HS 328 - LESSON 1 QUESTIONS & ANSWERS
1. Primary and secondary markets are an important link in the establishment of
a sound economy.
a. True
b. False- Answer - a. True
2. A firm that issues a fixed income security promises its investors that it will
make regular dividend payments.
a. True
b. False- Answer - b. False
Explanation- Answer - Firms that issue equity shares make dividend payments.
3. A hedge fund that invests in stocks, bonds, derivative securities, and
dia- monds can be characterized as an alternative investment.
a. True
b. False- Answer - a. True
4. Commercial paper is issued with maturities of 270 days or less to avoid
costly registration requirements.
a. True
b. False- Answer - a. True
5. A guarantee of payment by a bank during an international transaction
be- comes a banker's acceptance when sold in a secondary market.
,a. True
b. False- Answer - a. True
6. A traditional CD is typically a deposit of at least $100,000.
a. True
b. False- Answer - b. False
Explanation- Answer - That describes a negotiable CD or a jumbo CD.
, 7. TIPS are hedges against inflation.
a. True
b. False- Answer - a. True
8. Water bonds are repaid by user fees.
a. True
b. False- Answer - a. True
9. The interest received by investors from a municipal bond is always taxed at
the state level.
a. True
b. False- Answer - b. False
Explanation- Answer - Interest received by investors who live in a particular state is exempt from income tax on that state's income.
10. Mortgage-backed securities have relatively low credit risk but high prepay-
ment risk.
a. True
b. False- Answer - a. True
11. A municipal bond issued to construct a toll road between two large
cities would be classified as a general obligation bond.
a. True
b. False- Answer - b. False
1. Primary and secondary markets are an important link in the establishment of
a sound economy.
a. True
b. False- Answer - a. True
2. A firm that issues a fixed income security promises its investors that it will
make regular dividend payments.
a. True
b. False- Answer - b. False
Explanation- Answer - Firms that issue equity shares make dividend payments.
3. A hedge fund that invests in stocks, bonds, derivative securities, and
dia- monds can be characterized as an alternative investment.
a. True
b. False- Answer - a. True
4. Commercial paper is issued with maturities of 270 days or less to avoid
costly registration requirements.
a. True
b. False- Answer - a. True
5. A guarantee of payment by a bank during an international transaction
be- comes a banker's acceptance when sold in a secondary market.
,a. True
b. False- Answer - a. True
6. A traditional CD is typically a deposit of at least $100,000.
a. True
b. False- Answer - b. False
Explanation- Answer - That describes a negotiable CD or a jumbo CD.
, 7. TIPS are hedges against inflation.
a. True
b. False- Answer - a. True
8. Water bonds are repaid by user fees.
a. True
b. False- Answer - a. True
9. The interest received by investors from a municipal bond is always taxed at
the state level.
a. True
b. False- Answer - b. False
Explanation- Answer - Interest received by investors who live in a particular state is exempt from income tax on that state's income.
10. Mortgage-backed securities have relatively low credit risk but high prepay-
ment risk.
a. True
b. False- Answer - a. True
11. A municipal bond issued to construct a toll road between two large
cities would be classified as a general obligation bond.
a. True
b. False- Answer - b. False
