Q&A Hero

Q: The inside quotes on a limit order book can be found ______. A. at the top of the list B. at the bottom of the list C. by taking the averages of the bid and ask prices on the list D. only by direct contact with the specialist who maintains the book

Q: The ______________ is the most important dealer market in the United States, and the ______________ is the most important auction market. A. NYSE; NASDAQ B. NASDAQ; NYSE C. CME; OTC D. AMEX; NYSE

Q: In a __________ underwriting arrangement, the underwriter assumes the full risk that shares may not be sold to the public at the stipulated offering price. A. best-efforts B. firm-commitment C. private placement D. none of these options

Q: Specialists try to maintain a narrow bid-ask spread because: I. If the spread is too large, they will not participate in as many trades, losing commission income. II. The exchange requires specialists to maintain price continuity. III. Specialists are nonprofit entities designed to facilitate market transactions rather than make a profit. A. I only B. I and II only C. II and III only D. I, II, and III

Q: According to multiple studies by Ritter, initial public offerings tend to exhibit __________ performance initially and __________ performance over the long term. A. bad; good B. bad; bad C. good; good D. good; bad

Q: What would be the profit or loss per share of stock to an investor who bought an October expiration Apple call option with an exercise price of $130 if Apple closed on the expiration date at $120? Assume the option premium was $3.00.A. $0B. $3.00 gainC. $3.00 lossD. $7.00 gain

Q: Which of the following reforms were not included in 2014 regulations regarding money market funds? A. Institutional funds will "float" the prices of their shares. B. Funds can limit redemptions or impose a 2% fee if assets fall by more than 30%. C. increased disclosure of assets' values and liquidity D. All of the options were included.

Q: Several large banks manipulated the reported rates on which key money market rate? A. federal funds rate B. LIBOR C. bankers' acceptances D. brokers' calls rate

Q: LIBOR is a key reference rate in the money markets. Many ______ of dollars of loans and derivative assets are tied to it. A. thousands B. millions C. billions D. trillions

Q: The brokers' call rate represents A. the rate the broker charges an investor on a margin account. B. the rate the broker pays its bank on borrowed funds. C. the return earned by the broker on a margin account. D. the return earned by the investor on a margin account .

Q: Which of the following mortgage scenarios will benefit the homeowner the most? A. adjustable rate mortgage when interest rate increases. B. fixed rate mortgage when interest rates falls. C. fixed rate mortgage when interest rate rises. D. None of these options, as the banker's interest will always be protected.

Q: A benchmark market value index is comprised of three stocks. Yesterday the three stocks were priced at $12, $20, and $60. The number of outstanding shares for each is 600,000 shares, 500,000 shares, and 200,000 shares, respectively. If the stock prices changed to $16, $18, and $62 today respectively, what is the 1-day rate of return on the index? A. 5.78% B. 4.35% C. 6.16% D. 7.42%

Q: A benchmark index has three stocks priced at $23, $43, and $56. The number of outstanding shares for each is 350,000 shares, 405,000 shares, and 553,000 shares, respectively. If the market value weighted index was 970 yesterday and the prices changed to $23, $41, and $58 today, what is the new index value? A. 960 B. 970 C. 975 D. 985

Q: The Hydro Index is a price weighted stock index based on the 5 largest boat manufacturers in the nation. The stock prices for the five stocks are $10, $20, $80, $50 and $40. The price of the last stock was just split 2 for 1 and the stock price was halved from $40 to $20. What is the new divisor for a price weighted index? A. 5.00 B. 4.85 C. 4.50 D. 4.75

Q: A tax free municipal bond provides a yield of 2.34%. What is the equivalent taxable yield on the bond given a 28% tax bracket? A. 2.34% B. 2.68% C. 3.25% D. 4.92%

Q: An index computed from a simple average of returns is a/an _____. A. equal weighted index B. value weighted index C. price weighted index D. share weighted index

Q: What is the tax exempt equivalent yield on a 9% bond yield given a marginal tax rate of 28%? A. 6.48% B. 7.25% C. 8.02% D. 9%

Q: All but which one of the following indices is value weighted? A. NASDAQ Composite B. S&P 500 C. Wilshire 5000 D. DJIA

Q: A corporation in a 34% tax bracket invests in the preferred stock of another company and earns a 6% pretax rate of return. An individual investor in a 15% tax bracket invests in the same preferred stock and earns the same pretax return. The after-tax return to the corporation is _______, and the after-tax return to the individual investor is _______. A. 3.96%; 5.1% B. 5.39%; 5.1% C. 6%; 6% D.

Q: In a ___________ index, changes in the value of the stock with the greatest market value will move the index value the most, everything else equal. A. value-weighted index B. equally weighted index C. price-weighted index D. bond price index

Q: You decide to purchase an equal number of shares of stocks of firms to create a portfolio. If you wanted to construct an index to track your portfolio performance, your best match for your portfolio would be to construct ______. A. a value-weighted index B. an equally weighted index C. a price-weighted index D. a bond price index

Q: The rate of interest on short-term loans among financial institutions is _____. A. bankers' acceptances B. brokers' calls C. federal funds D. LIBOR

Q: Which of the following is not considered a money market investment? A. bankers' acceptance B. eurodollar C. repurchase agreement D. Treasury note

Q: Three stocks have share prices of $12, $75, and $30 with total market values of $400 million, $350 million, and $150 million, respectively. If you were to construct a price-weighted index of the three stocks, what would be the index value? A. 300 B. 39 C. 43 D. 30

Q: A stock quote indicates a stock price of $60 and a dividend yield of 3%. The latest quarterly dividend received by stock investors must have been ______ per share. A. $0.55 B. $1.80 C. $0.45 D. $1.25

Q: What would you expect to have happened to the spread between yields on commercial paper and Treasury bills immediately after September 11, 2001? A. no change, as both yields will remain the same B. increase, as the spread usually increases in response to a crisis C. decrease, as the spread usually decreases in response to a crisis D. no change, as both yields will move in the same direction

Q: A typical bond price quote includes all but which one of the following? A. coupon B. closing bond price C. yield to maturity D. dividend yield

Q: If you thought prices of stock would be rising over the next few months, you might want to __________________ on the stock. A. purchase a call option B. purchase a put option C. sell a futures contract D. place a short-sale order

Q: Which of the following is not a characteristic of common stock ownership? A. residual claimant B. unlimited liability C. voting rights D. right to any dividend paid by the corporation.

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

Q: Which of the following is used to back international sales of goods and services? A. certificate of deposit B. bankers' acceptance C. eurodollar deposits D. commercial paper

Q: Eurodollars are _________. A. dollar-denominated deposits at any foreign bank or foreign branch of an American bank B. dollar-denominated bonds issued by firms outside their home market C. currency issued by Euro Disney and traded in France D. dollars that wind up in banks as a result of money-laundering activities

Q: Which of the following is most like a short-term collateralized loan? A. certificate of deposit B. repurchase agreement C. bankers' acceptance D. commercial paper

Q: Large well-known companies often issue their own short-term unsecured debt notes directly to the public, rather than borrowing from banks; their notes are called _________. A. certificates of deposit B. repurchase agreements C. bankers' acceptances D. commercial paper

Q: The Standard & Poor's 500 is __________ weighted index. A. an equally B. a price- C. a value- D. a share-

Q: The Hang Seng index reflects market performance on which of the following major stock markets? A. Japan B. Singapore C. Taiwan D. Hong Kong

Q: The ________ the ratio of municipal bond yields to corporate bond yields, the _________ the cutoff tax bracket at which more individuals will prefer to hold municipal debt. A. higher; lower B. lower; lower C. higher; higher D. The answer cannot be determined without more information.

Q: Ownership of a call option entitles the owner to the __________ to __________ a specific stock, on or before a specific date, at a specific price. A. right; buy B. right; sell C. obligation; buy D. obligation; sell

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

Q: An investor in a 28% tax bracket is trying to decide whether to invest in a municipal bond or a corporate bond. She looks up municipal bond yields (rm) but wishes to calculate the taxable 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%)

Q: Ownership of a put option entitles the owner to the __________ to ___________ a specific stock, on or before a specific date, at a specific price. A. right; buy B. right; sell C. obligation; buy D. obligation; sell

Q: The purchase of a futures contract gives the buyer _________. A. the right to buy an item at a specified price B. the right to sell an item at a specified price C. the obligation to buy an item at a specified price D. the obligation to sell an item at a specified price

Q: A bond issued by the state of Alabama is priced to yield 6.25%. If you are in the 28% tax bracket, this bond would provide you with an equivalent taxable yield of _________. A. 4.5% B. 7.25% C. 8.68% D. none of these options

Q: In calculating the Dow Jones Industrial Average, the adjustment for a stock split occurs _________. A. automatically B. by adjusting the divisor C. by adjusting the numerator D. by adjusting the market value weights

Q: Which of the following does not approximate the performance of a buy-and-hold portfolio strategy? A. an equally weighted index B. a price-weighted index C. a value-weighted index D. all of these options (Weights are not a factor in this situation.)

Q: Preferred stock is like long-term debt in that ___________. A. it gives the holder voting power regarding the firm's management B. it promises to pay to its holder a fixed stream of income each year C. the preferred dividend is a tax-deductible expense for the firm D. in the event of bankruptcy preferred stock has equal status with debt

Q: Investors will earn higher rates of returns on TIPS than on equivalent default-risk standard bonds if _______________. A. inflation is lower than anticipated over the investment period B. inflation is higher than anticipated over the investment period C. the U.S. dollar increases in value against the euro D. the spread between commercial paper and Treasury securities remains low

Q: The Dow Jones Industrial Average is _________. A. a price-weighted average B. a value weight and average C. an equally weighted average D. an unweighted average

Q: The price quotations of Treasury bonds in the Wall Street Journal show a bid price of 104.5313 and an ask price of 104.5489. If you sell a Treasury bond, you expect to receive _________. A. $ 1,000.00 B. $ 1,045.00 C. $ 1,045.31 D. $ 1,045.48

Q: TIPS are ______. A. Treasury bonds that pay no interest and are sold at a discount B. U.K. bonds that protect investors from default risk C. securities that trade on the Toronto stock index D. Treasury bonds that protect investors from inflation

Q: If a Treasury note has a bid price of $996.25, the quoted bid price in the Wall Street Journal would be _________. A. 99:5/8 B. 99:6/10 C. 99.6250 D. none of the options

Q: An investor purchases one municipal bond and one corporate bond that pay rates of return of 5% and 6.4%, respectively. If the investor is in the 15% tax bracket, his after-tax rates of return on the municipal and corporate bonds would be, respectively, _____. A. 5% and 6.4% B. 5% and 5.44% C. 4.25% and 6.4% D. 5.75% and 5.44%

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

Q: A firm that has large securities holdings and wishes to raise money for a short length of time may be able to find the cheapest financing from which of the following? A. reverse repurchase agreement B. bankers' acceptance C. commercial paper D. repurchase agreement

Q: The interest rate charged by large banks in London to lend money among themselves is called _________. A. the prime rate B. the discount rate C. the federal funds rate D. LIBOR

Q: Which of the following indexes are market value-weighted? I. The NYSE Composite II. The S&P 500 III.The Wilshire 5000 A. I and II only B. II and III only C. I and III only D. I, II, and III

Q: Which one of the following provides the best example of securitization? A. convertible bond B. call option C. mortgage pass-through security D. preferred stock

Q: A __________ gives its holder the right to buy an asset for a specified exercise price on or before a specified expiration date. A. call option B. futures contract C. put option D. interest rate swap

Q: The U.K. stock index is the _________. A. DAX B. FTSE C. GSE D. TSE

Q: An investor buys a T-bill at a bank discount quote of 4.80 with 150 days to maturity. The investor's bond equivalent yield on this investment is _____. A. 4.8% B. 4.97% C. 5.47% D. 5.74%

Q: __________ is not a money market instrument. A. A certificate of deposit B. A Treasury bill C. A Treasury bond D. Commercial paper

Q: The yield on tax-exempt bonds is ______. A. usually less than 50% of the yield on taxable bonds B. normally about 90% of the yield on taxable bonds C. greater than the yield on taxable bonds D. less than the yield on taxable bonds

Q: Which one of the following is a true statement regarding corporate bonds? A. A corporate callable bond gives its 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 convertible bond gives its holder the right to exchange it for a specified number of the company's common shares. D. Holders of corporate bonds have voting rights in the company.

Q: A T-bill quote sheet has 90-day T-bill quotes with a 4.92 bid and a 4.86 ask. If the bill has a $10,000 face value, an investor could buy this bill for _____. A. $10,000 B. $9,878.50 C. $9,877 D. $9,880.16

Q: A __________ gives its holder the right to sell an asset for a specified exercise price on or before a specified expiration date. A. call option B. futures contract C. put option D. interest rate swap

Q: A bond that has no collateral is called a _________. A. callable bond B. debenture C. junk bond D. mortgage

Q: Which of the following are true statements about T-bills? I. T-bills typically sell in denominations of $10,000. II. Income earned on T-bills is exempt from all federal taxes. III. Income earned on T-bills is exempt from state and local taxes. A. I only B. I and II only C. I and III only D. I, II, and III

Q: Treasury bills are financial instruments issued by __________ to raise funds. A. commercial banks B. the federal government C. large corporations D. state and city governments

Q: Which one of the following is a true statement regarding the Dow Jones Industrial Average? A. It is a value-weighted average of 30 large industrial stocks. B. It is a price-weighted average of 30 large industrial stocks. C. It is a price-weighted average of 100 large stocks traded on the New York Stock Exchange. D. It is a value-weighted average of all stocks traded on the New York Stock Exchange.

Q: The maximum maturity on commercial paper is _____. A. 270 days B. 180 days C. 90 days D. 30 days

Q: Commercial paper is a short-term security issued by __________ to raise funds. A. the Federal Reserve B. the New York Stock Exchange C. large well-known companies D. all of these options

Q: Which of the following is not a nickname for an agency associated with the mortgage markets? A. Fannie Mae B. Freddie Mac C. Sallie Mae D. Ginnie Mae

Q: An individual who goes short in a futures position _____. A. commits to delivering the underlying commodity at contract maturity B. commits to purchasing the underlying commodity at contract maturity C. has the right to deliver the underlying commodity at contract maturity D. has the right to purchase the underlying commodity at contract maturity

Q: Which of the following is not a characteristic of a money market instrument? A. liquidity B. marketability C. low risk D. maturity greater than 1 year

Q: Which of the following is not a true statement regarding municipal bonds? A. A municipal bond is a debt obligation issued by state or local governments. B. A municipal bond is a debt obligation issued by the federal government. C. The interest income from a municipal bond is exempt from federal income taxation. D. The interest income from a municipal bond is exempt from state and local taxation in the issuing state.

Q: Deposits of commercial banks at the Federal Reserve are called _____. A. bankers' acceptances B. federal funds C. repurchase agreements D. time deposits

Q: The German stock market is measured by which market index? A. FTSE B. Dow Jones 30 C. DAX D. Nikkei

Q: The bid price of a Treasury bill is _________. A. the price at which the dealer in Treasury bills is willing to sell the bill B. the price at which the dealer in Treasury bills is willing to buy the bill C. greater than the ask price of the Treasury bill expressed in dollar terms D. the price at which the investor can buy the Treasury bill

Q: Which one of the following is a true statement? A. Dividends on preferred stocks are tax-deductible to individual investors but not to corporate investors. B. Common dividends cannot be paid if preferred dividends are in arrears on cumulative preferred stock. C. Preferred stockholders have voting power. D. Investors can sue managers for nonpayment of preferred dividends.

Q: _____ is considered to be an emerging market country. A. France B. Norway C. Brazil D. Canada