FINA 3315 EXAM 2 QUESTIONS AND
ANSWERS 100% PASS 2026/2027
Socially responsible funds are distinguished from other mutual funds because they
A - invest only in over the counter stocks
B - invest only in companies that meet specified moral, ethical, or environmental standards
C - do not charge any sales commissions or management fees
D - will sell their shares only to investors who sign a statement saying they do not smoke
tobacco or use alcohol - ANS B - invest only in companies that meet specified moral, ethical,
or environmental standards
As bonds approach their maturity dates
A - premiums or discounts will increase.
B - the risk of a call will increase.
C - the bonds prices will become more sensitive to changes in interest rates.
D - prices will approach their par values. - ANS D - prices will approach their par values.
An inverted yield curve
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,A - sometimes results from actions by the Federal Reserve to control inflation
B - rewards long term investors for the additional risk they are assuming
C - means that long term bonds are yielding more than short term bonds
D - results when investor demand for longer maturities exceeds the demand for shorter
maturities - ANS A - sometimes results from actions by the Federal Reserve to control
inflation
Yield curves for corporate and government securities have similar shapes, but the corporate
rates track below the government rates (T/F) - ANS False
A bond's sinking fund provisions specifies
A - which assets are available to secure the bond
B - which bond issues have a higher claim on the firm's assets in case the firm goes under
C - how the issuer will pay off the bond over time
D - a diminishing series of interest payments as the bond approaches maturity - ANS C - how
the issuer will pay off the bond over time
Treasury STRIPS are securities created by stripping the coupon and principal payments made by
an ordinary bond and selling them as individual securities. A U.S. Treasury note with exactly four
years to maturity most likely can be broken into as many as:
A - 8 Treasury STRIPS
B - 4 Treasury STRIPS
C - 9 Treasury STRIPS - ANS C - 9 Treasury STRIPS
The most important factor affecting the market price of a put or call is the
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, A - expiration date
B - price behavior of the corresponding warrant
C - market interest rate
D - price behavior of the underlying common stock - ANS D - price behavior of underlying
common stock
Standardized options expire on the last business day of the expiration month (T/F) - ANS False
The portfolio of a growth and income fund is likely to contain
A - an equal mix of stocks and fixed income securities
B - stocks of recently listed companies with rapid growth in revenues
C - a high percentage of stocks in established companies and a small amount of fixed income
securities
D - a high percentage of preferred stocks and bonds selling at a discount - ANS C - a high
percentage of stocks in established companies and a small amount of fixed income securities
Which of the following statements concerning mortgage backed securities are correct
I. They are secured by a pool of residential mortgages
II. A portion of the income stream is a non taxable return of capital
III. They are backed by the full faith and credit of the U.S. government
IV. Their maturity depends on prepayments of the mortgages in the pool - ANS I, II and IV
only
Four "decision traps " identified by behavioral finance are
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ANSWERS 100% PASS 2026/2027
Socially responsible funds are distinguished from other mutual funds because they
A - invest only in over the counter stocks
B - invest only in companies that meet specified moral, ethical, or environmental standards
C - do not charge any sales commissions or management fees
D - will sell their shares only to investors who sign a statement saying they do not smoke
tobacco or use alcohol - ANS B - invest only in companies that meet specified moral, ethical,
or environmental standards
As bonds approach their maturity dates
A - premiums or discounts will increase.
B - the risk of a call will increase.
C - the bonds prices will become more sensitive to changes in interest rates.
D - prices will approach their par values. - ANS D - prices will approach their par values.
An inverted yield curve
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,A - sometimes results from actions by the Federal Reserve to control inflation
B - rewards long term investors for the additional risk they are assuming
C - means that long term bonds are yielding more than short term bonds
D - results when investor demand for longer maturities exceeds the demand for shorter
maturities - ANS A - sometimes results from actions by the Federal Reserve to control
inflation
Yield curves for corporate and government securities have similar shapes, but the corporate
rates track below the government rates (T/F) - ANS False
A bond's sinking fund provisions specifies
A - which assets are available to secure the bond
B - which bond issues have a higher claim on the firm's assets in case the firm goes under
C - how the issuer will pay off the bond over time
D - a diminishing series of interest payments as the bond approaches maturity - ANS C - how
the issuer will pay off the bond over time
Treasury STRIPS are securities created by stripping the coupon and principal payments made by
an ordinary bond and selling them as individual securities. A U.S. Treasury note with exactly four
years to maturity most likely can be broken into as many as:
A - 8 Treasury STRIPS
B - 4 Treasury STRIPS
C - 9 Treasury STRIPS - ANS C - 9 Treasury STRIPS
The most important factor affecting the market price of a put or call is the
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, A - expiration date
B - price behavior of the corresponding warrant
C - market interest rate
D - price behavior of the underlying common stock - ANS D - price behavior of underlying
common stock
Standardized options expire on the last business day of the expiration month (T/F) - ANS False
The portfolio of a growth and income fund is likely to contain
A - an equal mix of stocks and fixed income securities
B - stocks of recently listed companies with rapid growth in revenues
C - a high percentage of stocks in established companies and a small amount of fixed income
securities
D - a high percentage of preferred stocks and bonds selling at a discount - ANS C - a high
percentage of stocks in established companies and a small amount of fixed income securities
Which of the following statements concerning mortgage backed securities are correct
I. They are secured by a pool of residential mortgages
II. A portion of the income stream is a non taxable return of capital
III. They are backed by the full faith and credit of the U.S. government
IV. Their maturity depends on prepayments of the mortgages in the pool - ANS I, II and IV
only
Four "decision traps " identified by behavioral finance are
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