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| 1 | |
Which one of the following is not a money market instrument? |
| | A) | a Treasury bond |
| | B) | a negotiable certificate of deposit |
| | C) | a Eurodollar account |
| | D) | a Treasury bill |
| | E) | commercial paper |
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| 2 | |
The bid price of a T-bill in the secondary market is |
| | 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. |
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| 3 | |
Which of the following is true of the Dow Jones Industrial Average? |
| | A) | The divisor must be adjusted for stock splits. |
| | B) | It is a price-weighted average of 30 large industrial firms. |
| | C) | It is a value-weighted average of 30 large industrial firms. |
| | D) | It is an equally weighted average of 30 large industrial firms. |
| | E) | A and B |
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| 4 | |
Which of the following statements is (are) true 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.
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| | A) | I and II only |
| | B) | I and III only |
| | C) | I, II, and III only |
| | D) | I, III, and IV only |
| | E) | I and IV only |
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| 5 | |
The price quotations of Treasury bonds in The Wall Street Journal show an ask price of 104:08 and a bid price of 104:04. As a buyer of the bond what is the dollar price you expect to pay? |
| | A) | $1,048.00 |
| | B) | $1,042.50 |
| | C) | $1,044.00 |
| | D) | $1,041.20 |
| | E) | $1,040.40 |
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| 6 | |
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: |
| | A) | 8.20%. |
| | B) | 10.75%. |
| | C) | 11.40%. |
| | D) | 4.82%. |
| | E) | none of the above |
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| 7 | |
Federally sponsored agency debt |
| | A) | has a small positive yield spread relative to U.S. Treasuries. |
| | B) | is legally insured by the U.S. Treasury. |
| | C) | probably would be backed by the U.S. Treasury in the event of a near-default. |
| | D) | A and C |
| | E) | B and C |
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| 8 | |
Freddie Mac and Ginnie Mae were organized to provide |
| | 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 source of funds for government agencies. |
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| 9 | |
Which of the following are characteristics of preferred stock?- It pays its holder a fixed amount of income each year, at the discretion of its managers.
- It gives its holder voting power in the firm.
- Its dividends are usually cumulative.
- Failure to pay dividends may result in bankruptcy proceedings.
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| | A) | I, III, and IV |
| | B) | I, II, and III |
| | C) | I and III |
| | D) | I, II, and IV |
| | E) | I, II, III, and IV |
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| 10 | |
With regard to a futures contract, the long position is held by |
| | 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) | the trader who commits to delivering the commodity on the delivery date. |
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