Fun an Finance
1)
The risk premium over and above the risk free rate consists of a number of components, including all of the following EXCEPT A) inflation risk.
B)
default risk.
C)
liquidity risk.
D)
tax treatment risk.
2)
At any time, the slope of the yield curve is affected by A) liquidity preferences. B) inflationary expectations. C) the comparative equilibrium of supply and demand in the short-term and long-term market segments. D) all of the above.
3)
Nico Nelson, a management trainee at a large New York-based bank is trying to estimate the real rate of return expected by investors. He notes that the 3-month T-bill currently yields 3 percent and has decided to use the consumer price index as a proxy for expected inflation. What is the estimated real rate of interest if the CPI is currently 2 percent? A)
1%
B)
5%
C)
2%
D)
3%
4)
A ________ is a restrictive provision on a bond which provides for the systematic retirement of the bonds prior to their maturity. A) sinking-fund requirement
B)
conversion feature C) subordination clause
D)
redemption clause
5)
A ________ is a complex and lengthy legal document stating the conditions under which a bond has been issued. A) warrant B) sinking fund
C)
bond indenture
D)
bond debenture
6)
________ is a paid individual, corporation, or commercial bank trust department that acts as a third party to a bond indenture to ensure that the issuer does not default on its contractual responsibilities to the bondholders. A)
A trustee
B)
A bond rating agency C)
A bond issuer
D)
An investment banker
7)
All of the following are examples of restrictive debt covenants EXCEPT A) constraint on subsequent borrowing. B) prohibition on selling accounts receivable. C) prohibition on entering certain types of lease arrangements.
The risk premium over and above the risk free rate consists of a number of components, including all of the following EXCEPT A) inflation risk.
B)
default risk.
C)
liquidity risk.
D)
tax treatment risk.
2)
At any time, the slope of the yield curve is affected by A) liquidity preferences. B) inflationary expectations. C) the comparative equilibrium of supply and demand in the short-term and long-term market segments. D) all of the above.
3)
Nico Nelson, a management trainee at a large New York-based bank is trying to estimate the real rate of return expected by investors. He notes that the 3-month T-bill currently yields 3 percent and has decided to use the consumer price index as a proxy for expected inflation. What is the estimated real rate of interest if the CPI is currently 2 percent? A)
1%
B)
5%
C)
2%
D)
3%
4)
A ________ is a restrictive provision on a bond which provides for the systematic retirement of the bonds prior to their maturity. A) sinking-fund requirement
B)
conversion feature C) subordination clause
D)
redemption clause
5)
A ________ is a complex and lengthy legal document stating the conditions under which a bond has been issued. A) warrant B) sinking fund
C)
bond indenture
D)
bond debenture
6)
________ is a paid individual, corporation, or commercial bank trust department that acts as a third party to a bond indenture to ensure that the issuer does not default on its contractual responsibilities to the bondholders. A)
A trustee
B)
A bond rating agency C)
A bond issuer
D)
An investment banker
7)
All of the following are examples of restrictive debt covenants EXCEPT A) constraint on subsequent borrowing. B) prohibition on selling accounts receivable. C) prohibition on entering certain types of lease arrangements.