Font size
WorksheetsInvestment _ Mid-term test
Total questions: 85
Worksheet time: 43mins
Which of the following is not a money market instrument?
Treasury bill
Commercial paper
Preferred stock
Banker's acceptance
Thirteen week T-bill auctions are conducted.
daily
weekly
monthly
quarterly
When computing the bank discount yield you would use days in the year.
260
360
365
366
A dollar denominated deposit at a London bank is called.
eurodollars
LIBOR
fed funds
banker's acceptance
Money market securities are sometimes referred to as 'cash equivalent' because.
they are safe and marketable
they are not liquid
they are high risk
they are low denomination
The most actively traded money market security is
Treasury bills
Bankers' Acceptances
Certificates of Deposit
Common stock
_______ voting of common stock gives minority shareholders the most representation on the board of directors.
Majority
Cumulative
Rights
Proxy
An investor in a T-bill earns interest by.
receiving interest payments every 90 days
receiving dividend payments every 30 days
converting the T-bill at maturity into a higher valued T-note
buying the bill at a discount from the face value received at maturity
would not be included in the EAFE index.
Australia
Canada
France
Japan
is considered to be an emerging market country.
France
Norway
Brazil
Canada
Which one of the following is a true statement?
Dividends on preferred stocks are tax-deductible to individual investors but not to corporate investors
Common dividends cannot be paid if preferred dividends are in arrears on cumulative preferred stock
Preferred stockholders have voting power
Investors can sue managers for nonpayment of preferred dividend
The bid price of a treasury bill is.
the price at which the dealer in treasury bills is willing to sell the bill
the price at which the dealer in treasury bills is willing to buy the bill
greater than the ask price of the treasury bill expressed in dollar terms
the price at which the investor can buy the treasury bill
The German stock market is measured by which market index?
FTSE
Dow Jones 30
DAX
Nikkei
Deposits of commercial banks at the Federal Reserve are called.
bankers acceptances
federal funds
repurchase agreements
time deposits
Which of the following is not a true statement regarding municipal bonds?
A municipal bond is a debt obligation issued by state or local governments.
A municipal bond is a debt obligation issued by the Federal Government.
The interest income from a municipal bond is exempt from federal income taxation.
The interest income from a municipal bond is exempt from state and local taxation in the issuing state.
Which of the following is not a characteristic of a money market instrument?
Liquidity
Marketability
Low risk
Maturity greater than one year
An individual who goes short in a futures position
commits to delivering the underlying commodity at contract maturity
commits to purchasing the underlying commodity at contract maturity
has the right to deliver the underlying commodity at contract maturity
has the right to purchase the underlying commodity at contract maturity
Which of the following is not a nickname for an agency associated with the mortgage markets?
Fannie Mae
Freddie Mac
Sallie Mae
Ginnie Mae
Commercial paper is a short-term security issued by to raise funds.
the Federal Reserve
commercial banks
large well-known companies
the New York Stock Exchange
The maximum maturity on commercial paper is
270 days
180 days
90 days
30 days
Which one of the following is a true statement regarding the Dow Jones Industrial Average?
It is a value-weighted average of 30 large industrial stocks
It is a price-weighted average of 30 large industrial stocks
It is a price-weighted average of 100 largest stocks traded on the New York Stock Exchange
It is a value-weighted average of all stocks traded on the New York Stock Exchange
Treasury bills are financial instruments issued by to raise funds.
commercial banks
the Federal Government
large corporations
state and city governments
Which of the following are true statements about T-bills?
I. T-bills typically sell in denominations of $10,000
II. Income earned on T-bills is exempt from all Federal taxes
III. Income earned on T-bills is exempt from state and local taxes
A. I only
B. I and II only
C. I and III only
D. I, II and III
A bond that has no collateral is called.
a callable bond
a debenture
a junk bond
a mortgage
A gives its holder the right to sell an asset for a specified exercise price on or before a specified expiration date.
call option
futures contract
put option
interest rate swap
A T-bill quote sheet has 90 day T-bill quotes with a 4.92 bid and a 4.86 ask. If the bill has a $10,000 face value an investor could buy this bill for
$10,000.00
$9,878.50
$9,877.00
$9,880.16
Which one of the following is a true statement regarding corporate bonds?
A corporate callable bond gives its holder the right to exchange it for a specified number of the company's common shares
A corporate debenture is a secured bond
A corporate convertible bond gives its holder the right to exchange it for a specified number of the company's common shares
Holders of corporate bonds have voting rights in the company
The yield on tax-exempt bonds is.
usually less than 50% of the yield on taxable bonds
normally about 90% of the yield on taxable bonds
greater than the yield on taxable bonds
less than the yield on taxable bonds
is not a money market instrument.
A certificate of deposit
A treasury bill
A treasury bond
Commercial paper
PV=9800, FV=10000. An investor buys a T-bill at a bank discount quote of 4.80 with 150 days to maturity. The investor's actual annual rate of return on this investment was.
4.80%
4.97%
5.47%
5.74%
The U.K. stock index is the.
DAX
FTSE
GSE
TSE
A gives its holder the right to buy an asset for a specified exercise price on or before a specified expiration date.
call option
futures contract
put option
interest rate swap
Which one of the following provides the best example of securitization?
convertible bond
call option
mortgage pass-through security
preferreds
Which one of the following provides the best example of securitization?
convertible bond
call option
mortgage pass-through security
preferred stock
Which of the following indices are market-value weighted?
I. The NYSE composite
II. The S&P 500
III. The Wilshire 5000
I and II only
II and III only
I and III only
I, II and III
The interest rate charged by large banks in London to lend money among themselves is called.
the prime rate
the discount rate
the federal funds rate
LIBOR
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?
Reverse repurchase agreement
Banker's acceptance
Commercial paper
Repurchase agreement
Currently the Dow Jones Industrial Average is computed by.
adding the prices of 30 large 'blue-chip' stocks and dividing by 30
calculating the total market value of the 30 firms in the index and dividing by 30
measuring the current total market value of the 30 stocks in the index relative to the total value on the previous day
adding the prices of 30 large 'blue-chip' stocks and dividing by a divisor adjusted for stock splits and largest stock dividends
An investor purchases one municipal and one corporate bond that pay rates of return of 5.00% and 6.40% respectively. If the investor is in the 15% tax bracket, his after-tax rates of return on the municipal and corporate bonds would be respectively.
5.00% and 6.40%
5.00% and 5.44%
4.25% and 6.40%
5.75% and 5.44%
If a treasury note has a bid price of $996.25, the quoted bid price in the Wall Street Journal would be.
99:25
99:63
99:20
99:08
TIPS are.
Treasury bonds that pay a variable rate of interest
U.K. bonds that protect investors from default risk
securities that trade on the Toronto stock index
Treasury bonds that protect investors from inflation
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.
$1,024.75
$1,024.38
$1,023.75
$1,022.50
The Dow Jones Industrial Average is.
a price weighted average
a value weighted average
an equally weighted average
an unweighted average
Investors will earn higher rates of return on TIPS than equivalent default risk standard bonds if.
inflation is lower than anticipated over the investment period
inflation is higher than anticipated over the investment period
the U.S. dollar increases in value against the euro
the spread between commercial paper and Treasury securities remains low
Preferred stock is like long-term debt in that.
it gives the holder voting power regarding the firm's management
it promises to pay to its holder a fixed stream of income each year
the preferred dividend is a tax-deductible expense for the firm
in the event of bankruptcy preferred stock has equal status with debt
Which of the following does not approximate the performance of a buy and hold portfolio strategy?
An equally weighted index
A price weighted index
A value weighted index
Weights are not a factor in this situation
In calculating the Dow Jones Industrial Average, the adjustment for a stock split occurs.
automatically
by adjusting the divisor
by adjusting the numerator
by adjusting the market value weight
If the market prices of the 30 stocks in the Dow Jones Industrial Average all change by the same dollar amount on a given day, assuming there are no stock splits, which stock will have the greatest impact on the average?
The one with the highest price
The one with the lowest price
All 30 stocks will have the same impact
The answer cannot be determined by the information given
A bond issued by the State of Alabama is priced to yield 6.25%. If you are in the 28% tax bracket this bond would provide you with an equivalent taxable yield of.
4.50%
7.25%
8.68%
none of the above
The purchase of a futures contract gives the buyer.
the right to buy an item at a specified price
the right to sell an item at a specified price
the obligation to buy an item at a specified price
the obligation to sell an item at a specified price
Ownership of a put option entitles the owner to the to a specific stock, on or before a specific date, at a specific price.
right, buy
right, sell
obligation, buy
obligation, sell
An investor in a 28% tax bracket is trying to decide whether to invest in a municipal bond or a corporate bond. She looks up municipal bond yields (r_m) but wishes to calculate the taxable equivalent yield r. The formula she should use is given by.
r = r_m * (1 - 28%)
r = r_m / (1 - 72%)
r = r_m * (1 - 72%)
r = r_m / (1 - 28%)
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 _____ exercise price will have the greatest value.
$40; $30
$30; $40
$35; $35
$40; $40
Ownership of a call option entitles the owner to the to a specific stock, on or before a specific date, at a specific price.
right, buy
right, sell
obligation, buy
obligation, sell
The _____ the ratio of municipal bond yields to corporate bond yields the ______ the cutoff tax bracket where more individuals will prefer to hold municipal debt.
higher; lower
lower; lower
lower; higher
higher; higher
Which of the following types of bonds are excluded from most bond indices?
Corporate bonds
Junk bonds
Municipal bonds
None of the above
The Hang Seng index reflects market performance on which of the following major stock markets?
Japan
Singapore
Taiwan
Hong Kong
The Standard and Poors 500 is a(n) weighted index.
equally
price
value
share
A firm that fails to pay dividends on its preferred stock is said to be.
insolvent
in arrears
insufferable
delinquent
Large well-known companies often issue their own short term unsecured debt notes directly to the public, rather than borrowing from banks, their notes are called.
certificates of deposit
repurchase agreements
banker's acceptances
commercial paper
Which of the following is most like a short-term collateralized loan?
Certificate of deposit
Repurchase agreement
Banker's acceptance
Commercial paper
Eurodollars are.
Dollar denominated deposits at any foreign bank or foreign branch of an American bank
Dollar denominated bonds issued by firms outside their home market
Currency issued by EuroDisney and traded in France
Dollars that wind up in banks as a result of money laundering activities
Which of the following is used to back international sales of goods and services?
Certificate of deposit
Banker's acceptance
Eurodollar deposits
Commercial paper
Treasury notes have initial maturities between years.
2 and 4
5 and 10
10 and 30
1 and 10
If you thought prices of stock would be rising over the next few months you may wish to on the stock.
purchase a call option
purchase a put option
sell a futures contract
place a short sale order
A typical bond price quote includes all but which one of the following?
Daily high price for the bond
Closing bond price
Yield to maturity
Dividend yield
What are business firms most likely to use derivative securities for?
Hedging
Speculating
Doing calculus problems
Market making
What would you expect to have happened to the spread between yields on commercial paper and Treasury bills immediately after September 11, 2001?
No change, as both yields will remain the same.
Increase, the spread usually increases in response to a crisis.
Decrease, the spread usually decreases in response to a crisis.
No change, as both yields will move in the same direction.
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.
$0.55
$1.80
$0.45
$1.25
Three stocks have share prices of $12, $75, and $30 with total market values of $400 million, $350 million and $150 million respectively. If you were to construct a price-weighted index of the three stocks what would be the index value?
300
39
43
30
Which of the following is not considered a money market investment?
Bankers acceptances
Eurodollar
Repurchase agreement
Treasury note
The Federal Reserve Board of Governors directly controls which of the following interest rates?
Bankers acceptances
Brokers call
Federal funds
LIBOR
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.
value weighted index
equal weighted index
price weighted index
bond price index
In an index changes in the value of the stock with the greatest market value will move the index value the most, everything else equal.
value weighted index
equal weighted index
price weighted index
bond price index
A corporation in a 34% tax bracket invests in the preferred stock of another company and earns a 6% pre-tax rate of return. An individual investor in a 15% tax bracket invests in the same preferred stock and earns the same pre-tax return. The after-tax return to the corporation is and the after tax return to the individual investor is.
3.96%; 5.1%
5.39%; 5.1%
6.00%; 6.00%
3.96%; 6.00%
All but which one of the following indices is value weighted?
Nasdaq Composite
S&P 500
Wilshire 5000
DJIA
What is the tax exempt equivalent yield on a 9% bond yield given a marginal tax rate of 28%?
6.48%
7.25%
8.02%
9.00%
A tax free municipal bond provides a yield of 3.2%. What is the equivalent taxable yield on the bond given a 35% tax bracket?
3.20%
3.68%
4.92%
5.00%
An index computed from a simple average of returns is a/an.
equal weighted index
value weighted index
price weighted index
share weighted index
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?
2.34%
2.68%
3.25%
4.92%
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?
23.43
35.36
40.33
49.58
The Hydro Index is a price weighted stock index based on the 5 largest boat manufacturers in the nation. The stock prices for the five stocks are $10, $20, $80, $50 and $40. The price of the last stock was just split 2 for 1 and the stock price was halved from $40 to $20. What is the new divisor for a price weighted index?
5.00
4.85
4.50
4.75
A benchmark index has three stocks priced at $23, $43, and $56. The number of outstanding shares for each is 350,000 shares, 405,000 shares, and 553,000 shares, respectively. If the market value weighted index was 970 yesterday and the prices changed to $23, $41, and $58, what is the new index value?
960
970
975
985
A benchmark market value index comprises three stocks. Yesterday the three stocks were priced at $12, $20, and $60. The number of outstanding shares for each is 600,000 shares, 500,000 shares, and 200,000 shares, respectively. If the stock prices changed to $16, $18, and $62 today respectively, what is the one day rate of return on the index?
5.78%
4.35%
6.16%
7.42%
Which of the following mortgage scenarios will benefit the homeowner the most?
Adjustable rate mortgage when interest rate increases.
Fixed rate mortgage when interest rates fall.
Fixed rate mortgage when interest rate rises.
None of the above, as banker's interest will always be protected.
