Actual Test 3 Test Bank
Actual Test 3 Test Bank
Actual Test 3 Test Bank
1.
2.
3.
4.
5.
6.
7.
8.
In the T-Bill secondary market the ask yield will normally be less
than the bid yield.
9.
10.
Fed funds are generally short term unsecured loans while repos
are short term secured loans.
MultipleChoiceQuestions
11. For the purposes for which they are used, money market
securities should have which of the following characteristics?
I.
II.
III.
IV.
B) II and IV
C) III and IV
D) I and II
E) I, II and III
Money market securities exhibit which of the following?
I. II. III. IV.
A) B) C) D) E)
Large denominationMaturity greater than one yearLow default risk
Contractually determined cash flows
I, II and IIII, III and IVII, III and IV II and IVI, II, III and IV
Answer: B Page: 123 Level: Medium
13.
A) Banker'sacceptance
B) Certificate of deposit
E) Eurodollar deposit
14.
A) Commercial paper
B) T-Bills
C) Repurchaseagreement
D) Negotiable CD
E) Banker's acceptance
15.
B) T-Bill
C) Repurchaseagreement
D) Negotiable CD
E) Banker's acceptance
16.
B) Maximumprice;minimumprice
C) Maximumprice;givenquantity
17.
A) $9,947.67 , $9,946.33
B) $9,678.00 , $9,686.00
C) $9,686.00 , $9,678.00
D) $9,946.33 , $9,947.67
D) As an EAR
price
.
D) BothAandB
21.
D) A and C
E) B and C
22.
A negotiable CD
B) Isaregisteredinstrument
E) $1,010,000
25. A banker's acceptance is
.
D) An add on instrument
A) Commercial paper
B) Banker'sacceptances
C) T-Bills
D) Fed funds
E) Repurchase agreements
25.
A) Commercial paper
B) Banker'sacceptances
C) T-Bills
26.
A) LIBOR
LIBOR is generally _____ the Fed funds rate because foreign bank
deposits are generally _____ than domestic bank deposits
A) Greater than; less risky
B) Lessthan;morerisky
C) Thesameas;equallyrisk
30.
D) 6.24%
E) 6.45%
31. A Chinese exporter sells $75,000 of toys to a French importer.
The Chinese exporter requires the French importer to obtain a
letter of credit. When the bank accepts the draft the exporter
discounts the 60 day note at a 3.5% discount. What is the exporter's
true effective annual financing cost?
A) 3.62%
B) 3.57%
C) 3.35%
D) 3.78%
E) 3.97%
32. If a $10,000 par T-Bill has a 4.5% discount quote and a 180
day maturity, what is the price of the T-Bill?
.
A) $9,550
B) $9,525
C) $9,775
D) $9,675
B) 3.48%
C) 3.47%
D) 3.52%
E) 3.55%
32. Suppose that $10 million face value commercial paper
with a 270 day maturity is selling for $9.65 million. What is
the BEY on the paper?
A) 3.627%
B) 4.903%
C) 4.836%
D) 4.934%
E) None of the above
35.
A) Commercial paper
B) Treasurybills
D) Negotiable CDs
E) Banker's Acceptances
36.
A) 4.44%
B) 4.28%
C) 4.93%
D) 4.31%
A) Competitive bidders
B) Noncompetitivebidders
C) Shortsalecommittedbidders
E) No group of bidders
38.
D) Procuringabanker'sacceptance
Chapter6BondMarketsTrue/FalseQuestions
11.
12.
13.
On the run Treasury notes and bonds are newly issued securities
and off the run Treasuries are securities that have been
previously issued.
15.
16.
The dirty price plus accrued interest is called the clean price of the
security.
17.
18.
V.
VI. An unsecured bond that has no specific collateral other than the
general creditworthiness of the issuing firm is called a debenture.
VII. With TIPS, the security's coupon rate is changed every six months
by the inflation rate as measured by the CPI.
VIII. Bond ratings use a classification system to give investors an idea
of the amount of interest rate risk associated with the bond issue.
IX. Bonds rated below Baa by Moody's or BBB by S&P are junk
bonds.
X.
XI.
A T-Bond with a $1000 par is quoted at 98:20 Bid, 98:24 Ask. The
clean price for you to buy this bond is
1 A) $986.25
2 B) $987.50
3 C) $982.00
4 D) $982.40
5 E) None of the above
A) 6.00%
B) 5.60%
C) 5.57%
D) 2.81%
E) 2.78%
17.
A) $10,000
B) $25,000
C) $49,634
D) $45,649
E) $41,877
The January 1, 2005 ask yield on a Treasury STRIP maturing in 8
years is 5.488%. If the face value is $1000, what should be the
QUOTED cost of the strip today (use semiannual compounding)?
A) 60:00
B) 64:03
C) 64:63
D) 64:27
E) 64:12
Which one of the following bonds is likely to have the highest
required rate of return, ceteris paribus?
.
B) Taxableatthestatelevelonly;exemptfromstatetaxesonly
C) Taxableatfederallevelonly;exemptfromfederaltaxes
28.
A) Rights offering
B) Privateplacement
C) Firmcommitment
D) Best efforts
E) Standby offering
.
A) Covenant
B) Debenture
C) Indenture
D) Denture
E) Monitor
40.
A) Samurai bonds
B) Zombiebonds
C) Bulldogbonds
D) Sovereign bonds
E) Phoenix bonds
41.
41.
A) $1,103.75
42.
B) $1,104.69
43.
C) $1,101.20
44.
D) $1,101.50
45.
(ignore commissions)?
A) $12.50
B) -$12.50
C) -$4.00
D) $4.00
E) $0.00
47.
D) $10,824.32
E) $10,986.69
A bond investor has a 99% chance of receiving all of her promised
payments on a particular bond issue in the first year of holding the
bond, but only a 97% chance in the second year and beyond. What
is the cumulative default probability over the first three years she
holds the bond?
A) 6.85%
B) 7.00%
C) 9.00%
D) 7.32%
E) 7.55%
You purchase a $1000 par convertible bond that can be converted
into 142 shares of stock. The stock is currently priced at $5.42.
What percentage price increase in the stock is needed to make
conversion worthwhile?
A) 15.5%
B) 29.9%
C) 18.2%
D) 23.7%
E) 19.8%
An investor buys a corporate callable bond at par that has a 6
Chapter18PensionFundsTrue/FalseQuestions
19.
Of the different types of defined benefit plans, plans using the final
pay method will usually produce the biggest retirement benefit to
employees.
20.
21.
22.
24.
25.
If you believe that taxes and are going to go up and you will likely
have to pay a high tax rate when you retire, you will probably be
better off with a Roth IRA than with a traditional IRA.
26.
27.
28.
A) $115,826,024
B) $150,000,000
C) $125,657,890
D) $111,458,231
18.
19.
20.
C) Insurancecompanies
21.
22.
E) Both C and D
22.
25.
26.
27.
28.
30.
An employee who has worked for his firm for 30 years can retire
right now and receive a constant annual benefit of $45,000. He has
a final pay plan that pays his average salary over his final 5 years
A) Are eligible for PBGC insurance and money sharing plans are
not
C) Can have contributions that vary from year to year with profits,
while money sharing plan contributions are fixed
.
.
A) Underfunded; $31.75
B) Underfunded;$215
C) Overfunded;$31.75
D) Overfunded; $215
34.
A) Defined benefit
35.
B) Insured pension
36.
C) Corporatepension
37.
D) Uninsured pension
38.
E) Defined contribution
43.
A) I, IV and V only
E) 29.52%
Employee plus employer contributions to a 401(k) are
$15,000 per year. Equity funds are earning 15%, bond funds
8% and money market funds 6%. The employee wants to
retire as soon as possible with $1 million in retirement assets.
How much more quickly can he retire if he puts all his
money in equity than if he puts 1/3 in each?
.
A) 3.3 years
B) 9.7 years
C) 4.6 years
D) 2.4 years
E) 12.2 years
25. Which of the following statements are true about a
traditional IRA?
I.
II. III. IV. V.
per
Subject to an income limit, in 2005 a single person may
contribute up to $4000 year of pretax income to an IRAAll
withdrawals are tax freeEarnings on the IRA account are not
taxed until withdrawn
You must begin withdrawals at age 59 12 Withdrawal(s) can
be a lump sum or installments
46.
A) I, II, IV
47.
B) I, II, IV and V
48.
C) I, III and V
49.
D) II, IV and V
50.
E) III, IV and V
Answer: C Page: 521 Level: Medium
48.
49.
2 B) TraditionalIRA
3 C) Keogh
4 D) Penny Benny
5 E) Public Pension plan
45.
46.
47.
1.
2.
B) Maximumvestingtimes
3.
C) Minimumfundingrequirements
4.
5.
The PBGC
1.
2.
3.
4.
5.
51.
54.
You want to have $2,000,000 when you retire and you are in a
defined contribution plan. You can earn 8% per year on the money
invested and you will retire in 30 years. Your employer also
contributes to your plan. The employer will contribute 6% of what
you put into the plan each year. How much do you have to
contribute per year to meet your goal? A) $18,435.43
B) $17,654.87
C) $16,879.32
D) $16,655.53
E) $15,999.44
Vesting refers to
1 A) How long until an employee owns any employer
contributions to the employee's pension plan
2 B) How long until an employee can transfer any of
their own contributions to a new plan if they switch
jobs
3 C) Eligibilityrequirementstoretireearly
4 D) Restrictions on asset allocations with in a defined
contribution plan
5 E) The extent to which an employee materially
participated in a given business in a given year
55.
IRAs are
1 A) Self directed investment vehicles designed to
provide supplemental retirement income
2 B) Corporate retirement plans for self employed
individuals and small businesses
2.
3.
E) 2052
Chapter17True/FalseQuestions
29.
Over the last ten years the number of banks has been declining, but
the number of mutual funds has been growing.
30.
Net new cash flows to money market mutual funds vary inversely
with interest rate spreads on money market funds and savings
deposits.
31.
Most of the recent growth of long term mutual funds has occurred
because of the bull market of the 1990s.
32.
33.
34.
XII. The typical household that owns mutual funds owns no more than
3 mutual funds.
XIII. Each fund's prospectus is required to disclose the fund's beta risk
and total risk.
XIV. The market value of a fund's net assets divided by the number of
mutual fund shares outstanding is called the NAV of the fund.
XV. Open end fund shares often trade at a discount or premium relative
to NAV.
XVI. Load funds typically provide investors with higher rates of return
and offer more services such as check writing, transfers between
funds, etc.
XVII. A 12 b-1 fee is an implicit load charge.
XVIII. Of long term equity funds, municipal funds and growth and
income funds are the largest categories.
XIX. A drop in interest rates will usually result in an increase in the
number of money market mutual fund shares.
15. The Federal Mutual Fund Commission (FMFC) is the primary
regulator of the mutual fund industry.
MultipleChoiceQuestions
.
B) Equity;bond
A) Common stock
B) Commercialpaper
C) Longtermbonds
D) Treasury bills
E) Both A) and C)
25.
B) Increased;increased
C) Increased;decreased
D) Decreased; increased
C) Arenowfederallyinsured,likebankdeposits
24. The 'profile' of the typical mutual fund owners implies that
he or she is a:
24.
25.
Generation Xer
III. Employed
IV. College graduate
29.
A) III only
30.
31.
32.
33.
31.
By type of fund, there are more _____ funds than any other.
A) Equity
B) Bond
E) Hybrid
32.
The largest proportion of long term mutual fund assets are held by
_____ and the largest proportion of money market mutual fund
assets are held by _____.
B) NAV
C) Expenseratio
D) 12b-1 fee
E) Management fee
28. Rank the following types of funds from most risky to least
risky (variations exist but rank them generally)
I. II. III. IV. A) B) C) D) E)
GrowthGrowth and income Money market mutual fund Bond
fund
II, I, III, IV I, II, IV, III I, IV, II, III II, III, I, IV III, IV, II, I
Answer: B Page: 493 Level: Easy
.
A) $5,135.48
B) $5,197.50
C) $5,500.00
D) $5,431.25
E) $5,162.50
A fund has a NAV of $30 per share but the shares are currently
selling for $32. This fund must be
An open end mutual fund owns 1000 share of Krispy Kreme priced
at $40. The fund also owns 2000 shares of Ben & Jerry's priced at
$55, and 1000 shares of Pepsi priced at $45. The fund itself has
3000 of its own shares outstanding. What is the NAV of a fund's
share?
A) $65
B) $55
C) $45
D) $35
E) $25
40.
You have $8,000 to invest in a mutual fund with a NAV = $45. You
choose a fund with a 5.5% load, a 1% management fee and a
0.25% 12b-1 fee. Assume that the management and 12b-1 fees are
charged on year end assets. The gross annual return on the fund's
shares was 12%. What was your net annual rate of return to the
nearest basis point?
A) 3.26%
B) 6.50%
C) 6.25%
D) 4.52%
E) 4.02%
41.
B) Additionalservicesfromfunds
E) 12B-1 remunerations
42.
C) NYSE
D) SEC
E) NSMIA