Question 1

Which of the following are characteristics of preferred stock? I)  It pays its holder a fixed amount of income each year at the discretion of its managers.
II)  It gives its holder voting power in the firm.
III)  Its dividends are usually cumulative.
IV)  Failure to pay dividends may result in bankruptcy proceedings.

Accepted Answer

A)  I, III, and IV
B)  I, II, and III
C)  I and III
D)  I, II, and IVE) None of the above
F) B) and C)

Question 2

Which of the following securities is a money market instrument?

Accepted Answer

A)  Treasury note
B)  Treasury bond
C)  Municipal bond
D)  Commercial paperE) A) and B)
F) B) and C)

Question 3

If the market prices of each of the 30 stocks in the Dow Jones Industrial Average (DJIA)  all change by the same percentage amount during a given day, which stock will have the greatest impact on the DJIA?

Accepted Answer

A)  The stock trading at the highest dollar price per share
B)  The stock having the greatest amount of debt in its capital structure
C)  The stock having the greatest amount of equity in its capital structure
D)  The stock having the lowest volatilityE) A) and B)
F) A) and C)

Question 4

The ____ is an example of a U.S.index of small firms.

Accepted Answer

A)  S&P 500
B)  DJIA
C)  DAX
D)  Russell 2000E) B) and D)
F) All of the above

Question 5

The smallest component of the money market is

Accepted Answer

A)  repurchase agreements.
B)  small-denomination time deposits.
C)  savings deposits.
D)  money market mutual funds.
E)  commercial paper.F) A) and B)
G) A) and E)

Question 6

The ____ index represents the performance of the German stock market.

Accepted Answer

A)  DAX
B)  FTSE
C)  Nikkei
D)  Hang SengE) A) and C)
F) A) and B)

Question 7

The largest component of the fixed-income market is _______ debt.

Accepted Answer

A)  Treasury
B)  asset-backed
C)  corporate
D)  tax-exemptE) None of the above
F) All of the above

Question 8

Certificates of deposit are insured by the

Accepted Answer

A)  SPIC.
B)  CFTC.
C)  Lloyds of London.
D)  FDIC.E) A) and D)
F) All of the above D

Question 9

An investor purchases one municipal and one corporate bond that pay rates of return of 6% and 8%, respectively.If the investor is in the 25% marginal tax bracket, his or her after-tax rates of return on the municipal and corporate bonds would be ________ and ______, respectively.

Accepted Answer

A)  6%; 8%
B)  4.5%; 6%
C)  4.5%; 8%
D)  6%; 6%E) All of the above
F) A) and B)

Question 10

A 5.5%, 20-year municipal bond is currently priced to yield 7.2%.For a taxpayer in the 33% marginal tax bracket, this bond would offer an equivalent taxable yield of

Accepted Answer

A)  8.20%.
B)  10.75%.
C)  11.40%.
D)  4.82%.E) None of the above
F) A) and B)

Question 11

In order for you to be indifferent between the after-tax returns on a corporate bond paying 9% and a tax-exempt municipal bond paying 7%, what would your tax bracket need to be?

Accepted Answer

A)  17.6%
B)  27%
C)  22.2%
D)  19.8%E) A) and B)
F) B) and C)

Question 12

The ____ index represents the performance of the Hong Kong stock market.

Accepted Answer

A)  DAX
B)  FTSE
C)  Nikkei
D)  Hang SengE) A) and B)
F) None of the above

Question 13

With regard to a futures contract, the long position is held by

Accepted Answer

A)  the trader who bought the contract at the largest discount.
B)  the trader who has to travel the farthest distance to deliver the commodity.
C)  the trader who plans to hold the contract open for the lengthiest time period.
D)  the trader who commits to purchasing the commodity on the delivery date.E) None of the above
F) B) and C) D

Question 14

A municipal bond issued to finance an airport, hospital, turnpike, or port authority is typically a

Accepted Answer

A)  revenue bond.
B)  general-obligation bond.
C)  industrial-development bond.
D)  revenue bond or general-obligation bond.E) A) and D)
F) A) and C)

Question 15

What does the term negotiable mean, with regard to negotiable certificates of deposit?

Accepted Answer

A)  The CD can be sold to another investor if the owner needs to cash it in before its maturity date.
B)  The rate of interest on the CD is subject to negotiation.
C)  The CD is automatically reinvested at its maturity date.
D)  The CD has staggered maturity dates built in.E) A) and B)
F) All of the above

Question 16

Brokers' calls

Accepted Answer

A)  are funds used by individuals who wish to buy stocks on margin.
B)  are funds borrowed by the broker from the bank, with the agreement to repay the bank immediately if requested to do so.
C)  carry a rate that is usually about one percentage point lower than the rate on Canadian T-bills.
D)  are funds used by individuals who wish to buy stocks on margin and are funds borrowed by the broker from the bank, with the agreement to repay the bank immediately if requested to do so.E) None of the above
F) B) and C) D

Question 17

The ____ index represents the performance of the Canadian stock market.

Accepted Answer

A)  DAX
B)  FTSE
C)  S&P/TSX
D)  Hang SengE) A) and C)
F) B) and D)

Question 18

Freddie Mac and Ginnie Mae were organized to provide

Accepted Answer

A)  a primary market for mortgage transactions.
B)  liquidity for the mortgage market.
C)  a primary market for farm loan transactions.
D)  liquidity for the farm loan market.E) A) and B)
F) A) and C)

Question 19

If a Treasury note has a bid price of $975, the quoted bid price in the Wall Street Journal would be

Accepted Answer

A)  97:50.
B)  97:16.
C)  97:80.
D)  94:24.E) None of the above
F) A) and B)

Question 20

In order for you to be indifferent between the after-tax returns on a corporate bond paying 8.5% and a tax-exempt municipal bond paying 6.12%, what would your tax bracket need to be?

Accepted Answer

A)  33%
B)  72%
C)  15%
D)  28%E) C) and D)
F) B) and D)

Exam 2: Financial Markets, Asset Classes and Financial Instruments

Correct Answer
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Which of the following securities is a money market instrument?

Correct Answer
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If the market prices of each of the 30 stocks in the Dow Jones Industrial Average (DJIA) all change by the same percentage amount during a given day, which stock will have the greatest impact on the DJIA?

Correct Answer
verified

The ____ is an example of a U.S.index of small firms.

Correct Answer
verified

The smallest component of the money market is

Correct Answer
verified

The ____ index represents the performance of the German stock market.

Correct Answer
verified

The largest component of the fixed-income market is _______ debt.

Correct Answer
verified

Certificates of deposit are insured by the

Correct Answer
verified
D

An investor purchases one municipal and one corporate bond that pay rates of return of 6% and 8%, respectively.If the investor is in the 25% marginal tax bracket, his or her after-tax rates of return on the municipal and corporate bonds would be __ and , respectively.

Correct Answer
verified

A 5.5%, 20-year municipal bond is currently priced to yield 7.2%.For a taxpayer in the 33% marginal tax bracket, this bond would offer an equivalent taxable yield of

Correct Answer
verified

In order for you to be indifferent between the after-tax returns on a corporate bond paying 9% and a tax-exempt municipal bond paying 7%, what would your tax bracket need to be?

Correct Answer
verified

The ____ index represents the performance of the Hong Kong stock market.

Correct Answer
verified

With regard to a futures contract, the long position is held by

Correct Answer
verified
D

A municipal bond issued to finance an airport, hospital, turnpike, or port authority is typically a

Correct Answer
verified

What does the term negotiable mean, with regard to negotiable certificates of deposit?

Correct Answer
verified

Brokers' calls

Correct Answer
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D

The ____ index represents the performance of the Canadian stock market.

Correct Answer
verified

Freddie Mac and Ginnie Mae were organized to provide

Correct Answer
verified

If a Treasury note has a bid price of $975, the quoted bid price in the Wall Street Journal would be

Correct Answer
verified

In order for you to be indifferent between the after-tax returns on a corporate bond paying 8.5% and a tax-exempt municipal bond paying 6.12%, what would your tax bracket need to be?

Correct Answer
verified

Exam 2: Financial Markets, Asset Classes and Financial Instruments

Correct AnswerverifiedShow Answer

Which of the following securities is a money market instrument?

Correct AnswerverifiedShow Answer

If the market prices of each of the 30 stocks in the Dow Jones Industrial Average (DJIA) all change by the same percentage amount during a given day, which stock will have the greatest impact on the DJIA?

Correct AnswerverifiedShow Answer

The ____ is an example of a U.S.index of small firms.

Correct AnswerverifiedShow Answer

The smallest component of the money market is

Correct AnswerverifiedShow Answer

The ____ index represents the performance of the German stock market.

Correct AnswerverifiedShow Answer

The largest component of the fixed-income market is _______ debt.

Correct AnswerverifiedShow Answer

Certificates of deposit are insured by the

Correct AnswerverifiedD

An investor purchases one municipal and one corporate bond that pay rates of return of 6% and 8%, respectively.If the investor is in the 25% marginal tax bracket, his or her after-tax rates of return on the municipal and corporate bonds would be ________ and ______, respectively.

Correct AnswerverifiedShow Answer

A 5.5%, 20-year municipal bond is currently priced to yield 7.2%.For a taxpayer in the 33% marginal tax bracket, this bond would offer an equivalent taxable yield of

Correct AnswerverifiedShow Answer

In order for you to be indifferent between the after-tax returns on a corporate bond paying 9% and a tax-exempt municipal bond paying 7%, what would your tax bracket need to be?

Correct AnswerverifiedShow Answer

The ____ index represents the performance of the Hong Kong stock market.

Correct AnswerverifiedShow Answer

With regard to a futures contract, the long position is held by

Correct AnswerverifiedD

A municipal bond issued to finance an airport, hospital, turnpike, or port authority is typically a

Correct AnswerverifiedShow Answer

What does the term negotiable mean, with regard to negotiable certificates of deposit?

Correct AnswerverifiedShow Answer

Brokers' calls

Correct AnswerverifiedD

The ____ index represents the performance of the Canadian stock market.

Correct AnswerverifiedShow Answer

Freddie Mac and Ginnie Mae were organized to provide

Correct AnswerverifiedShow Answer

If a Treasury note has a bid price of $975, the quoted bid price in the Wall Street Journal would be

Correct AnswerverifiedShow Answer

In order for you to be indifferent between the after-tax returns on a corporate bond paying 8.5% and a tax-exempt municipal bond paying 6.12%, what would your tax bracket need to be?

Correct AnswerverifiedShow Answer

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D

An investor purchases one municipal and one corporate bond that pay rates of return of 6% and 8%, respectively.If the investor is in the 25% marginal tax bracket, his or her after-tax rates of return on the municipal and corporate bonds would be __ and , respectively.

Correct Answer
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D

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D

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