FINA 4011 - Homework Review - Exam 1 Prep Questions and Answers Already Passed
Money market securities are sometimes referred to as cash equivalents because __________.
a) they are safe and marketable
b) they are not as liquid as capital market securities
c) they have higher risk than common stocks
d) they trade in a small denomination - Answers a) they are safe and marketable
The most marketable money market security is _________.
a) Treasury bills
b) Treasury notes
c) certificate of deposit
d) commercial paper - Answers a) Treasury bills
__________ is a discounted zero-coupon short-term bond issued by Department of the Treasury.
a) T-bill
b) T-note
c) Certificate of deposit
d) Commercial paper - Answers a) T-bill
The bid price of a Treasury bill is _________.
a) the price at which the dealer in Treasury bills is willing to sell the bill
b) the price at which the dealer in Treasury bills is willing to buy the bill
c) always higher than the ask price of the bill
d) the price at which the investor can buy the Treasury bill - Answers b) the price at which the
dealer in Treasury bills is willing to buy the bill
__________ is a time deposit with a bank that the bank pays interest and principal at the end of
the fixed term.
a) Certificate of deposit
b) Commercial paper
,c) Repurchase agreement
d) T-bill - Answers a) Certificate of deposit
A large and well-known companies often issue __________ directly to the public. It is usually
short-term unsecured debt notes.
a) Certificate of deposit
b) T-bond
c) Commercial paper
d) Preferred stock - Answers c) Commercial paper
In __________ market, the dealer sells Treasury securities to an investor on an overnight basis,
with an agreement to buy back those securities the next day at a slightly higher price.
a)Federal fund
b)Treasury securities
c)Repo
d)CD - Answers c) Repo
In regular FOMC meetings, the Fed announces a target range for __________.
a)LIBOR rate
b)federal fund rate
c)asked yield
d)interest rate on T-bill - Answers b) federal fund rate
Treasury notes have initial maturities between __________ years.
a)2 and 4
b)5 and 10
c)10 and 30
d)1 and 10 - Answers d) 1 and 10
You want to sell Treasury bonds whose face value is $1,000 by placing market order. At which
price can you sell the T-bonds?
MaturityBidAskAsked yieldOct 13 100.5 101.3 0.035
, a)$1,000
b)$1,005
c)$1,013
d)$1,035 - Answers b) $1,005.
__________ is a bond issued by state and local government. Income from the bond is exempt
from federal and local taxes.
a)Certificate of deposit
b)Municipal bond
c)T-bond
d)Repurchase agreement - Answers b) Municipal bond
TIPS is a security issued by the department of Treasury where the amount of par value and
coupon payment changes with __________.
a)Interest rate
b)Inflation rate
c)Bank discount yield
d)Demand and supply - Answers b) Inflation rate.
Which of the following statements about municipal bonds is FALSE?
a)Investors expect higher investment return on municipal bonds, compared to (taxable)
corporate bonds.
b)A municipal bond is a debt obligation issued by state or local governments.
c)The interest income from a municipal bond is exempt from federal income tax.
d)Revenue municipal bonds are backed by revenue from the funded project. - Answers
a)Investors expect higher investment return on municipal bonds, compared to (taxable)
corporate bonds.
Which of the following statements about common stocks is FALSE?
a) Common stocks are hybrid securities.
b) Common stock holders have voting rights.
Money market securities are sometimes referred to as cash equivalents because __________.
a) they are safe and marketable
b) they are not as liquid as capital market securities
c) they have higher risk than common stocks
d) they trade in a small denomination - Answers a) they are safe and marketable
The most marketable money market security is _________.
a) Treasury bills
b) Treasury notes
c) certificate of deposit
d) commercial paper - Answers a) Treasury bills
__________ is a discounted zero-coupon short-term bond issued by Department of the Treasury.
a) T-bill
b) T-note
c) Certificate of deposit
d) Commercial paper - Answers a) T-bill
The bid price of a Treasury bill is _________.
a) the price at which the dealer in Treasury bills is willing to sell the bill
b) the price at which the dealer in Treasury bills is willing to buy the bill
c) always higher than the ask price of the bill
d) the price at which the investor can buy the Treasury bill - Answers b) the price at which the
dealer in Treasury bills is willing to buy the bill
__________ is a time deposit with a bank that the bank pays interest and principal at the end of
the fixed term.
a) Certificate of deposit
b) Commercial paper
,c) Repurchase agreement
d) T-bill - Answers a) Certificate of deposit
A large and well-known companies often issue __________ directly to the public. It is usually
short-term unsecured debt notes.
a) Certificate of deposit
b) T-bond
c) Commercial paper
d) Preferred stock - Answers c) Commercial paper
In __________ market, the dealer sells Treasury securities to an investor on an overnight basis,
with an agreement to buy back those securities the next day at a slightly higher price.
a)Federal fund
b)Treasury securities
c)Repo
d)CD - Answers c) Repo
In regular FOMC meetings, the Fed announces a target range for __________.
a)LIBOR rate
b)federal fund rate
c)asked yield
d)interest rate on T-bill - Answers b) federal fund rate
Treasury notes have initial maturities between __________ years.
a)2 and 4
b)5 and 10
c)10 and 30
d)1 and 10 - Answers d) 1 and 10
You want to sell Treasury bonds whose face value is $1,000 by placing market order. At which
price can you sell the T-bonds?
MaturityBidAskAsked yieldOct 13 100.5 101.3 0.035
, a)$1,000
b)$1,005
c)$1,013
d)$1,035 - Answers b) $1,005.
__________ is a bond issued by state and local government. Income from the bond is exempt
from federal and local taxes.
a)Certificate of deposit
b)Municipal bond
c)T-bond
d)Repurchase agreement - Answers b) Municipal bond
TIPS is a security issued by the department of Treasury where the amount of par value and
coupon payment changes with __________.
a)Interest rate
b)Inflation rate
c)Bank discount yield
d)Demand and supply - Answers b) Inflation rate.
Which of the following statements about municipal bonds is FALSE?
a)Investors expect higher investment return on municipal bonds, compared to (taxable)
corporate bonds.
b)A municipal bond is a debt obligation issued by state or local governments.
c)The interest income from a municipal bond is exempt from federal income tax.
d)Revenue municipal bonds are backed by revenue from the funded project. - Answers
a)Investors expect higher investment return on municipal bonds, compared to (taxable)
corporate bonds.
Which of the following statements about common stocks is FALSE?
a) Common stocks are hybrid securities.
b) Common stock holders have voting rights.
