FINA 4011 EXAM 1 QUESTIONS WITH
ACCURATE ANSWERS
Money market securities are sometimes referred to as cash equivalents
because - ANSWER they are safe and marketable
the most marketable money market security is - ANSWER treasury bills
the bid price of a treasury bill is - ANSWER the price at which the dealer in
treasury bills is willing to buy the bill
which of the following statements about a CD is FALSE - ANSWER CDs are
insured for up to $10,000 in the event of a bank insolvency
commercial paper is a short term security issued by ______ to raise funds -
ANSWER large well known companies
which one of the following is a true statement about repos - ANSWER its
overnight borrowing
in regular FOMC meetings, the Fed announces a target range for - ANSWER
federal funds rate
deposits of commercial banks at the federal reserve are called - ANSWER
federal funds
treasury notes have initial maturities between _____ years - ANSWER 1 and 10
which of the following is NOT a true statement regarding municipal bonds -
ANSWER investors expect higher yield on municipal bonds, compared to
(taxable) corporate bonds
Which one of the following statements about common stocks is FALSE -
ANSWER unpaid dividends to common stock holders accumulate over time, and
must be paid in full
which of the following statements about common stock ownership is TRUE -
ANSWER stockholders indirectly participate in firm management by electing
board of directors
preferred stock is like long-term debt in that - ANSWER it promises to pay to its
holder a fixed stream of income each year
, which one of the following is a TRUE statement regarding stock indexes -
ANSWER S&P 500 index is constructed from 500 companies in the US stock
market
an investor buys a T-bill with 150 days to maturity for $9,800. The bill has a face
value of $10,000. The bank discount yield on this bond is ________ - ANSWER
4.80%
T-bill with face value of $10,000 and 90 days to maturity is selling at a bank
discount yield of 5%. What is the price of the bill? - ANSWER $9,875
an investor buys a T-bill with 150 days to maturity for $9,800. The bill has a face
value of $10,000. The investors asked yield (or bond equivalent yield) on this
investment is ___________ - ANSWER 4.97%
you wish to construct three-stock version of the S&P 500 index, and calculate its
return today.
Stock A: 1,000 shares outstanding/ price of $20 per share yesterday/ price of
$22 per share today
Stock B: 500 shares outstanding/ price of $25 per share yesterday/ $20 today
Stock C: 800 shares outstanding/ $40 per share yesterday/ $42 today - ANSWER
Under firm-commitment underwriting, the ________ assumes the full risk that the
shares cannot be sold to the public at the stipulated offering price - ANSWER
underwriter
purchase of new issues of stock take place - ANSWER in the primary market
underwriting is one of the services provided by - ANSWER investment bankers
process of polling potential investors for IPO is called - ANSWER book-building
which one of the following markets is the most integrated and organized market
- ANSWER auction markets
which one of the following is a FALSE statement about different types of markets
- ANSWER brokers purchase for their own accounts and later sell them for a
profit from their inventory
which one of the following statements about stock orders is TRUE - ANSWER
market orders are executed immediately unless there is no buyer/seller at all
price
ACCURATE ANSWERS
Money market securities are sometimes referred to as cash equivalents
because - ANSWER they are safe and marketable
the most marketable money market security is - ANSWER treasury bills
the bid price of a treasury bill is - ANSWER the price at which the dealer in
treasury bills is willing to buy the bill
which of the following statements about a CD is FALSE - ANSWER CDs are
insured for up to $10,000 in the event of a bank insolvency
commercial paper is a short term security issued by ______ to raise funds -
ANSWER large well known companies
which one of the following is a true statement about repos - ANSWER its
overnight borrowing
in regular FOMC meetings, the Fed announces a target range for - ANSWER
federal funds rate
deposits of commercial banks at the federal reserve are called - ANSWER
federal funds
treasury notes have initial maturities between _____ years - ANSWER 1 and 10
which of the following is NOT a true statement regarding municipal bonds -
ANSWER investors expect higher yield on municipal bonds, compared to
(taxable) corporate bonds
Which one of the following statements about common stocks is FALSE -
ANSWER unpaid dividends to common stock holders accumulate over time, and
must be paid in full
which of the following statements about common stock ownership is TRUE -
ANSWER stockholders indirectly participate in firm management by electing
board of directors
preferred stock is like long-term debt in that - ANSWER it promises to pay to its
holder a fixed stream of income each year
, which one of the following is a TRUE statement regarding stock indexes -
ANSWER S&P 500 index is constructed from 500 companies in the US stock
market
an investor buys a T-bill with 150 days to maturity for $9,800. The bill has a face
value of $10,000. The bank discount yield on this bond is ________ - ANSWER
4.80%
T-bill with face value of $10,000 and 90 days to maturity is selling at a bank
discount yield of 5%. What is the price of the bill? - ANSWER $9,875
an investor buys a T-bill with 150 days to maturity for $9,800. The bill has a face
value of $10,000. The investors asked yield (or bond equivalent yield) on this
investment is ___________ - ANSWER 4.97%
you wish to construct three-stock version of the S&P 500 index, and calculate its
return today.
Stock A: 1,000 shares outstanding/ price of $20 per share yesterday/ price of
$22 per share today
Stock B: 500 shares outstanding/ price of $25 per share yesterday/ $20 today
Stock C: 800 shares outstanding/ $40 per share yesterday/ $42 today - ANSWER
Under firm-commitment underwriting, the ________ assumes the full risk that the
shares cannot be sold to the public at the stipulated offering price - ANSWER
underwriter
purchase of new issues of stock take place - ANSWER in the primary market
underwriting is one of the services provided by - ANSWER investment bankers
process of polling potential investors for IPO is called - ANSWER book-building
which one of the following markets is the most integrated and organized market
- ANSWER auction markets
which one of the following is a FALSE statement about different types of markets
- ANSWER brokers purchase for their own accounts and later sell them for a
profit from their inventory
which one of the following statements about stock orders is TRUE - ANSWER
market orders are executed immediately unless there is no buyer/seller at all
price
