Q&A Hero

Q: Large or jumbo CDs are $100,000 or greater in size.

Q: There is evidence that the bond market may be less efficient than the stock market.

Q: As the yield spread between high and low rating categories increases, this indicates a gain of confidence in the economy.

Q: A bond quote of 91 7/8 on a $1,000 par value bond means the bond is trading at $918.75.

Q: A split rating means that bond-rating agencies assigned different ratings.

Q: The higher the bond rating of a corporation, the higher the interest rate that is likely to be paid.

Q: Private placements refer exclusively to stock issues sold to insurance companies or individuals.

Q: The bond market investor must be prepared to deal in a relatively strong primary market (new issues market) and a relatively weak secondary market (resale market).

Q: The bond market is dominated by institutional investors.

Q: The dollar volume of new corporate debt issues has exceeded the dollar volume of new corporate equity issues for many years.

Q: An investor in a municipal bond will receive 8% interest. He is in a 33% tax bracket. The comparable before-tax yield on a taxable investment is 14%.

Q: Interest on federally-sponsored credit agency issues (such as the Federal Home Loan Bank) is not tax-free to the recipient.

Q: A Treasury bill is a long-term obligation of the federal government.

Q: Corporate issues make up the largest percentage of new debt offerings in the bond market.

Q: Income bonds specify that interest is to be paid only to the extent that it is earned in current income.

Q: A secured corporate bond is referred to as a debenture.

Q: An after-acquired clause requires that new property must be placed under the original mortgage.

Q: A sinking fund may be used to pay off a perpetual bond.

Q: The major provisions in the bond agreement are spelled out in the bond debenture.

Q: Preferred stock dividends are tax-deductible to the corporation, and also provide tax advantages to the corporate investor.

Q: While the stock market has an active secondary market, the bond market consists primarily of investors who buy and hold bond issues to maturity.

Q: Like the stock market, there is a strong secondary market for bond issues, particularly corporate and municipal bonds.

Q: Corporate bonds carry a higher yield than government issues, and are fully taxable for federal, state, and local purposes.

Q: Interest and capital gains on municipal bonds are tax-exempt by the IRS.

Q: An important feature of the GNMA (GinnieMae) pass-through certificate is that there is no principal balance at maturity.

Q: The IRS taxes zero-coupon bonds as if interest were paid annually, even though no cash flow is received until maturity.

Q: Income bonds are highly favored by corporations, because they provide the benefits of tax-deductible interest payments, without the contractual obligations of most debt instruments.

Q: A call provision allows the corporation to retire a bond before maturity by paying a small discount below par value.

Q: Changes in the market rate of interest are reflected in the semiannual interest payments of a variable rate note, while the price remains stable.

Q: The higher the mutual fund cash position,A.the more likely the market is to go down.B.the more likely the market is to go up.C.the more likely the market is to stay relatively unchanged.D.the higher mutual fund redemptions will be in the future.

Q: Smart money rules or approaches to the market include: A.short sales by specialists. B.the put-call ratio. C.Investment Advisory recommendations. D.the odd-lot theory.

Q: Contrary opinion rules or approaches to the market include: A.the odd-lot theory. B.short sales positions by the public. C.the mutual fund cash position. D.A and B

Q: Under the Dow Theory, all of the following represent trends in the market except: A.daily fluctuations. B.secondary movement. C.primary trends. D.linear trends.

Q: Technical analysis is based on all of the following assumptions except: A.that market value is determined by the interaction of demand and supply. B.that stocks with strong earnings gains will outperform the market. C.the assumption that, though there are minor fluctuations in the market, stock prices tend to move in trends that persist for long periods of time. D.that shifts in demand and supply can be detected sooner or later. E.that reversals of trends are caused by shifts in demand and supply.

Q: A ratio of the total short sales positions on an exchange to average daily exchange volume for the month is normally A.between 0-.5 B.between 1.0-2.0 C.between 2.0-3.0 D.over 3.0

Q: Smart Money Rules include: A.Barron's Confidence Index. B.short sales by individuals. C.short sales by specialists. D.Both A and C

Q: The problem in reading charts has always been: A.with the errors that are frequently made in the graphing process. B.understanding the past market movements. C.in analyzing the patterns in such a fashion that they truly predict stock market movements before they unfold. D.None of the above

Q: The breadth of the market indicator: A.attempts to measure what a broad range of securities is doing as opposed to merely examining a market average. B.can be used to analyze upturns in the market. C.compares the advance-declines with the movement of a popular market average to determine if there is divergence between the two. D.All of the above

Q: While the Dow Jones Industrial Average may be weighted toward large firms, a __________ indicator may be used to examine all stocks on an exchange. A.Key B.Contrary opinion C.Breadth of the market D.More than one of the above

Q: As the ratio of specialist short sales to total short sales increases, technicians consider the market to be: A.bullish. B.bearish. C.neutral. D.in the second leg of a bull market.

Q: A low Barron's Confidence Index means that: A.investors prefer stocks to bonds. B.the yield on bonds is greater than that on stock. C.low-quality bonds have returns much higher than high-quality bonds. D.low-quality bonds have returns slightly higher than high-quality bonds.

Q: All of the following are smart money rules except: A.investment advisory recommendations. B.short sales by specialists. C.Barron's Confidence Index. D.None of the above are exceptions

Q: Volume of short sales represents a contrary opinion rule, because: A.short sellers generally do not know what they are doing. B.short sellers tend to overreact. C.short sales generate potential demand for stocks. D.More than one of the above

Q: The ____________ suggests watching the small investor, who is right most of the time but misses key market turns, and then doing the opposite. A.contrary opinion rule B.odd-lot theory C.greed index D.None of the above

Q: The essence of _______ is to determine whose judgment about the market is wrong. A.key indicators B.smart money rules C.contrary opinion rules D.None of the above

Q: A point and figure chart is used to demonstrate: A.advances and declines of stock prices. B.high, low, and closing price on a daily basis. C.changes of two points or more. D.More than one of the above

Q: A bar chart is used to demonstrate: A.advances and declines of stock prices. B.high, low, and closing stock price on a daily basis. C.changes of two points or more. D.More than one of the above

Q: According to the Dow Theory, daily fluctuations and secondary movements in the market are used to help identify: A.a key indicator. B.a primary trend. C.shifts in demand and supply. D.More than one of the above

Q: The Dow Theory uses _________ to follow three major types of market movements. A.charting B.key indicators C.fundamental analysis D.None of the above

Q: ______________ analysis focuses on charts and graphs based on internal market data, while _____________ analysis emphasizes earnings reports, management capabilities, and new product development. A.Technical; fundamental B.Fundamental; technical C.Technical; external D.Technical; semi-strong

Q: A breadth of the market indicator attempts to measure what a broad range of securities is doing as opposed to merely examining a market average.

Q: The Barron's Confidence Index is used to observe the trading pattern of investors in the stock market.

Q: The essence of the contrary opinion rule is that it is easier to figure out who is right than who is wrong.

Q: Chartists carefully read point and figure charts to observe market patterns (where there is support, resistance, breakouts, congestion, and so on).

Q: The Dow Theory maintains that there are three major fluctuations in the market: daily fluctuations, weekly fluctuations, and yearly fluctuations.

Q: High mutual fund cash positions would represent withdrawal from the market and thus a possible future market decline.

Q: A high ratio of specialist short sales compared to exchange short sales is interpreted as bearish.

Q: Barron's Confidence Index has only a mixed record of success.

Q: Investment advisory recommendations are part of the smart money rules.

Q: A high short interest ratio is considered bullish.

Q: The short interest ratio is the total short sales position, divided by average daily exchange volume for the month.

Q: When short sellers are bearish, it is thought to be a bullish signal.

Q: Odd-lot traders have never outguessed professional traders.

Q: Odd-lot traders traditionally are assumed to be strong sellers right before the bottom of a bear market, but this is not always the case.

Q: Point and figure charts emphasize significant price changes and price reversals.

Q: Chartists do not consider volume significant in reading market indicators.

Q: A support level signals new demand.

Q: The Dow Theory puts emphasis on long-run trends.

Q: Technical analysis assumes that many chart patterns tend to repeat themselves.

Q: Mutual fund cash positions are not generally a reliable indicator of market health or activity.

Q: Divergence between advances and declines on the New York Stock Exchange and the Dow Jones Industrial Average may signal a reversing trend in the market.

Q: Short-selling by individual investors provides future demand potential to cover their short position.

Q: Under normal circumstances, the Barron's Confidence Index is between 100 and 200.

Q: The Barron's Confidence Index is based on the premise that bond traders, being more sophisticated than stock traders, pick up trends more quickly.

Q: The support level is the stock price that generates new demand, while the resistance level is the price at which investors begin to sell in order to take a profit.

Q: The idea that stock prices tend to move in trends that persist for long periods, and that these trends can be detected in charts, are basic assumptions of fundamental analysis.

Q: Anomalies related to the semi-strong form of the efficient market hypothesis indicate that:A.the market is truly efficient.B.high returns are very difficult to achieve.C.the market is less than perfectly efficient.D.public information is almost useless.

Q: The semi-strong form of the efficient market hypothesis says that investors are not able to use _____________ information for their gain. A.public B.insider C.charting D.leading indicators

Q: The three forms of the efficient market hypothesis (not in any particular order) are stated as: A.weak, semi-strong, and superior. B.weak, normal, and strong. C.semi-strong, weak, and strong. D.semi-strong, normal, and superior.

Q: The semi-strong form of the efficient market hypothesis maintains that: A.all public and private information is already impounded into the value of a security. B.there is no relationship between past and future prices. C.all public information is already impounded into the value of a security. D.insider information is immediately impounded into the value of a security.