Test
Exam #3
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Preguntas del test (50)
1Suppose that you purchase a 91-day Treasury bill for $9,850 that is worth $10,000 when it
matures. The security's annualized yield if held to maturity is about- AA) 4 percent.
- BB) 5 percent.
- CC) 6 percent.
- DD) 7 percent.
2Suppose that you purchase a 182-day Treasury bill for $9,850 that is worth $10,000 when it
matures. The security's annualized yield if held to maturity is about- AA) 1.5%.
- BB) 2%.
- CC) 3%.
- DD) 6%.
3 If the Fed wants to lower the federal funds interest rate, it will ________ the banking system by
________ securities.- AA) add reserves to; selling
- BB) remove reserves from; selling
- CC) add reserves to; buying
- DD) remove reserves from; buying
4If the Fed wants to raise the federal funds interest rate, it will ________ securities to ________ the
banking system.- AA) sell; add reserves to
- BB) sell; remove reserves from
- CC) buy; remove reserves from
- DD) buy; add reserves to
5Money market instruments issued by the U.S. Treasury are called
- AA) Treasury strips.
- BB) Treasury bills.
- CC) Treasury bonds.
- DD) Treasury notes.
6A negotiable certificate of deposit
- AA) is a term security because it has a specified maturity date.
- BB) is a bearer instrument, meaning whoever holds the certificate at maturity receives the
principal and interest. - CC) can be bought and sold until maturity
- DD) all of the above.
- EE) only A and B of the above.
7 Negotiable certificates of deposit
- AA) typically have a maturity of one to four months.
- BB) are bearer instruments because their holders earn the interest and principal at maturity.
- CC) are usually denominated at $100,000.
- DD) are all of the above.
- EE) are only A and B of the above.
8The advantage of mutual funds is that they
- AA) give investors with relatively small amounts of cash to invest access to large-denomination
securities. - BB) require no cash up front.
- CC) always yield the highest returns.
- DD) both A and B of the above.
- AA) give investors with relatively small amounts of cash to invest access to large-denomination
9The usual maturity range for commercial paper is
- AA) 1 to 270 days.
- BB) 1 to 15 days.
- CC) 4, 13, and 26 weeks.
- DD) 1 to 7 days.
10The usual maturity range for fed funds is
- AA) 1 to 270 days.
- BB) 1 to 15 days.
- CC) 4, 13, and 26 weeks.
- DD) 1 to 7 days.
11(I) Securities that have an original maturity greater than one year are traded in capital markets.
(II) The best known capital market securities are stocks and bonds.- AA) (I) is true, (II) false.
- BB) (I) is false, (II) true.
- CC) Both (I) and (II) are true.
- DD) Both (I) and (II) are false.
12The ________ rate is the rate of interest that the issuer must pay.
- AA) market
- BB) discount
- CC) funds
- DD) coupon
13How much annual interest will a firm pay on an 8% coupon rate $1,000 face value bond that has
a yield to maturity of 9.5%? Assume the bond pays interest semiannually.- AA) $95
- BB) $40
- CC) $80
- DD) $90
14The security with the longest maturity is a Treasury
- AA) note.
- BB) bill.
- CC) bond.
- DD) acceptance.
15The relationship between the AAA-yield and BBB-yield for corporate bonds can best be
described as which of the following?- AA) The AAA-yield is always higher than the BBB-yield
- BB) There is no obvious relationship between the AAA-yield and the BBB-yield.
- CC) The AAA-yield is usually higher than the BBB-yield, but that relationship has changed at
times. - DD) The AAA-yield is always lower than the BBB-yield.
16Which of the following corporate bonds would have the lowest interest rate?
- AA) BBB
- BB) A
- CC) AAA
- DD) BAA
17TRACE is under the
- AA) FINRA.
- BB) Federal Reserve.
- CC) SEC.
- DD) FDIC.
18The current yield is a less accurate approximation of the yield to maturity the ________ the time
to maturity of the bond and the ________ the price is from/to the par value.- AA) shorter; farther
- BB) longer; farther
- CC) shorter; closer
- DD) longer; closer
19The current yield on a $6,000, 10 percent coupon bond selling for $5,000 is
- AA) 5%.
- BB) 10%.
- CC) 12%
- DD) 15%.
20The current yield on a $5,000, 8 percent coupon bond selling for $4,000 is
- AA) 5%.
- BB) 8%.
- CC) 10%.
- DD) 20%.
- EE) none of the above.
21The current yield is an exact measure of the yield to maturity for
- AA) short-term bonds.
- BB) perpetuities.
- CC) municipal bonds.
- DD) long-term bonds.
22When an old bond's market value is above its par value, the bond is selling at a ________. This
occurs because the old bond's coupon rate is ________ the coupon rates of new bonds with
similar risk.- AA) premium; below
- BB) discount; below
- CC) discount; above
- DD) premium; above
23The riskiest capital market security is
- AA) common stock.
- BB) Treasury bonds.
- CC) corporate bonds.
- DD) preferred stock.
24A ________ PE may indicate that the market feels the firm's earnings are very ________ risk and
is therefore willing to pay a ________ for them.- AA) high; low; premium
- BB) high; high; premium
- CC) low; low; discount
- DD) high; high; discount
25A stock currently sells for $25 per share and pays $0.24 per year in dividends. What is an
investor's valuation of this stock if she expects it to be selling for $30 in one year and requires a
15 percent return on equity investments?- AA) $27.74
- BB) $26.30
- CC) $26.09
- DD) $30.24
26A stock currently sells for $30 per share and pays $1.00 per year in dividends. What is an
investor's valuation of this stock if he expects it to be selling for $37 in one year and requires a 12- AA) $33.93
- BB) $38
- CC) $34.50
- DD) $33.50
27 According to the Gordon growth model, what is an investor's valuation of a stock whose current
dividend is $1.00 per year if dividends are expected to grow at a constant rate of 10 percent over
a long period of time and the investor's required return is 11 percent?- AA) $5.24
- BB) $11
- CC) $110
- DD) $10
- EE) $100
28According to the Gordon growth model, what is an investor's valuation of a stock whose current
dividend is $1.00 per year if dividends are expected to grow at a constant rate of 10 percent over
a long period of time and the investor's required return is 15 percent?- AA) $20
- BB) $11
- CC) $7.33
- DD) $4.40
- EE) $22
29 Holding other things constant, a stock's value will be highest if its dividend growth rate is
- AA) 15%.
- BB) 10%.
- CC) 2%
- DD) 5%.
30 Holding other things constant, a stock's value will be highest if its most recent dividend is
- AA) $1.00.
- BB) $5.00.
- CC) $0.50.
- DD) $2.00.
31Holding other things constant, a stock's value will be highest if the investor's required return on
investments in equity is- AA) 10%.
- BB) 5%.
- CC) 20%.
- DD) 15%.
32 Suppose the average industry PE ratio for auto parts retailers is 20. What is the current price of
Auto Zone stock if the retailer's earnings per share is projected to be $1.85?- AA) $9.25
- BB) $10.81
- CC) $21.85
- DD) $37
33What is the value of a common stock that is expected to pay a $4 dividend next year and will
grow at 5% every year thereafter if your required return is 14%? Use the Gordon growth model
to compute the answer.- AA) $44.44
- BB) $28.75
- CC) $63.87
- DD) $54.34
34Jericho Industries is expected to have an EPS next year of $2.11. What is the value of Jericho's
stock if the industry P/E is expected to be 17.4?- AA) $36.71
- BB) $8.74
- CC) $41.78
- DD) $17.40
35Typically, discount points should not be paid if the borrower will pay off the loan in ________
years or less.- AA) 5
- BB) 10
- CC) 15
- DD) 20
36 Mortgages can mature in
- AA) 15 years.
- BB) 20 years.
- CC) 30 years.
- DD) All of these.
37Which of the following terms are found in mortgage loan contracts to protect the lender from
financial loss?- AA) Down payment
- BB) Collateral
- CC) Private mortgage insurance
- DD) All of the above
38Mortgage-backed securities
- AA) are securities collateralized by a pool of mortgages
- BB) have been growing in popularity in recent years as institutional investors look for attractive
investment opportunities. - CC) are securities collateralized by both insured and uninsured mortgages.
- DD) are all of the above.
- EE) are only A and B of the above.
39A loan for borrowers who do not qualify for loans at the usual market rate of interest because of
a poor credit rating or because the loan is larger than justified by their income is- AA) an insured mortgage.
- BB) a securitized mortgage.
- CC) a graduated-payment mortgage.
- DD) a subprime mortgage.
40The Federal Housing Administration (FHA)
- AA) funds purchases of mortgages by selling bonds to the public.
- BB) was set up to buy mortgages from thrifts so that these institutions could make more loans.
- CC) provides insurance for certain mortgage contracts.
- DD) does all of the above
- EE) does only A and B of the above.
41 A spot transaction in the foreign exchange market involves the
- AA) immediate (within two days) exchange of bank deposits.
- BB) exchange of exports and imports at a specified future date.
- CC) exchange of bank deposits at a specified future date.
- DD) immediate (within two days) exchange of exports and imports.
42When the value of the British pound changes from $1.50 to $1.25, the pound has ________ and
the dollar has ________.- AA) appreciated; appreciated
- BB) depreciated; appreciated
- CC) appreciated; depreciated
- DD) depreciated; depreciated
43If the dollar ________ from 1.2 euros per dollar to 0.8 euros per dollar, the euro ________ from
0.83 dollars to 1.25 dollars per euro.- AA) appreciates; depreciates
- BB) appreciates; appreciates
- CC) depreciates; depreciates
- DD) depreciates; appreciates
44If the dollar appreciates from 0.8 euros per dollar to 1.2 euros per dollar, the euro depreciates
from ________ dollars to ________ dollars per euro.- AA) 0.83; 1.25
- BB) 1.50; 0.67
- CC) 1.25; 0.83
- DD) 0.67; 1.50
45 If the dollar depreciates relative to the Swiss franc,
- AA) American computers will become less expensive in Switzerland.
- BB) Swiss chocolate will become more expensive in the United States.
- CC) Swiss chocolate will become cheaper in the United States.
- DD) both A and B of the above will happen.
46The foreign exchange market is
- AA) conducted out of New York City.
- BB) an auction market held at the NYSE.
- CC) an over-the-counter market.
- DD) physically located in Los Angeles.
47In the long run, ________ affect the exchange rate.
- AA) productivity
- BB) relative price levels
- CC) tariffs and quotas
- DD) all of the above.
48If the 2015 inflation rate in Britain is 6 percent, and the inflation rate in the U.S. is 4 percent, then
the theory of purchasing power parity predicts that, during 2015, the value of the British pound
in terms of U.S. dollars will- AA) fall by 10 percent.
- BB) fall by 2 percent.
- CC) rise by 10 percent.
- DD) rise by 2 percent.
- EE) do none of the above.
49The rate at which domestic goods can be exchanged for foreign goods is called the
- AA) real exchange rate.
- BB) money rate.
- CC) foreign exchange rate.
- DD) nominal exchange rate.
50Increased demand for a country's ________ causes its currency to appreciate in the long run,
while increased demand for ________ causes its currency to depreciate.- AA) exports; exports
- BB) exports; imports
- CC) imports; exports
- DD) imports; imports
Información
- Descripción
- Sales Representative Exam 3 Test sobre Exam #3, creado por Harrison Obermann el 13/11/2024.
- Autor
- Harrison Obermann
- Idioma
- English
- Visitas
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