MC questions with answers by chapter - Chapter 02 Asset Classes and Financial Instruments Multiple - Studeersnel (2024)

Which of the following is not a money market instrument?A. Treasury billB. Commercial paperC. Preferred stockD. Banker's acceptance

Thirteen week T-bill auctions are conducted ____.A. dailyB. weeklyC. monthlyD. quarterly

When computing the bank discount yield you would use ____ days in the year.A. 260B. 360C. 365D. 366

A dollar denominated deposit at a London bank is called _____.A. eurodollarsB. LIBORC. fed fundsD. banker's acceptance

Money market securities are sometimes referred to as "cash equivalent" because _____.A. they are safe and marketableB. they are not liquidC. they are high riskD. they are low denomination

The most actively traded money market security isA. Treasury billsB. Bankers' AcceptancesC. Certificates of DepositD. Common stock

______ voting of common stock gives minority shareholders the most representation on theboard of directors.A. MajorityB. CumulativeC. RightsD. Proxy

An investor in a T-bill earns interest by _________.A. receiving interest payments every 90 daysB. receiving dividend payments every 30 daysC. converting the T-bill at maturity into a higher valued T-noteD. buying the bill at a discount from the face value received at maturity

______ would not be included in the EAFE index.A. AustraliaB. CanadaC. FranceD. Japan

_____ is considered to be an emerging market country.A. FranceB. NorwayC. BrazilD. Canada

Which of the following is not a characteristic of a money market instrument?A. LiquidityB. MarketabilityC. Low riskD. Maturity greater than one year

An individual who goes short in a futures positionA. commits to delivering the underlying commodity at contract maturityB. commits to purchasing the underlying commodity at contract maturityC. has the right to deliver the underlying commodity at contract maturityD. 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 mortgagemarkets?A. Fannie MaeB. Freddie MacC. Sallie MaeD. Ginnie Mae

Commercial paper is a short-term security issued by __________ to raise funds.A. the Federal ReserveB. commercial banksC. large well-known companiesD. the New York Stock Exchange

The maximum maturity on commercial paper isA. 270 daysB. 180 daysC. 90 daysD. 30 days

Which one of the following is a true statement regarding the Dow Jones IndustrialAverage?A. It is a value-weighted average of 30 large industrial stocksB. It is a price-weighted average of 30 large industrial stocksC. It is a price-weighted average of 100 large stocks traded on the New York Stock ExchangeD. 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.A. commercial banksB. the Federal GovernmentC. large corporationsD. state and city governments

Which of the following are true statements about T-bills?I. T-bills typically sell in denominations of $10,II. Income earned on T-bills is exempt from all Federal taxesIII. Income earned on T-bills is exempt from state and local taxesA. I onlyB. I and II onlyC. I and III onlyD. I, II and III

A bond that has no collateral is called _________.A. a callable bondB. a debentureC. a junk bondD. a mortgage

A __________ gives its holder the right to sell an asset for a specified exercise price on orbefore a specified expiration date.A. call optionB. futures contractC. put optionD. interest rate swap

The U. stock index is the _________.A. DAXB. FTSEC. GSED. TSE

A __________ gives its holder the right to buy an asset for a specified exercise price on orbefore a specified expiration date.A. call optionB. futures contractC. put optionD. interest rate swap

Which one of the following provides the best example of securitization?A. convertible bondB. call optionC. mortgage pass-through securityD. preferred stock

Which of the following indices are market-value weighted?I. The NYSE CompositeII. The S&P 500III. The Wilshire 5000A. I and II onlyB. II and III onlyC. I and III onlyD. I, II and III

The interest rate charged by large banks in London to lend money among themselves iscalled _________.A. the prime rateB. the discount rateC. the federal funds rateD. LIBOR

A firm that has large securities holdings that wishes to raise money for a short length oftime may be able to find the cheapest financing from which of the following?A. Reverse repurchase agreementB. Banker's acceptanceC. Commercial paperD. Repurchase agreement

Currently the Dow Jones Industrial Average is computed by _________.A. adding the prices of 30 large "blue-chip" stocks and dividing by 30B. calculating the total market value of the 30 firms in the index and dividing by 30C. measuring the current total market value of the 30 stocks in the index relative to the totalvalue on the previous dayD. adding the prices of 30 large "blue-chip" stocks and dividing by a divisor adjusted forstock splits and large stock dividends

An investor purchases one municipal and one corporate bond that pay rates of return of5% and 6% respectively. If the investor is in the 15% tax bracket, his after tax rates ofreturn on the municipal and corporate bonds would be respectivelyA. 5% and 6%B. 5% and 5%C. 4% and 6%D. 5% and 5%

If a treasury note has a bid price of $996, the quoted bid price in the Wall StreetJournal would be _________.A. 99:B. 99:C. 99:D. 99:

Which of the following does not approximate the performance of a buy and hold portfoliostrategy?A. An equally weighted indexB. A price weighted indexC. A value weighted indexD. Weights are not a factor in this situation

In calculating the Dow Jones Industrial Average, the adjustment for a stock split occurs_________.A. automaticallyB. by adjusting the divisorC. by adjusting the numeratorD. by adjusting the market value weights

If the market prices of the 30 stocks in the Dow Jones Industrial Average all change by thesame dollar amount on a given day, assuming there are no stock splits which stock will havethe greatest impact on the average?A. The one with the highest priceB. The one with the lowest priceC. All 30 stocks will have the same impactD. The answer cannot be determined by the information given

A bond issued by the State of Alabama is priced to yield 6%. If you are in the 28% taxbracket this bond would provide you with an equivalent taxable yield of _________.A. 4%B. 7%C. 8%D. none of the above

The purchase of a futures contract gives the buyer _________.A. the right to buy an item at a specified priceB. the right to sell an item at a specified priceC. the obligation to buy an item at a specified priceD. the obligation to sell an item at a specified price

Ownership of a put option entitles the owner to the __________ to ___________ aspecific stock, on or before a specific date, at a specific price.A. right, buyB. right, sellC. obligation, buyD. obligation, sell

An investor in a 28% tax bracket is trying to decide whether to invest in a municipal bondor a corporate bond. She looks up municipal bond yields (rm) but wishes to calculate thetaxable equivalent yield r. The formula she should use is given by ______.A. r = rm * (1 - 28%)B. r = rm/(1 - 72%)C. r = rm * (1 - 72%)D. r = rm/(1 - 28%)

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

Ownership of a call option entitles the owner to the __________ to __________ a specificstock, on or before a specific date, at a specific price.A. right, buyB. right, sellC. obligation, buyD. obligation, sell

Large well-known companies often issue their own short term unsecured debt notesdirectly to the public, rather than borrowing from banks, their notes are called _________.A. certificates of depositB. repurchase agreementsC. banker's acceptancesD. commercial paper

Which of the following is most like a short-term collateralized loan?A. Certificate of depositB. Repurchase agreementC. Banker's acceptanceD. Commercial paper

Eurodollars are _________.A. dollar denominated deposits at any foreign bank or foreign branch of an American bankB. dollar denominated bonds issued by firms outside their home marketC. currency issued by Euro Disney and traded in FranceD. 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?A. Certificate of depositB. Banker's acceptanceC. Eurodollar depositsD. Commercial paper

Treasury notes have initial maturities between ________ years.A. 2 and 4B. 5 and 10C. 10 and 30D. 1 and 10

Which of the following are not characteristic of common stock ownership?A. Residual claimantB. Unlimited liabilityC. Voting rightsD. Limited life of the security

If you thought prices of stock would be rising over the next few months you may wish to__________________ on the stock.A. purchase a call optionB. purchase a put optionC. sell a futures contractD. place a short sale order

A typical bond price quote includes all but which one of the following?A. Daily high price for the bondB. Closing bond priceC. Yield to maturityD. Dividend yield

What are business firms most likely to use derivative securities for?A. HedgingB. SpeculatingC. Doing calculus problemsD. Market making

What would you expect to have happened to the spread between yields on commercialpaper and Treasury bills immediately after September 11, 2001?A. No change, as both yields will remain the same.B. Increase, the spread usually increases in response to a crisis.C. Decrease, the spread usually decreases in response to a crisis.D. No change, as both yields will move in the same direction.

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 foryour portfolio would be to construct a/an ______.A. value weighted indexB. equal weighted indexC. price weighted indexD. bond price index

In a ___________ index changes in the value of the stock with the greatest market valuewill move the index value the most everything else equal.A. value weighted indexB. equal weighted indexC. price weighted indexD. bond price index

A corporation in a 34% tax bracket invests in the preferred stock of another company andearns a 6% pre-tax rate of return. An individual investor in a 15% tax bracket invests in thesame preferred stock and earns the same pre-tax return. The after tax return to the corporationis _______ and the after tax return to the individual investor is _______.A. 3%; 5%B. 5%; 5%C. 6%; 6%D. 3%; 6%

All but which one of the following indices is value weighted?A. Nasdaq CompositeB. S&P 500C. Wilshire 5000D. DJIA

What is the tax exempt equivalent yield on a 9% bond yield given a marginal tax rate of28%?A. 6%B. 7%C. 8%D. 9%

A tax free municipal bond provides a yield of 3%. What is the equivalent taxable yieldon the bond given a 35% tax bracket?A. 3%B. 3%C. 4%D. 5%

An index computed from a simple average of returns is a/an _____.A. equal weighted indexB. value weighted indexC. price weighted indexD. share weighted index

A tax free municipal bond provides a yield of 2%. What is the equivalent taxable yieldon the bond given a 28% tax bracket?A. 2%B. 2%C. 3%D. 4%

The Chompers Index is a price weighted stock index based on the 3 largest fast foodchains. The stock prices for the three stocks are $54, $23, and $44. What is the price weightedindex value of the Chompers Index?A. 23.B. 35.C. 40.D. 49.