Bond and Net Asset Value

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Practice questions

Quiz 1

FIR 3710 Investments

1.Why are derivatives potentially dangerous?
A)They involve leverage.
B)They are used to hedge.
C)They are a tool for risk management.
D)There are more than 1200 different derivatives on the market.

2.__________ assets generate net income to the economy and __________ assets define allocation of income among investors. A)Financial, financial
B)Financial, real
C)Real, financial
D)Real, real

3.Asset allocation refers to the __________.
A)allocation of the investment portfolio across broad asset classes B)analysis of the value of securities
C)choice of specific assets within each asset class D)none of the above

4.A __________ represents an ownership share in a corporation. A)call option
B)common stock
C)fixed-income security
D)none of the above

5.__________ portfolio management calls for holding diversified portfolios without spending effort or resources attempting to improve investment performance through security analysis. A)Active

B)Idiotic
C)Passive
D)none of the above

6.Security selection refers to __________.
A)choosing specific securities within each asset-class B)deciding how much to invest in each asset-class C)deciding how much to invest in the market portfolio versus the riskless asset D)none of the above

7.The success of common stock investments depends on the success of __________. A)derivative securities
B)fixed income securities
C)the firm and its real assets
D)none of the above

8.__________ is a true statement.
A)Dividends on preferred stocks are tax-deductible B)Common dividends are paid before preferred dividends C)Preferred stockholders have voting power
D)Preferred dividends are usually cumulative

9.__________ 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.

10.In a futures contract, the short position is taken by the person who __________. A)commits to delivering the commodity
B)commits to purchasing the commodity
C)plays between second base and third base
D)uses his margin

11.Treasury bills are financial instruments initially sold by __________ to raise funds. A)commercial banks
B)the Federal Government
C)large corporations
D)state and city governments

12.__________ is not a money market instrument.
A)A certificate of deposit
B)A treasury bill
C)A treasury bond
D)Commercial paper

13.__________ market-value weighted.
A)The New York Stock Exchange Composite index is
B)The Standard & Poor's Composite 500 Stock index is C)The Wilshire 5000 index is
D)All of the above are

14.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)adding the prices of the 30 stocks in the index and dividing by a divisor D)adding the prices of the 500 stocks in the...
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