Question 1

Which of the following is most like a short-term collateralised loan?

Accepted Answer

A)  Certificate of deposit
B)  Repurchase agreement
C)  Banker's acceptance
D)  Commercial paperE) All of the above
F) A) and B)

Question 2

You decide to purchase an equal number of shares of firms to create a portfolio. If you wished to construct an index to track your portfolio performance your best match for your portfolio would be to construct a/an ________.

Accepted Answer

A)  value weighted index
B)  equal weighted index
C)  price weighted index
D)  bond price indexE) C) and D)
F) All of the above

Question 3

Treasury notes are financial instruments issued by ________ to raise funds.

Accepted Answer

A)  commercial banks
B)  the Australian Commonwealth Government
C)  large corporations
D)  state and city governmentsE) C) and D)
F) B) and C)

Question 4

An investor purchases one corporate bond that pay rates of return of 6.40%. If the investor is in the 15% tax bracket, his after tax rates of return on the corporate bond would be

Accepted Answer

A)  6.40%
B)  5.44%
C)  7.36%
D)  6.25%E) A) and B)
F) B) and D)

Question 5

Which of the following is not a money market instrument?

Accepted Answer

A)  Treasury bond
B)  Commercial paper
C)  Preferred share
D)  Banker's acceptanceE) A) and D)
F) None of the above

Question 6

The Dow Jones Industrial Average is ________.

Accepted Answer

A)  a price weighted average
B)  a value weight and average
C)  an equally weighted average
D)  an unweighted averageE) All of the above
F) A) and B)

Question 7

The major share index of Australian market is the ________.

Accepted Answer

A)  ASX 200
B)  FTSE
C)  GSE
D)  TSEE) A) and C)
F) A) and B)

Question 8

In a ________ index changes in the value of the share with the greatest market value will move the index value the most everything else equal.

Accepted Answer

A)  value weighted index
B)  equal weighted index
C)  price weighted index
D)  bond price indexE) All of the above
F) A) and B)

Question 9

A bond that has no collateral is called ________.

Accepted Answer

A)  a callable bond
B)  a debenture
C)  a junk bond
D)  a mortgageE) B) and C)
F) C) and D)

Question 10

The Hang Seng index reflects market performance on which of the following major share markets?

Accepted Answer

A)  Japan
B)  Singapore
C)  Taiwan
D)  Hong KongE) All of the above
F) A) and B)

Question 11

The Reserve Bank of Australia (RBA)  directly controls which of the following interest rates?

Accepted Answer

A)  Bankers' acceptances
B)  Brokers' call
C)  Cash rate
D)  LIBORE) All of the above
F) None of the above

Question 12

The purchase of a futures contract gives the buyer ________.

Accepted Answer

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 priceE) B) and D)
F) B) and C)

Question 13

Preferred share can be callable by the issuing firm, in which case it is said to be ________.

Accepted Answer

A)  insolvent
B)  redeemable
C)  insufferable
D)  delinquentE) All of the above
F) A) and D)

Question 14

Money market securities are sometimes referred to as 'cash equivalent' because ________.

Accepted Answer

A)  they are safe and marketable
B)  they are not liquid
C)  they are high risk
D)  they are low denominationE) B) and C)
F) A) and D)

Question 15

A share quote indicates a share price of $60 and a dividend yield of 3%. The latest quarterly dividend received by share investors must have been ________ per share.

Accepted Answer

A)  $0.55
B)  $1.80
C)  $0.45
D)  $1.25E) All of the above
F) A) and C)

Question 16

The yield on tax-exempt bonds is ________.

Accepted Answer

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 bondsE) All of the above
F) A) and B)

Question 17

Which one of the following is a true statement regarding corporate bonds?

Accepted Answer

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.E) None of the above
F) C) and D)

Question 18

Which one of the following is a true statement?

Accepted Answer

A)  Dividends on preferred shares 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 share.
C)  Preferred shareholders have voting power.
D)  Investors can sue managers for nonpayment of preferred dividends.E) None of the above
F) C) and D)

Question 19

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 ________.

Accepted Answer

A)  certificates of deposit
B)  repurchase agreements
C)  banker's acceptances
D)  commercial paperE) None of the above
F) A) and B)

Question 20

A firm that has large securities holdings that wishes to raise money for a short length of time may be able to find the cheapest financing from which of the following?

Accepted Answer

A)  Reverse repurchase agreement
B)  Banker's acceptance
C)  Commercial paper
D)  Repurchase agreementE) C) and D)
F) B) and C)

Exam 2: Asset Classes and Financial Instruments

In a ________ index changes in the value of the share with the greatest market value will move the index value the most everything else equal.

Correct AnswerverifiedShow Answer

Preferred share can be callable by the issuing firm, in which case it is said to be ________.

Correct AnswerverifiedShow Answer

Which one of the following is a true statement regarding corporate bonds?

Correct AnswerverifiedShow Answer

A bond that has no collateral is called ________.

Correct AnswerverifiedShow Answer

Which of the following is not a money market instrument?

Correct AnswerverifiedShow Answer

The Dow Jones Industrial Average is ________.

Correct AnswerverifiedShow Answer

Money market securities are sometimes referred to as 'cash equivalent' because ________.

Correct AnswerverifiedShow Answer

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 ________.

Correct AnswerverifiedShow Answer

The yield on tax-exempt bonds is ________.

Correct AnswerverifiedShow Answer

You decide to purchase an equal number of shares of firms to create a portfolio. If you wished to construct an index to track your portfolio performance your best match for your portfolio would be to construct a/an ________.

Correct AnswerverifiedShow Answer

The major share index of Australian market is the ________.

Correct AnswerverifiedShow Answer

Which of the following is most like a short-term collateralised loan?

Correct AnswerverifiedShow Answer

Treasury notes are financial instruments issued by ________ to raise funds.

Correct AnswerverifiedShow Answer

The purchase of a futures contract gives the buyer ________.

Correct AnswerverifiedShow Answer

An investor purchases one corporate bond that pay rates of return of 6.40%. If the investor is in the 15% tax bracket, his after tax rates of return on the corporate bond would be

Correct AnswerverifiedShow Answer

Which one of the following is a true statement?

Correct AnswerverifiedShow Answer

A firm that has large securities holdings that wishes to raise money for a short length of time may be able to find the cheapest financing from which of the following?

Correct AnswerverifiedShow Answer

The Hang Seng index reflects market performance on which of the following major share markets?

Correct AnswerverifiedShow Answer

The Reserve Bank of Australia (RBA) directly controls which of the following interest rates?

Correct AnswerverifiedShow Answer

A share quote indicates a share price of $60 and a dividend yield of 3%. The latest quarterly dividend received by share investors must have been ________ per share.

Correct AnswerverifiedShow Answer

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