FINA 3315 PRACTICE EXAM 2
QUESTIONS AND ANSWERS 100% PASS
2026/2027
A type of fund that invests in real estate and/or mortgages is known as a - ANS REIT
Market volume is a function of market demand for and supply of stocks. - ANS True
Municipal bonds usually have higher yields than bonds issued by the U. S. Government. -
ANS False
One advantage gained by investing in a bond fund rather than in individual bonds is the -
ANS diversification among issuers.
Income from ________ is exempt from federal income taxes? - ANS municipal bond funds
Mortgage−backed
bonds are issued primarily by state governments and are secured by home mortgages. -
ANS False
Which of the following statements are correct concerning municipal bonds?
@2026 ALLRIGHTS RESERVED 1
,I. Yields on municipal bonds are usually lower than yields on Treasury bonds.
II. Municipal bonds are most appealing to individuals with high incomes.
III. Interest on a municipal bond is exempt from federal income tax.
IV. Municipal bonds are less risky than Treasury bonds. - ANS I, II and III only
An inverted yield curve - ANS sometimes results from actions by the Federal Reserve to
control inflation.
The major attraction of convertible bonds is - ANS the option to convert the bond into shares
of the company's stock.
The on balance volume (OBV) indicator - ANS indicates an up market when heavy volume
accompanies price increases
Which of the following are needed to determine the appropriate value of a bond?
I. required rate of return
II. time to maturity
III. frequency of interest payments
IV. coupon rate - ANS I, II, III and IV
A REIT or real estate investment trust may invest in all of the following except - ANS stocks of
companies engaged in construction and building materials.
Yield curves for corporate and government securities have similar shapes, but the corporate
rates track below the government rates. - ANS False
@2026 ALLRIGHTS RESERVED 2
,There is strong evidence that investors who trade frequently outperform the market. -
ANS False
Which one of the following statements is correct concerning bond investors? -
ANS Conservative investors buy bonds when interest rates are high.
Which one of the following activities is likely to be useful if the market is only weak form
efficient?
A) attempting to find the best times to buy and sell
B) attempting to find repeating pattern in stock price behavior
C) attempting to determine if stock prices have upward or downward momentum
D) None of the above would be useful. - ANS D) None of the above would be useful.
The practice of bundling mortgages or other types of loans into pools and selling pieces of the
pool as
bond−like
instruments to investors is known as - ANS securitization
Generally speaking,
short−term
bonds have lower yields than
long−term
bonds. - ANS True
A bond with 14 years to maturity and a coupon rate of 6.375% has a yield-to-maturity (YTM) of
4.5%. Assuming the bond's YTM remains constant, the bond's value as it approaches maturity
will most likely: - ANS Decrease
@2026 ALLRIGHTS RESERVED 3
, Which of the following statements about U.S. Agency bonds are true?
I. They are backed by the "full faith and credit" of the U.S. government.
II. Their risk is almost as low as government notes and bonds.
III. Their yields are slightly higher than those of government securities.
IV. They are exempt from state and federal taxes. - ANS II and III only
Investors interested in predictable cash flow from their investments should consider funds that
offer - ANS systematic withdrawal plans.
The process that quickly eliminates price discrepancies in efficient markets is known as -
ANS arbitrage.
Sinking funds are most likely to - ANS reduce credit risk (default risk).
Which of the following factors influence shortterm interest rates on government securities?
I. Federal Reserve actions
II. interest rate risk
III. expected future inflation
IV. the real rate of return - ANS I, III and IV only
An annual fee charged to cover the marketing costs of a mutual fund is called a: - ANS 12(b)-1
fee.
Back−end
loads - ANS are charged if an investor sells his or her shares within the first few years
@2026 ALLRIGHTS RESERVED 4
QUESTIONS AND ANSWERS 100% PASS
2026/2027
A type of fund that invests in real estate and/or mortgages is known as a - ANS REIT
Market volume is a function of market demand for and supply of stocks. - ANS True
Municipal bonds usually have higher yields than bonds issued by the U. S. Government. -
ANS False
One advantage gained by investing in a bond fund rather than in individual bonds is the -
ANS diversification among issuers.
Income from ________ is exempt from federal income taxes? - ANS municipal bond funds
Mortgage−backed
bonds are issued primarily by state governments and are secured by home mortgages. -
ANS False
Which of the following statements are correct concerning municipal bonds?
@2026 ALLRIGHTS RESERVED 1
,I. Yields on municipal bonds are usually lower than yields on Treasury bonds.
II. Municipal bonds are most appealing to individuals with high incomes.
III. Interest on a municipal bond is exempt from federal income tax.
IV. Municipal bonds are less risky than Treasury bonds. - ANS I, II and III only
An inverted yield curve - ANS sometimes results from actions by the Federal Reserve to
control inflation.
The major attraction of convertible bonds is - ANS the option to convert the bond into shares
of the company's stock.
The on balance volume (OBV) indicator - ANS indicates an up market when heavy volume
accompanies price increases
Which of the following are needed to determine the appropriate value of a bond?
I. required rate of return
II. time to maturity
III. frequency of interest payments
IV. coupon rate - ANS I, II, III and IV
A REIT or real estate investment trust may invest in all of the following except - ANS stocks of
companies engaged in construction and building materials.
Yield curves for corporate and government securities have similar shapes, but the corporate
rates track below the government rates. - ANS False
@2026 ALLRIGHTS RESERVED 2
,There is strong evidence that investors who trade frequently outperform the market. -
ANS False
Which one of the following statements is correct concerning bond investors? -
ANS Conservative investors buy bonds when interest rates are high.
Which one of the following activities is likely to be useful if the market is only weak form
efficient?
A) attempting to find the best times to buy and sell
B) attempting to find repeating pattern in stock price behavior
C) attempting to determine if stock prices have upward or downward momentum
D) None of the above would be useful. - ANS D) None of the above would be useful.
The practice of bundling mortgages or other types of loans into pools and selling pieces of the
pool as
bond−like
instruments to investors is known as - ANS securitization
Generally speaking,
short−term
bonds have lower yields than
long−term
bonds. - ANS True
A bond with 14 years to maturity and a coupon rate of 6.375% has a yield-to-maturity (YTM) of
4.5%. Assuming the bond's YTM remains constant, the bond's value as it approaches maturity
will most likely: - ANS Decrease
@2026 ALLRIGHTS RESERVED 3
, Which of the following statements about U.S. Agency bonds are true?
I. They are backed by the "full faith and credit" of the U.S. government.
II. Their risk is almost as low as government notes and bonds.
III. Their yields are slightly higher than those of government securities.
IV. They are exempt from state and federal taxes. - ANS II and III only
Investors interested in predictable cash flow from their investments should consider funds that
offer - ANS systematic withdrawal plans.
The process that quickly eliminates price discrepancies in efficient markets is known as -
ANS arbitrage.
Sinking funds are most likely to - ANS reduce credit risk (default risk).
Which of the following factors influence shortterm interest rates on government securities?
I. Federal Reserve actions
II. interest rate risk
III. expected future inflation
IV. the real rate of return - ANS I, III and IV only
An annual fee charged to cover the marketing costs of a mutual fund is called a: - ANS 12(b)-1
fee.
Back−end
loads - ANS are charged if an investor sells his or her shares within the first few years
@2026 ALLRIGHTS RESERVED 4
