Question 1

You purchased a futures contract on corn at a futures price of 331, and at the time of expiration the price was 343.What was your profit or loss

Accepted Answer

A)  -$12.00
B)  $12.00
C)  -$600
D)  $600E) None of the above
F) B) and D)

Question 2

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) B) and C)

Question 3

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)  The interest rate paid on the CD will vary with a designated market rate.F) A) and B)
G) C) and D)

Question 4

If a Treasury note has a bid price of $995, the quoted bid price in the Wall Street Journal would be

Accepted Answer

A)  99:50.
B)  99:16.
C)  99:80.
D)  99:24.
E)  99:32.F) A) and D)
G) A) and C)

Question 5

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) All of the above
F) A) and D)

Question 6

The ____ index represents the performance of the U.K.stock market.

Accepted Answer

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

Question 7

The smallest component of the bond market is _______ debt.

Accepted Answer

A)  Treasury
B)  other asset-backed
C)  corporate
D)  tax-exempt
E)  mortgage-backedF) B) and E)
G) None of the above

Question 8

Unsecured bonds are called

Accepted Answer

A)  junk bonds.
B)  debentures.
C)  indentures.
D)  subordinated debentures.
E)  either debentures or subordinated debentures.F) B) and D)
G) B) and E)

Question 9

A bond that can be retired prior to maturity by the issuer is a(an)  ____________ bond.

Accepted Answer

A)  convertible
B)  secured
C)  unsecured
D)  callable
E)  YankeeF) B) and C)
G) A) and B)

Question 10

The bid price of a T-bill in the secondary market is

Accepted Answer

A)  the price at which the dealer in T-bills is willing to sell the bill.
B)  the price at which the dealer in T-bills is willing to buy the bill.
C)  greater than the asked price of the T-bill.
D)  the price at which the investor can buy the T-bill.
E)  never quoted in the financial press.F) A) and E)
G) A) and C)

Question 11

Suppose an investor is considering a corporate bond with a 7.17% before-tax yield and a municipal bond with a 5.93% before-tax yield.At what marginal tax rate would the investor be indifferent between investing in the corporate and investing in the muni

Accepted Answer

A)  15.4%
B)  23.7%
C)  39.5%
D)  17.3%
E)  12.4%F) A) and C)
G) C) and D)

Question 12

You sold a futures contract on corn at a futures price of 331 and at the time of expiration the price was 343.What was your profit or loss

Accepted Answer

A)  -$12.00
B)  $12.00
C)  -$600
D)  $600E) None of the above
F) C) and D)

Question 13

An investor purchases one municipal and one corporate bond that pay rates of return of 7.2% and 9.1%, respectively.If the investor is in the 15% marginal tax bracket, his or her after-tax rates of return on the municipal and corporate bonds would be ________ and ______, respectively.

Accepted Answer

A)  7.2% and 9.1%
B)  7.2% and 7.735%
C)  6.12% and 7.735%
D)  8.471% and 9.1%E) All of the above
F) B) and D)

Question 14

Which of the following statements is true regarding a corporate bond

Accepted Answer

A)  A corporate callable bond gives the holder the right to exchange it for a specified number of the company's common shares.
B)  A corporate debenture is a secured bond.
C)  A corporate indenture is a secured bond.
D)  A corporate convertible bond gives the holder the right to exchange the bond for a specified number of the company's common shares.
E)  Holders of corporate bonds have voting rights in the company.F) A) and C)
G) A) and B)

Question 15

Commercial paper is a short-term security issued by ________ to raise funds.

Accepted Answer

A)  the Federal Reserve Bank
B)  commercial banks
C)  large, well-known companies
D)  the New York Stock Exchange
E)  state and local governmentsF) All of the above
G) C) and D)

Question 16

Certificates of deposit are insured by the

Accepted Answer

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

Question 17

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

Accepted Answer

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

Question 18

A form of short-term borrowing by dealers in government securities is

Accepted Answer

A)  reserve requirements.
B)  repurchase agreements.
C)  bankers' acceptances.
D)  commercial paper.
E)  brokers' calls.F) A) and E)
G) A) and D)

Question 19

The yield to maturity reported in the financial pages for Treasury securities

Accepted Answer

A)  is calculated by compounding the semiannual yield.
B)  is calculated by doubling the semiannual yield.
C)  is also called the bond equivalent yield.
D)  is calculated as the yield-to-call for premium bonds.
E)  is calculated by doubling the semiannual yield and is also called the bond equivalent yield.F) A) and B)
G) A) and C)

Question 20

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% and 8%
B)  4.5% and 6%
C)  4.5% and 8%
D)  6% and 6%E) B) and C)
F) A) and C)

Exam 2: Asset Classes and Financial Instruments

Certificates of deposit are insured by the

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A form of short-term borrowing by dealers in government securities is

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The smallest component of the bond market is _______ debt.

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You purchased a futures contract on corn at a futures price of 331, and at the time of expiration the price was 343.What was your profit or loss

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Commercial paper is a short-term security issued by ________ to raise funds.

Correct AnswerverifiedShow Answer

The ____ index represents the performance of the U.K.stock market.

Correct AnswerverifiedShow Answer

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

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Unsecured bonds are called

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The yield to maturity reported in the financial pages for Treasury securities

Correct AnswerverifiedShow Answer

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

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Suppose an investor is considering a corporate bond with a 7.17% before-tax yield and a municipal bond with a 5.93% before-tax yield.At what marginal tax rate would the investor be indifferent between investing in the corporate and investing in the muni

Correct AnswerverifiedShow Answer

You sold a futures contract on corn at a futures price of 331 and at the time of expiration the price was 343.What was your profit or loss

Correct AnswerverifiedShow Answer

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.

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If a Treasury note has a bid price of $995, the quoted bid price in the Wall Street Journal would be

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

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

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Which of the following statements is true regarding a corporate bond

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A bond that can be retired prior to maturity by the issuer is a(an) ____________ bond.

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An investor purchases one municipal and one corporate bond that pay rates of return of 7.2% and 9.1%, respectively.If the investor is in the 15% marginal tax bracket, his or her after-tax rates of return on the municipal and corporate bonds would be ________ and ______, respectively.

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The bid price of a T-bill in the secondary market is

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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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An investor purchases one municipal and one corporate bond that pay rates of return of 7.2% and 9.1%, respectively.If the investor is in the 15% 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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