TE 4 Mock 2 - SS2

Which of the following statements about private equity securities is incorrect?

• A. They cannot be sold on secondary markets.
• B. They have market-determined quoted prices.
• C. They are primarily issued to institutional investors.

• A. $20.35.
• B. $20.58.
• C. $20.50.

Which of the following statements related to secondary bond markets is most accurate?

• A. Newly issued corporate bonds are issued in secondary bond markets.
• B. Secondary bond markets are where bonds are traded between investors.
• C. The major participants in secondary bond markets globally are retail investors.

Which of the following accounting issues should mostly likely be considered a character warning flag in credit analysis?

• A. Expensing items immediately
• B. Changing auditors infrequently
• C. Significant off-balance-sheet financing

A bond has a Macaulay duration of 6.0, modified duration of 6.5, and convexity of 50.25. If the bond’s yield to maturity decreases by 50 bps, the expected percentage price change is closest to:

• A. 3.06%.
• B. 3.31%.
• C. 3.25%.

For a forward contract with a value of zero, a situation where the spot price is above the forward price is best explained by high:

• A. interest rates.
• B. storage costs.
• C. convenience yield.

Compared to traditional investments, alternative investments least likely demonstrate which of the following characteristics?

• A. Narrow manager specialization
• B. Underlying investments that are illiquid
• C. A high degree of regulation

If prices reflect all public and private information, the market is best described as:

• A. weak-form efficient.
• B. strong-form efficient.
• C. semi-strong-form efficient.

An observation that stocks with above average price-to-earnings ratios have consistently underperformed those with below average price-to-earnings ratios least likely contradicts which form of market efficiency?

• A. Strong form
• B. Semi-strong form
• C. Weak form

Which of the following is least likely a feature typical of an agency residential mortgage-backed security (RMBS)?

• A. A guarantee by a government-sponsored enterprise
• B. The satisfaction of specific established underwriting standards
• C. The use of credit enhancements to reduce credit risk