amount of Rosa’s retained earnings? Figure 14-1 Rosa’s is a […]

A $25,000 face value GNMA pass-through quote sheet lists a spread to average life of 103, PSA of 220, and a price of 101-09. This means that I. the pass-through yield is 103 basis points above the comparable maturity Treasury […]

The Fed changes reserve requirements from 10 percent to 7 percent, thereby creating $900 million in excess reserves. The total change in deposits (with no drains) would be (1/0.07) X $900 million A.$3,000 million. B.$15,625 million. C.$12,857 million. D.$3,795 million. […]

Refer to Figure 10-2. A few months later, Todd and his wife were driving through town when they were hit by Frank, an uninsured driver, who ran a stop sign. Todd sustained injuries of $12,000, and his wife’s injuries were […]

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 […]

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. Answer: FALSE The real risk-free rate is […]

An order to buy shares of stock at a specified price or better is called a limit order. The lower the level of interest rates, the greater a bond’s price sensitivity to interest rate changes. Answer: TRUE Money markets exist […]

There are three types of major financial markets today: primary, secondary, and derivatives markets. The NYSE and NASDAQ are both examples of derivatives markets. When directly owning a real estate investment, the actual title is held by the investors. True […]

For Social Security purposes, fully insured status implies that the worker will receive the maximum dollar amount of benefits allowable.€ True False The majority of money market securities are low-denomination, low-risk investments designed to appeal to individual investors with excess […]

A type of absentee ballot that allows a representative to vote on behalf of the stockholder is called a proxy. The term structure of interest rates is the relationship between interest rates on bonds similar in terms except for maturity. […]

The market in which firms sell new securities to raise cash is called the secondary market. Federal Reserve Board members are appointed by the U.S. president and confirmed by the Senate for a nonrenewable 14-year term. Answer: TRUE A seasoned […]

“On the run” Treasury notes and bonds are newly issued securities and “off the run” Treasuries are securities that have been previously issued. Households generally supply more funds to the markets as their income and wealth increase, ceteris paribus. Answer: […]

On average, bank liabilities tend to have shorter maturities and greater liquidity than bank assets. The monetary base is the amount of coin and currency in circulation plus reserves. Answer: TRUE Both retail and wholesale CDs are negotiable instruments despite […]

Revenue bonds are backed by the full revenue of the municipality. The purchaser of a T-bond futures contract priced at 101-16 at the time of sale agrees to deliver $100,000 face value Treasury bonds in exchange for receiving $101,500 at […]

Higher interest rates lead to lower bond convexity, ceteris paribus. If you were born in 1994, you will reach your full-benefit retirement age for Social Security in 2061. True False Answer: True When the quantity of a financial security supplied […]

A bond with an 11 percent coupon and a 9 percent required return will sell at a premium to par. In the event of bankruptcy, a firm’s janitor must be paid all of the salary owed to him before stockholders […]

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 […]

Since 1980, the number of banks in the United States has been increasing dramatically due to deregulation of the industry. At year-end a firm has assets of $100 and debts due of $120. In this situation, the stockholders must pay […]

Discount points are paid to reduce the down payment required. Commercial paper, Treasury bills, and banker’s acceptance rates are all quoted as discount yields. Answer: TRUE Business loans have dropped in importance since 1987 as measured by the proportion of […]