Question 1

If you thought prices of stock would be rising over the next few months you may wish to __________________ on the stock.

Accepted Answer

A)   purchase a call option
B)   purchase a put option
C)   sell a futures contract
D)   place a short sale orderE) B) and D)
F) A) and B)

Question 2

Which of the following is not a money market instrument?

Accepted Answer

A)   Treasury bill
B)   Commercial paper
C)   Preferred stock
D)   Banker's acceptanceE) B) and D)
F) A) and C)

Question 3

The interest rate charged by large banks in London to lend money among themselves is called _________.

Accepted Answer

A)   the prime rate
B)   the discount rate
C)   the federal funds rate
D)   LIBORE) None of the above
F) A) and D)

Question 4

An index computed from a simple average of returns is a/an _____.

Accepted Answer

A)   equal weighted index
B)   value weighted index
C)   price weighted index
D)   share weighted indexE) All of the above
F) B) and C)

Question 5

You decide to purchase an equal number of shares of stocks of firms to create a portfolio.If you wished to construct an index to track your portfolio performance your best match for your portfolio would be to construct a/an ______.

Accepted Answer

A)   value weighted index
B)   equal weighted index
C)   price weighted index
D)   bond price indexE) A) and B)
F) A) and D)

Question 6

A firm that has large securities holdings that wishes to raise money for a short length of time may be able to find the cheapest financing from which of the following?

Accepted Answer

A)   Reverse repurchase agreement
B)   Banker's acceptance
C)   Commercial paper
D)   Repurchase agreementE) A) and B)
F) None of the above

Question 7

A typical bond price quote includes all but which one of the following?

Accepted Answer

A)   Daily high price for the bond
B)   Closing bond price
C)   Yield to maturity
D)   Dividend yieldE) None of the above
F) A) and C)

Question 8

Which of the following does not approximate the performance of a buy and hold portfolio strategy?

Accepted Answer

A)   An equally weighted index
B)   A price weighted index
C)   A value weighted index
D)   Weights are not a factor in this situationE) A) and C)
F) C) and D)

Question 9

Currently the Dow Jones Industrial Average is computed by _________.

Accepted Answer

A)   adding the prices of 30 large "blue-chip" stocks and dividing by 30
B)   calculating the total market value of the 30 firms in the index and dividing by 30
C)   measuring the current total market value of the 30 stocks in the index relative to the total value on the previous day
D)   adding the prices of 30 large "blue-chip" stocks and dividing by a divisor adjusted for stock splits and large stock dividendsE) B) and C)
F) None of the above

Question 10

The price quotations of treasury bonds in the Wall Street Journal show a bid price of 102:12 and an ask price of 102:14.If you sold the bond you expect to receive _________.

Accepted Answer

A)   $1,024.75
B)   $1,024.38
C)   $1,023.75
D)   $1,022.50E) All of the above
F) A) and B)

Question 11

When computing the bank discount yield you would use ____ days in the year.

Accepted Answer

A)   260
B)   360
C)   365
D)   366E) C) and D)
F) A) and B)

Question 12

Which of the following mortgage scenarios will benefit the homeowner the most?

Accepted Answer

A)   Adjustable rate mortgage when interest rate increases.
B)   Fixed rate mortgage when interest rates falls.
C)   Fixed rare mortgage when interest rate rises.
D)   None of the above, as banker's interest will always be protected.E) A) and D)
F) A) and C)

Question 13

Ownership of a put option entitles the owner to the __________ to ___________ a specific stock,on or before a specific date,at a specific price.

Accepted Answer

A)   right, buy
B)   right, sell
C)   obligation, buy
D)   obligation, sellE) All of the above
F) None of the above

Question 14

June call and put options on King Books Inc are available with exercise prices of $30,$35 and $40.Among the different exercise prices,the call option with the _____ exercise price and the put option with the _____ exercise price will have the greatest value.

Accepted Answer

A)   $40; $30
B)   $30; $40
C)   $35; $35
D)   $40; $40E) A) and B)
F) None of the above

Question 15

The Chompers Index is a price weighted stock index based on the 3 largest fast food chains.The stock prices for the three stocks are $54,$23,and $44.What is the price weighted index value of the Chompers Index?

Accepted Answer

A)   23.43
B)   35.36
C)   40.33
D)   49.58E) A) and B)
F) B) and C)

Question 16

__________ is not a money market instrument.

Accepted Answer

A)   A certificate of deposit
B)   A treasury bill
C)   A treasury bond
D)   Commercial paperE) C) and D)
F) None of the above

Question 17

Preferred stock is like long-term debt in that ___________.

Accepted Answer

A)   it gives the holder voting power regarding the firm's management
B)   it promises to pay to its holder a fixed stream of income each year
C)   the preferred dividend is a tax-deductible expense for the firm
D)   in the event of bankruptcy preferred stock has equal status with debtE) B) and C)
F) All of the above

Question 18

A tax free municipal bond provides a yield of 2.34%.What is the equivalent taxable yield on the bond given a 28% tax bracket?

Accepted Answer

A)   2.34%
B)   2.68%
C)   3.25%
D)   4.92%E) All of the above
F) None of the above

Question 19

A stock quote indicates a stock price of $60 and a dividend yield of 3%.The latest quarterly dividend received by stock investors must have been ______ per share.

Accepted Answer

A)   $0.55
B)   $1.80
C)   $0.45
D)   $1.25E) A) and B)
F) A) and C)

Question 20

The maximum maturity on commercial paper is

Accepted Answer

A)   270 days
B)   180 days
C)   90 days
D)   30 daysE) A) and D)
F) None of the above

Exam 2: Asset Classes and Financial Instruments

When computing the bank discount yield you would use ____ days in the year.

Correct AnswerverifiedShow Answer

The maximum maturity on commercial paper is

Correct AnswerverifiedShow Answer

A firm that has large securities holdings that wishes to raise money for a short length of time may be able to find the cheapest financing from which of the following?

Correct AnswerverifiedShow Answer

Preferred stock is like long-term debt in that ___________.

Correct AnswerverifiedShow Answer

__________ is not a money market instrument.

Correct AnswerverifiedShow Answer

You decide to purchase an equal number of shares of stocks of firms to create a portfolio.If you wished to construct an index to track your portfolio performance your best match for your portfolio would be to construct a/an ______.

Correct AnswerverifiedShow Answer

June call and put options on King Books Inc are available with exercise prices of $30,$35 and $40.Among the different exercise prices,the call option with the _____ exercise price and the put option with the _____ exercise price will have the greatest value.

Correct AnswerverifiedShow Answer

Which of the following mortgage scenarios will benefit the homeowner the most?

Correct AnswerverifiedShow Answer

Which of the following is not a money market instrument?

Correct AnswerverifiedShow Answer

A stock quote indicates a stock price of $60 and a dividend yield of 3%.The latest quarterly dividend received by stock investors must have been ______ per share.

Correct AnswerverifiedShow Answer

Which of the following does not approximate the performance of a buy and hold portfolio strategy?

Correct AnswerverifiedShow Answer

Ownership of a put option entitles the owner to the __________ to ___________ a specific stock,on or before a specific date,at a specific price.

Correct AnswerverifiedShow Answer

A typical bond price quote includes all but which one of the following?

Correct AnswerverifiedShow Answer

If you thought prices of stock would be rising over the next few months you may wish to __________________ on the stock.

Correct AnswerverifiedShow Answer

An index computed from a simple average of returns is a/an _____.

Correct AnswerverifiedShow Answer

The price quotations of treasury bonds in the Wall Street Journal show a bid price of 102:12 and an ask price of 102:14.If you sold the bond you expect to receive _________.

Correct AnswerverifiedShow Answer

The interest rate charged by large banks in London to lend money among themselves is called _________.

Correct AnswerverifiedShow Answer

A tax free municipal bond provides a yield of 2.34%.What is the equivalent taxable yield on the bond given a 28% tax bracket?

Correct AnswerverifiedShow Answer

Currently the Dow Jones Industrial Average is computed by _________.

Correct AnswerverifiedShow Answer

The Chompers Index is a price weighted stock index based on the 3 largest fast food chains.The stock prices for the three stocks are $54,$23,and $44.What is the price weighted index value of the Chompers Index?

Correct AnswerverifiedShow Answer

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June call and put options on King Books Inc are available with exercise prices of $30,$35 and $40.Among the different exercise prices,the call option with the _ exercise price and the put option with the _ exercise price will have the greatest value.

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Ownership of a put option entitles the owner to the to _ a specific stock,on or before a specific date,at a specific price.

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