Chapter 2.

1. Certificates of deposit are insured for up to in the event of bank insolvency.

a. $100,000
b. $250,000
c. $10,000
d. $500,000
2. Deposits of commercial banks at the Federal Reserve Bank are called

a. repurchase agreements.
b. reserve requirements.
c. time deposits.
d. Federal funds
e. bankers' acceptances.
3. A 5.5% 20-year municipal bond is currently priced to yield 7.2%. For a taxpayer in
the 33% marginal tax bracket, this bond would offer an equivalent taxable yield of
a. 11.40%.
b. 4.82%.
c. 10.75%. -> Equivalent taxable yield= YTM/(1-taxes)=
7.2%/(1-33%)=10.746%
d. 8.20%.
4. A municipal bond issued to finance an airport, hospital, turnpike, or port authority
is typically a

a. general obligation bond.

b. revenue bond or general obligation bond.
c. revenue bond.
d. industrial development bond.

5. A U.S. dollar-denominated bond that is sold in Singapore is a

a. Samurai bond.
b. Bulldog bond.
c. Yankee bond.
d. Eurobond.

6. Brokers' calls

a. are funds used by individuals who wish to buy stocks on margin and are
funds borrowed by the broker from the bank, with the agreement to repay
the bank immediately if requested to do so.
 b. are funds borrowed by the broker from the bank, with the agreement to repay the
bank immediately if requested to do so.
c. carry a rate that is usually about one percentage point lower than the rate on
U.S.
T-bills.
d. are funds used by individuals who wish to buy stocks on margin and carry a rate
that is usually about one percentage point lower than the rate on U.S. T-bills.
e. are funds used by individuals who wish to buy stocks on margin.

7. Freddie Mac and Ginnie Mae were organized to provide

a. a source of funds for government agencies.

b. a primary market for mortgage transactions.
c. liquidity for the mortgage market.
d. a primary market for farm loan transactions.
e. liquidity for the farm loan market.

8. The ........ index represents the performance of the Japanese stock market.

a. DAX
b. Nikkei
c. FTSE
d. Hang Seng

9. The bid price of a T-bill in the secondary market is

a. the price at which the investor can buy the T-bill.

b. the price at which the dealer in T-bills is willing to buy the bill.
c. the price at which the dealer in T-bills is willing to sell the bill.
d. never quoted in the financial press.
e. greater than the asked price of the T-bill.

10. The ....... is an example of a U.S. index of small firms.

a. Russell 2000
b. DJIA
c. S&P 500
d. DAX
e. All of the options

11. A put option allows the holder to

a. sell the option in the open market prior to expiration.

b. buy the underlying asset at the strike price on or before the expiration date and
sell the option in the open market prior to expiration.
c. sell the underlying asset at the strike price on or before the expiration date.
 d. sell the underlying asset at the strike price on or before the expiration date
and sell the option in the open market prior to expiration.
e. buy the underlying asset at the strike price on or before the expiration date.

12. The ........ index represents the performance of the Hong Kong stock market.

a. Nikkei
b. Hang Seng
c. FTSE
d. DAX

13. In order for you to be indifferent between the after-tax returns on a corporate
bond paying 8.5% and a tax-exempt municipal bond paying 6.12%, what would
your tax bracket need to be?

a. 15%
b. 72%
c. 33%
d. 28% -> Rm=r*(1-t) -> 6.12%=8.5%*(1-x) -> x=0.28=28%

e. Cannot tell from the information given

14. The ...... index represents the performance of the Canadian stock market.

a. TSX
b. FTSE
c. DAX
d. Hang Seng

15. A form of short-term borrowing by dealers in government securities is

a. bankers' acceptances.
b. brokers' calls.
c. reserve requirements.
d. commercial paper.

e. repurchase agreements.

16. The ........ index represents the performance of the German stock market.

a. Hang Seng
b. Nikkei
c. FTSE
d. DAX

17. A call option allows the buyer to

a. sell the option in the open market prior to expiration.

b. buy the underlying asset at the exercise price on or before the expiration
date and sell the option in the open market prior to expiration.
 c. sell the underlying asset at the exercise price on or before the expiration date
and sell the option in the open market prior to expiration.
d. buy the underlying asset at the exercise price on or before the expiration date.
e. sell the underlying asset at the exercise price on or before the expiration date.

18. In calculating the Standard and Poor's stock price indices, the adjustment for
stock split occurs

a. quarterly, on the last trading day of each quarter.

b. automatically.
c. by adjusting the numerator.
d. by adjusting the divisor.

19. The ....... index represents the performance of the U.K. stock market.

a. Nikkei
b. FTSE
c. Hang Seng
d. DAX
20. T-bills are financial instruments initially sold by ........ to raise funds.

a. agencies of the federal government

b. the U.S. government and agencies of the federal government
c. commercial banks
d. state and local governments
e. the U.S. government

21. Certificates of deposit are insured by the

a. SPIC.
b. All of the options
c. CFTC.
d. FDIC.
e. Lloyds of London.

22. In the event of the firm's bankruptcy

a. the most shareholders can lose is their original investment in the firm's stock.
b. the claims of preferred shareholders are honored before those of the common
shareholders.
c. the most shareholders can lose is their original investment in the firm's
stock and the claims of preferred shareholders are honored before those of
the common shareholders.
d. common shareholders are the first in line to receive their claims on the firm's
assets.
 e. bondholders have claim to what is left from the liquidation of the firm's assets
after paying the shareholders.

23. If the market prices of each of the 30 stocks in the Dow Jones Industrial Average
(DJIA) all change by the same percentage amount during a given day, which
stock will have the greatest impact on the DJIA?

a. The stock having the lowest volatility

b. The stock trading at the highest dollar price per share
c. The stock having the greatest amount of equity in its capital structure
d. The stock having the greatest amount of debt in its capital structure

24. The Dow Jones Industrial Average (DJIA) is computed by

a. adding the prices of 30 large "blue-chip" stocks and dividing by 30.

b. calculating the total market value of the 30 firms in the index and dividing by 30.
c. adding the prices of the 500 stocks in the index and dividing by a divisor.
d. adding the prices of the 30 stocks in the index and dividing by the value of these
stocks as of some base date period.
e. adding the prices of the 30 stocks in the index and dividing by a divisor.

25. The is an example of a U.S. index of large firms.

a. DAX
b. All of the options
c. Russell 2000
d. DJIA
e. Wilshire 5000

26. A bond that can be retired prior to maturity by the issuer is a(an) bond.

a. Yankee
b. callable (TP có thể mua lại)
c. unsecured
d. convertible
e. secured

27. Commercial paper is a short-term security issued by to raise funds.

a. commercial banks
b. large, well-known companies
c. state and local governments
d. the Federal Reserve Bank
e. the New York Stock Exchange
 Chapter 2.2 chưa dò
1. Which of the following statements is true regarding a corporate bond?
a. A corporate debenture is a secured bond.
b. A corporate indenture is a secured bond.
c. A corporate convertible bond gives the holder the right to exchange the
bond for a specified number of the company's common shares.
d. Holders of corporate bonds have voting rights in the company.
e. A corporate callable bond gives the holder the right to exchange it for a specified
number of the company's common shares.

2. Which of the following securities is a money market instrument?

a. Treasury bond
b. Treasury note
c. Commercial paper
d. Mortgage security
e. Municipal bond
3. The money market is a subsector of the
a. derivatives market.
b. None of the options
c. commodity market.
d. capital market.
e. equity market.
4. Which of the following is NOT a mortgage-related government or government-
sponsored agency?
a. The Federal National Mortgage Association
b. Freddie Mac
c. The U.S. Treasury
d. Ginnie Mae
e. The Federal Home Loan Bank
5. The smallest component of the money market is
a. small-denomination time deposits.
b. savings deposits.
c. repurchase agreements.
d. money market mutual funds.
e. commercial paper
6. What does the term negotiable mean with regard to negotiable certificates of
deposit?
a. The CD has staggered maturity dates built in.
b. The rate of interest on the CD is subject to negotiation.
 c. The CD is automatically reinvested at its maturity date.
d. The CD can be sold to another investor if the owner needs to cash it in
before its maturity date.
e. The interest rate paid on the CD will vary with a designated market rate.
7. With regard to a futures contract, the short position is held by
a. the trader who commits to purchasing the commodity on the delivery date.
b. the trader who has to travel the farthest distance to deliver the commodity.
c. the trader who commits to delivering the commodity on the delivery date.
d. the trader who plans to hold the contract open for the lengthiest time period.
e. the trader who bought the contract at the largest discount.
8. The largest component of the money market is
a. Eurodollars.
b. money market mutual funds.
c. repurchase agreements.
d. T-bills.
e. savings deposits.
9. The ultimate stock index in the U.S. is the
a. S&P 500.
b. DJIA.
c. Russell 2000.
d. Wilshire 5000.
10. Which of the following statement(s) is(are) true regarding municipal bonds? I) A
municipal bond is a debt obligation issued by state or local governments. II) A
municipal bond is a debt obligation issued by the federal government. III) The
interest income from a municipal bond is exempt from federal income taxation.
IV) The interest income from a municipal bond is exempt from state and local
taxation in the issuing state.
a. I and II only
b. I and III only
c. I, II, and III only
d. I, III, and IV only
e. I and IV only
11. The largest component of the bond market is ..... debt.
a. corporate
b. asset-backed
c. Treasury
d. tax-exempt
e. mortgage-backed
12. Unsecured bonds are called
a. subordinated debentures.
b. junk bonds.
 c. debentures.
d. either debentures or subordinated debentures.
e. indentures.
13. The maximum maturity of commercial paper that can be issued without SEC
registration is

a. 30 days.
b. 180 days.
c. 90 days.
d. 270 days.
14. Which one of the following is NOT a money market instrument?
a. Negotiable certificate of deposit
b. Eurodollar account
c. Treasury bill
d. Commercial paper
e. Treasury bond
15. Which of the following is used extensively in foreign trade when the
creditworthiness of one trader is unknown to the trading partner?
a. Repos
b. Federal funds
c. Bankers' acceptances
d. Eurodollars 16.
16. Which of the following is true regarding a firm's securities?

a. Preferred dividends are contractual obligations.

b. Common dividends are paid before preferred dividends.
c. Preferred stockholders have voting rights.
d. Common dividends usually can be paid if preferred dividends have been skipped.
e. Preferred dividends are usually cumulative.
17. The yield to maturity reported in the financial pages for Treasury securities
a. is calculated by doubling the semiannual yield and is also called the bond
equivalent yield.
b. is calculated by doubling the semiannual yield.
c. is also called the bond equivalent yield.
d. is calculated by compounding the semiannual yield.
e. is calculated as the yield-to-call for premium bonds.
18. Which of the following indices is(are) market-value weighted?
I) The New York Stock Exchange Composite Index
II) The Standard and Poor's 500 Stock Index
III) The Dow Jones Industrial Average
a. II and III only
 b. I and III only
c. I only
d. I and II only
e. I, II, and III
19. Which of the following is NOT a characteristic of a money market instrument? a.
Marketability
b. Long maturity
c. Liquidity premium
d. Long maturity and liquidity premium
e. Liquidity
20. The interest rate charged by banks with excess reserves at a Federal Reserve
Bank to banks needing overnight loans to meet reserve requirements is called
the
a. federal funds rate.
b. discount rate
c. prime rate.
d. call money rate.
e. money market rate.
21. The smallest component of the bond market is ...... debt.
a. corporate
b. tax-exempt
c. other asset-backed
d. mortgage-backed
e. Treasury
22. The index that includes the largest number of actively traded stocks is
a. the Russell Index.
b. the Value Line Composite Index.
c. the Wilshire 5000 Index.
d. the NASDAQ Composite Index.
e. the NYSE Composite Index.
23. Which of the following is NOT a component of the money market?
a. Eurodollars
b. Repurchase agreements
c. Money market mutual fund.
d. Commercial paper
e. Real estate investment trusts
24. Which one of the following terms BEST describes Eurodollars?
a. Dollar-denominated deposits at American banks in the U.S.
b. Dollar-denominated deposits at foreign banks and branches of American
banks outside the U.S.
c. Dollar-denominated deposits only in European banks.
 d. Dollars that have been exchanged for European currency.
e. Dollar-denominated deposits at branches of foreign banks in the U.S.
25. Which of the following is true of the Dow Jones Industrial Average?
a. The divisor must be adjusted for stock splits.
b. It is a value-weighted average of 30 large industrial stocks.
c. It is a price-weighted average of 30 large industrial stocks and the divisor
must be adjusted for stock splits.
d. It is a value-weighted average of 30 large industrial stocks and the divisor must
be adjusted for stock splits.
e. It is a price-weighted average of 30 large industrial stocks.
26. Which of the following statements regarding the Dow Jones Industrial Average
(DJIA) is false?
a. The DJIA is affected equally by changes in low- and high-priced stocks.
b. The DJIA consists of 30 blue chip stocks.
c. The DJIA is not very representative of the market as a whole.
d. The DJIA divisor needs to be adjusted for stock splits.
e. The value of the DJIA is much higher than individual stock prices.
27. Treasury Inflation-Protected Securities (TIPS)
a. pay a variable interest rate that is indexed to inflation, but maintain a constant
principal.
b. provide a constant stream of income in real (inflation-adjusted) dollars.
c. provide a constant stream of income in real (inflation-adjusted) dollars and
have their principal adjusted in proportion to the Consumer Price Index.
d. have their principal adjusted in proportion to the Consumer Price Index.
e. pay a fixed interest rate for life.

Chapter 3.1
1. Shares for short transactions (câu này không biết)
a. are usually borrowed from other brokers.
b. are typically shares held by the short seller's broker in street name.
c. are borrowed from commercial banks.
d. are typically shares held by the short seller's broker in street name and are
borrowed from commercial banks.

2. Firms raise capital by issuing stock

a. to unwary investors.
b. in the secondary market.
c. in the primary market.
d. only on days when the market is up.
 3. A purchase of a new issue of stock takes place

a. in the primary market and usually with the assistance of an investment

banker.
b. usually with the assistance of an investment banker.
c. in the primary market.
d. in the secondary market.
e. in the secondary and primary markets.

4. The trading of stock that was previously issued takes place

a. in the secondary and primary markets.

b. in the secondary market.
c. in the primary market.
d. usually with the assistance of an investment banker.

5. Investment bankers

a. act as advisors to companies in helping them analyze their financial needs and
find buyers for newly issued securities.
b. accept deposits from savers and lend them out to companies.
c. act as intermediaries between issuers of stocks and investors and act as
advisors to companies in helping them analyze their financial needs and
find buyers for newly issued securities.
d. act as intermediaries between issuers of stocks and investors.

6. In a "firm commitment," the investment banker

a. agrees to help the firm sell the stock at a favorable price and finds the best
marketing arrangement for the investment banking firm.
b. finds the best marketing arrangement for the investment banking firm.
c. buys the stock from the company and resells the issue to the public.
d. agrees to help the firm sell the stock at a favorable price.

7. Shelf registration

a. is a way of placing issues in the primary market and increases transaction costs
to the issuing firm.
b. allows firms to register securities for sale over a two-year period.
c. is a way of placing issues in the primary market.
d. increases transaction costs to the issuing firm.
e. is a way of placing issues in the primary market and allows firms to register
securities for sale over a two-year period.

8. The secondary market consists of

a. transactions through the investment banker.

 b. transactions in the OTC market.
c. transactions on the AMEX, through the investment banker, and in the OTC
market.
d. transactions on the AMEX and in the OTC market.
e. transactions on the AMEX.

9. When a firm markets new securities, a preliminary registration statement must be

filed with

a. the exchange on which the security will be listed.

b. the Federal Reserve.
c. all other companies in the same line of business.
d. the Securities and Exchange Commission.
e. the Federal Deposit Insurance Corporation.
10. In a typical underwriting arrangement the investment banking firm : I) sells
shares to the public via an underwriting syndicate. II) purchases the securities
from the issuing company. III) assumes the full risk that the shares may not be
sold at the offering price. IV) agrees to help the firm sell the issue to the public, but
does not actually purchase the securities.

a. I, II, and III

b. I and IV
c. I and II
d. II and III
e. I, III, and IV

11. Restrictions on trading involving insider information apply to the following except

a. corporate officers.

b. None of the options is subject to insider trading restrictions.

c. major stockholders.
d. corporate directors.
e. All of the options are subject to insider trading restrictions.

12. A sale by IBM of new stock to the public would be a(n)

a. private placement.
b. initial public offering.
c. short sale.
d. secondary market transaction.
e. seasoned equity offering.

13. The cost of buying and selling a stock consists of

a. broker's commissions, dealer's bid-asked spread, and a price concession

an investor may be forced to make.
 b. dealer's bid-asked spread.
c. broker's commissions.
d. broker's commissions and dealer's bid-asked spread.
e. a price concession an investor may be forced to make.

14. The finalized registration statement for new securities approved by the SEC is
called
a. a best-efforts agreement.
b. the preliminary statement.
c. a firm commitment.
d. a red herring.
e. the prospectus.

15. All of the following are considered new trading strategies except

a. dark pools.
b. short selling.
c. high frequency trading.
d. algorithmic trading.

16. Initial margin requirements are determined by

a. the New York Stock Exchange.

b. the Federal Reserve System and the New York Stock Exchange.
c. the Securities and Exchange Commission.
d. the Federal Reserve System.

17. Specialists on stock exchanges perform which of the following functions?

a. Act as dealers in their own accounts and analyze the securities in which they
specialize.
b. Act as dealers in their own accounts and provide liquidity to the market.
c. Provide liquidity to the market.
d. Analyze the securities in which they specialize.
e. Act as dealers in their own accounts.

Chapter 3.2 đúng hết

1. You want to buy 100 shares of Hotstock Inc. at the best possible price as quickly
as possible. You would most likely place a

a. limit-sell order.
b. stop-loss order.
c. market order.
 d. limit-buy order.
e. stop-buy order.

2. Which of the following statements regarding the specialist are true?

a. Specialists stand ready to trade at quoted bid and ask prices.

b. Specialists maintain a book listing outstanding unexecuted limit orders,
earn income from commissions and spreads in stock prices, and stand
ready to trade at quoted bid and ask prices.
c. Specialists earn income from commissions and spreads in stock prices.
d. Specialists maintain a book listing outstanding unexecuted limit orders.
e. Specialists cannot trade in their own accounts.

3. Which of the following is true regarding private placements of primary security

offerings?
a. Extensive and costly registration statements are required by the SEC.
b. They trade in secondary markets.
c. The shares are sold directly to a small group of institutional or wealthy
investors.
d. For very large issues, they are better suited than public offerings.
e. They have greater liquidity than public offerings.

4. Which of the following orders is most useful to short sellers who want to limit their
potential losses?

a. Limit order
b. Limit-loss order
c. Stop-buy order
d. Discretionary order

5. You buy 300 shares of Qualitycorp for $30 per share and deposit initial margin of
50%. The next day, Qualitycorp's price drops to $25 per share. What is your
actual margin?
a. 25% Giá tiền gốc: $30.300.50%= 4500
b. 33%
Giá tiền sau khi rớt xuống $25: $25.300= 7500
c. 40%
d. 60% Actual margin = (7500-4500)/7500=0.4
e. 50%

6. You sell short 100 shares of Loser Co. at a market price of $45 per share. Your
maximum possible loss is

a. $4,500.
b. unlimited.
c. zero.
 d. Cannot tell from the information given
e. $9,000.

7. You sold JCP stock short at $80 per share. Your losses could be minimized by
placing a

a. limit-buy order.
b. stop-buy order.
c. day-order.
d. None of the options
e. limit-sell order.

8. Which of the following orders instructs the broker to buy at or above a specified
price?
a. Discretionary order
b. Limit-buy order
c. Market order
d. Limit-sell order
e. Stop-buy order

9. Which of the following orders instructs the broker to buy at the current market
price?
a. Stop-buy order
b. Market order
c. Limit order
d. Discretionary order
e. Limit-loss order

10. Which of the following orders instructs the broker to sell at or below a specified
price?
a. Stop-buy order
b. Market order
c. Stop-loss
d. Limit-sell order
e. Limit-buy order

11. When stocks are held in street name

a. the investor receives a stock certificate with the owner's street address.
b. the investor does not receive a stock certificate and the broker holds the
stock in the brokerage firm's name on behalf of the client.
c. the investor does not receive a stock certificate.
d. the broker holds the stock in the brokerage firm's name on behalf of the client.
e. the investor receives a stock certificate without the owner's street address.
12. Which of the following orders instructs the broker to sell at or above a specified
price?
a. Limit-buy order
b. Stop-buy order
c. Limit-sell order
d. Market order
e. Discretionary order

13. You purchased JNJ stock at $50 per share. The stock is currently selling at $65.
Your gains may be protected by placing a

a. limit-buy order.
b. stop-buy order.
c. limit-sell order.
d. None of the options
e. market order.

14. You want to purchase XON stock at $60 from your broker using as little of your
own money as possible. If initial margin is 50% and you have $3,000 to invest,
how many shares can you buy?

a. 25 shares $3000/$60= 50 shares

b. 200 shares
50 shares/50% = 100
c. 100 shares
d. 500 shares
e. 50 shares
15. Which of the following orders instructs the broker to buy at or below a specified
price?
a. Limit-loss order
b. Discretionary order
c. Limit-buy order
d. Market order
e. Stop-buy order

16. Which one of the following statements regarding orders is false?

a. A market order is an order to buy or sell a stock on a specific exchange

(market).
b. A limit-sell order is where investors specify prices at which they are willing to sell
a security.
c. A market order is simply an order to buy or sell a stock immediately at the
prevailing market price.
d. If stock ABC is selling at $50, a limit-buy order may instruct the broker to buy the
stock if and when the share price falls below $45.
CHUONG 4 ( SAI 1 CÂU) chưa dò
1. Commingled funds are

a. partnerships of investors that pool their funds, which are then managed for a
fee.

b. closed-end funds that may be repurchased only once every two years at the
discretion of mutual fund management.

c. funds that may be purchased at intervals of 3, 6, or 12 months at the discretion of

management.

d. amounts invested in domestic and global equities.

e. amounts invested in equity and fixed-income mutual funds.

2. Pools of money invested in a portfolio that is fixed for the life of the fund are
called

a.open-end funds.

b.redeemable trust certificates.

c.closed-end funds.

d.unit investment trusts.

e.REITS.
3. Which of the following would increase the net asset value of a mutual fund
share, assuming all other things remain unchanged?

a.An increase in the value of one of the fund's stocks

b.An increase in the number of fund shares outstanding

c.An increase in the fund's accounts payable

d.A change in the fund's management

4. Of the following types of ETFs, an investor who wishes to invest in a diversified

portfolio that tracks the Wilshire 5000 should choose a.DIA.

b.QQQQ.

c.IWM.
d.VTI.

e.SPY.

5. Which one of the following statements regarding closed-end mutual funds is

false?

a.None of the options

b.The funds redeem shares at their net asset value.

c.The funds always trade at a discount from NAV.

d.The funds offer investors professional management.

e.The funds always trade at a discount from NAV and redeem shares at their net asset
value.

6. Which of the following is true regarding equity mutual funds?

I) They invest primarily in stock.
II) They may hold fixed-income securities as well as stock.
III) Most hold money market securities as well as stock.
IV) Two types of equity funds are income funds and growth funds.
a.I, II, and III
b.I, II, III, and IV

c.I and IV

d.I, III, and IV

e.I, II, and IV

7. Investors in closed-end funds who wish to liquidate their positions must

a.sell their shares to the issuer at a discount to net asset value.

b.sell their shares to the issuer for net asset value.

c.hold their shares to maturity.

d.sell their shares through a broker.

e.sell their shares to the issuer at a premium to net asset value.

8. Which of the following statements about real estate investment trusts is true?

a.REITs invest in real estate or loans secured by real estate.

b.REITs invest in real estate or loans secured by real estate and raise capital by
borrowing from banks and issuing mortgages.

c.REITs raise capital by borrowing from banks and issuing mortgages.

d.REITs are similar to open-end funds, with shares redeemable at NAV.

e.All of the options are true.

9. Which one of the following statements regarding open-end mutual funds is

false?

a.The funds redeem shares at net asset value and offer investors professional
management.

b.The funds redeem shares at net asset value.

c.The funds offer investors professional management and a guaranteed rate of return.

d.The funds offer investors a guaranteed rate of return.

e.The funds offer investors professional management.

10. Jargon Rapid Growth is a mutual fund that has traditionally accepted funds
from new investors and issued new shares at net asset value. Jeremy Jargon
manages the fund himself and has become concerned that its level of assets
has become too high for his management abilities. He issues a statement that
Jargon will no longer accept funds from new investors, but will continue to
accept additional investments from current shareholders. Which of the
following is true about Jargon Rapid Growth fund?
a.Jargon is an open-end fund but would change to a closed-end fund if it wouldn't accept
additional funds from current investors.

b.Jargon used to be an open-end fund but has now become a closed-end fund.

c.Jargon has always been an open-end fund and will remain an open-end fund.

d.Jargon has always been a closed-end fund and will remain a closed-end fund.

e.Jargon is violating SEC policy by refusing to accept new investors.

11. Multiple Mutual Funds had year-end assets of $457,000,000 and liabilities of
$17,000,000. There were 24,300,000 shares in the fund at year-end. What was
Multiple Mutual's net asset value?
a.$18.11
($457,000,000 - 17,000,000)/24,300,000
B. = $18.11.

$181.07

c.$7.00

d.$69.96

e.$18.81
12. Of the following types of ETFs, an investor who wishes to invest in a diversified
portfolio that tracks the Russell 2000 should choose
a.QQQQ.

b.IWM.

c.DIA.

d.VTI.

e.SPY.

13. Closed end funds are frequently issued at a ........ to NAV and subsequently
trade at a ......... to NAV.
a.discount, premium

b.premium, premium

c.No consistent relationship has been observed.

d.discount, discount

e.premium, discount

14. Growth Fund had year-end assets of $862,000,000 and liabilities of

$12,000,000. There were 32,675,254 shares in the fund at year-end. What
was Growth Fund's net asset value?

a.$26.01
($862,000,000 -12,000,000)/32,675,254 =
b.$19.62 $26.01.
c.$21.56

d.$28.17

e.$25.24

15. Of the following types of ETFs, an investor who wishes to invest in a

diversified portfolio that tracks the S&P 500 should choose
a.SPY.

b.IWM.

c.QQQQ.

d.VTI.

e.DIA.

16. Which of the following statements about real estate investment trusts is true?

a.REITs are usually highly leveraged.

b.All of the options are true.

c.REITs are similar to closed-end funds.

d.REITs may be equity trusts or mortgage trusts.

e.REITs may be equity trusts or mortgage trusts and are usually highly leveraged.

17. Pinnacle Fund had year-end assets of $825,000,000 and liabilities of

$25,000,000. If Pinnacle's NAV was $32.18, how many shares must have been
held in the fund?
a.21,619,346.92

b.22,930,546.28

c.25,693,645.25

d.24,860,161.59

18. The fee that mutual funds use to help pay for advertising and promotional
literature is called a

a.12b-1 fee.

b.structured fee.

c.front-end load fee.

d.operating expense fee.

e.back-end load fee.

19. At issue, offering prices of open-end funds will often be

a.greater than NAV due to excess demand.

b.greater than NAV due to loads and commissions.

c.less than NAV due to loads and commissions.

d.less than or greater than NAV with no apparent pattern.

e.less than NAV due to limited demand.

20. Which of the following statements about money market mutual funds is true?

a.They invest in commercial paper, CDs, and repurchase agreements.

b.All of the options are true.

c.They invest in commercial paper, CDs, and repurchase agreements, and they
usually offer check-writing privileges.

d. They are highly leveraged and risky.

e. They usually offer check-writing privileges.

21. Of the following types of ETFs, an investor who wishes to invest in a diversified
portfolio that tracks the Dow Jones Industrials should choose

a.DIA. b.SPY.

c.IWM.

d.QQQQ.

e.VTI.

22. Most actively managed mutual funds, when compared to a market index such as
the Wilshire 5000,

a.beat the market return in most years.

b.exceed the return on index funds.

c.beat the market return in all years.

d.do not outperform the market.

23. Of the following types of ETFs, an investor who wishes to invest in a diversified
portfolio that tracks the MSCI Japan Index should choose
a.VTI.

b.SPY.

c.QQQQ.

d.IWM.

e.EWJ.

24. Which of the following characteristics apply to unit investment trusts? I) Most are
invested in fixed-income portfolios. II) They are actively managed portfolios. III)
The sponsor pools securities, then sells public shares in the trust. IV) The
portfolio is fixed for the life of the fund.

a.I, III, and IV

b.I, II, and III

c.I and II

d.I and IV

e.I, II, III, and IV

25. Of the following types of ETFs, an investor who wishes to invest in a diversified
portfolio that tracks the MSCI France Index should choose
a.VTI.

b.EWJ.

c.SPY.

d.EWQ.

e.IWM.

26. Diversified Portfolios had year-end assets of $279,000,000 and liabilities of

$43,000,000. If Diversified's NAV was $42.13, how many shares must have been
held in the fund?
a.

43,000,000

b.

5,601,709

c.

6,488,372

d.

1,182,203

27. Differences between hedge funds and mutual funds are that a. hedge funds are

typically open only to wealthy or institutional investors. b.

All of the options

c.
hedge fund managers can pursue ún strategies not available to mutual funds, such as
short selling, heavy use of derivatives, and leverage.

d.

hedge funds are only subject to minimal SEC regulation.

e.

hedge funds are commonly structured as private partnerships.

28. Of the following types of ETFs, an investor who wishes to invest in a diversified
portfolio that tracks the Nasdaq 100 should choose
a.

DIA.

b.
SPY.

c.

VTI.

d.

IWM.

e.QQQQ.

29. Which of the following functions do investment companies perform for their
investors?
a.Diversification and divisibility

b.Professional management

c.All of the options

d.Record keeping and administration

e.Lower transaction costs

CHUONG 5
1) You purchased a share of stock for $65. One year later you received $2.37 as
a dividend and sold the share for $63. What was your holding-period return?
a.0.57%

b. 1.63%

c.None of the options

d.-0.2550%

e.-0.89% the holding-period return = ($63 - $65 + $2.37) / $65 = -$0.2550 or

-0.2550%

2) Which of the following statement(s) is(are) true? I) The real rate of

interest is determined by the supply and demand for funds. II) The real
rate of interest is determined by the expected rate of inflation. III) The
real rate of interest can be affected by actions of the Fed. IV) The real
rate of interest is equal to the nominal interest rate plus the expected
rate of inflation.
a.II and III only.

b.I and III only.

c.I and II only.

d.III and IV only.

e.I, II, III, and IV only.

3) You purchased a share of stock for $68. One year later you received $3.00 as a
dividend and sold the share for $74.50. What was your holding-period return?

A. 12.5%

B. 14.0%( ($3.00 + $74.50 - $68.00)/$68.00 = 0.1397, or 14.0%.)

C. 13.6%

D. 11.8%

4) You purchased a share of stock for $120. One year later you received $1.82 as a
dividend and sold the share for $136. What was your holding-period return? a.15.67%

b.18.85%

c.None of the options

d. 22.12%

e. 13.24%
5) If the annual real rate of interest is 5% and the expected inflation rate is
4%, the nominal rate of interest would be approximately

A. 1%.
b. 9%. 5+4=9%
C. 20%.
D. 15%.

6) When assessing tail risk by looking at the 5% worst-case scenario, the

most realistic view of downside exposure would be A. expected shortfall.

B. value at risk.

C. conditional tail expectation.

D. expected shortfall and value at risk.

E. expected shortfall and conditional tail expectation.

7) Which of the following determine(s) the level of real interest rates? I)The
supply of savings by households and business firms. II) The demand for
investment funds. III) The government's net supply and/or demand for
funds

A. I only B. II only C. I and II only D. I, II, and III

8) Skewness is a measure of

a. the dividend yield of the distribution.

b.None of the options

c.the normality of a distribution.

d.the downside risk of a distribution.

e. how fat the tails of a distribution are.

9) A year ago, you invested $10,000 in a savings account that pays an

annual interest rate of 3%. What is your approximate annual real rate of return
if the rate of inflation was 4% over the year?

a.7%
b.-1%

c.1%

d.3%

10) An investor purchased a bond 63 days ago for $980. He received $17
in interest and sold the bond for $987. What is the holding-period return on his
investment?

a. 2.68%

b. 1.92%

c.1.52%
d. 2.45% ( HPR = ($17 + 987 - 980)/$980 = .0244898 = approximately 2.45%.) 11)

When a distribution is negatively skewed,

a.the tails are fatter than in a normal distribution.

b.standard deviation overestimates risk.

c.standard deviation underestimates risk.

d.standard deviation correctly estimates risk

12) Kurtosis is a measure of

a.the dividend yield of the distribution.

b.how fat the tails of a distribution are.

c.how fat the tails of a distribution are and the normality of a distribution.

d.the normality of a distribution.

e.the downside risk of a distribution.

13) A year ago, you invested $2,500 in a savings account that pays an annual
interest rate of 2.5%. What is your approximate annual real rate of return if
the rate of inflation was 3.4% over the year?

a.3.4%

b.-0.9% ( 2.5% - 3.4% = -0.9%.)

c.5.9%

d. 0.9%

14) A year ago, you invested $2,500 in a savings account that pays an annual
interest rate of 5.7%. What is your approximate annual real rate of return if the
rate of inflation was 1.6% over the year?

a. 2.5%

b. 4.1% ( 5.7% - 1.6% = 4.1%)

c.1.6%

d. 2.9%

15) An investor purchased a bond 45 days ago for $985. He received $15 in
interest and sold the bond for $980. What is the holding-period return on his
investment?

a. 0.01%

b. 1.92%

c.1.02% ( HPR = ($15 + 980 - 985)/$985 = .010152284 = approximately 1.02%.)

d.0.50%

16) If a distribution has "fat tails," it exhibits

a.a kurtosis of zero

b.negative skewness.

c.positive skewness and kurtosis.

d.positive skewness.

e.kurtosis.

17)Over the past year you earned a nominal rate of interest of 8% on your
money. The inflation rate was 3.5% over the same period. The exact actual
growth rate of your purchasing power was

a. 15.55%.
b. 5.02%.

c.15.04%.

d. 4.81%.

e. 4.35%. ( r = (1 + R)/(1 + I) - 1; 1.08/1.035 - 1 = 4.35%.) 18) When a distribution

is positively skewed,

a.standard deviation overestimates risk.

b.standard deviation correctly estimates risk.

c.standard deviation underestimates risk.

d.the tails are fatter than in a normal distribution.

19) Over the past year you earned a nominal rate of interest of 12.5% on your
money. The inflation rate was 2.6% over the same period. The exact actual
growth rate of your purchasing power was

a. 9.90%.

b. 9.65%. ( r = (1 + R)/(1 + I) - 1; 1.125/1.026 - 1 = 9.65%.)

c.9.15%.

d. 10.52%.

20) Other things equal, an increase in the government budget deficit

a.drives the interest rate down.

b.might not have any effect on interest rates.

c.increases business prospects.

d drives the interest rate
. up.
21) Over the past year you earned a nominal rate of interest of 8% on your
money. The inflation rate was 4% over the same period. The exact actual
growth rate of your purchasing power was

a. 15.0%.

b. 4.8%.

c.10.0%.
d. 3.8%. (r = (1 + R)/(1 + I) - 1; 1.08%/1.04% - 1 = 3.8%.)

e. 15.5%

22) You purchased a share of stock for $12. One year later you received $0.25
as a dividend and sold the share for $12.92. What was your holding-period
return?

a. 10.65%
b. 9.75% ( ($0.25 + $12.92 - $12)/$12 = 0.0975, or 9.75%.)

c.11.75%

d. 11.25%

e.None of the options

23) If the annual real rate of in ún terest is 4% and the expected inflation rate is
3%, the nominal rate of interest would be approximately

a.None of the options

b.1%.

c.4%.

d.3%.

e.5%.

24)If the annual real rate of interest is 3.5% and the expected inflation rate is
2.5%, the nominal rate of interest would be approximately

a.2.5%.

b.1%.

c.6.8%.

d.None of the options

e.3.5%.

25) Over the past year you earned a nominal rate of interest of 10% on your
money. The inflation rate was 5% over the same period. The exact actual growth
rate of your purchasing power was

a. 15.0%.

b. 4.8%. ( r = (1 + R)/(1 + I) -1; 1.10%/1.05% - 1 = 4.8%.)

c.10.0%.

d. 5.0%.
e. 15.5%.

26) Ceteris paribus, a decrease in the demand for loanable funds

a.results from an increase in business prospects and a decrease in the level of savings.

b.might not have any effect on interest rates.

c.drives the interest rate up.

d.drives the interest rate down.

27) When comparing investments with different horizons, the ....... provides
the more accurate comparison.

a.effective annual rate

b.average annual return

c.arithmetic average

d.historical annual average

28) The holding-period return (HPR) for a stock is equal to

a.the nominal yield minus the real yield.

b.the capital gains yield minus the dividend yield.

c.the real yield minus the inflation rate.

d.the dividend yield plus the capital gains yield.

e.the capital gains yield minus the tax rate.

29) A year ago, you invested $1,000 in a savings account that pays an annual
interest rate of 9%. What is your approximate annual real rate of return if
the rate of inflation was 4% over the year?

a.10%
b.7%

c.5% 9-4=5

d.3%
30) You purchased a share of stock for $20. One year later you received $1
as a dividend and sold the share for $29. What was your holding-period
return?

a.50% (1+29-20)/20=0.5

b.40%

c.5%

d.None of the options

e.45%

31) A year ago, you invested $10,000 in a savings account that pays an ann
ún ual interest rate of 5%. What is your approximate annual real rate of
return if the rate of inflation was 3.5% over the year?

a.None of the options

b.1.5%

c.7%

d.3%ún

e.10%

32) If the Federal Reserve lowers the discount rate, ceteris paribus, the
equilibrium levels of funds lent will ....... and the equilibrium level of real
interest rates will .....

a.increase; decrease

b.decrease; decrease

c.increase; increase

d.reverse direction from their previous trends; reverse direction from their previous
trends

e.decrease; increase
33) If the annual real rate of interest is 2.5% and the expected inflation rate
is 3.4%, the nominal rate of interest would be approximately
a.4.9%.

b.7%.

c.None of the options

d.0.9%.

e.-0.9%.

34) A year ago, you invested $12,000 in an investment that produced a

return of 18%. What is your approximate annual real rate of return if the rate
of inflation was 2% over the year?

a.18%

b.2%

c.16% 18-2=16

d.15%

35) A year ago, you invested $1,000 in a savings account that pays an
annual interest rate of 6%. What is your approximate annual real rate of return
if the rate of inflation was 2% over the year?

a.4% 6-2=4

b.2%

c.6%

d.3%

36) Over the past year you earned a nominal rate of interest of 14% on your
money. The inflation rate was 2% over the same period. The exact actual
growth rate of your purchasing power was

a. 14.32%.

b. 15.02%.

c.11.76%. ( r = (1 + R)/(1 + I) - 1; 1.14/1.02 - 1 = 11.76%.)

d. 16.00%.
37) If the annual real rate of interest is 2.5% and the expected inflation rate is
3.7%, the nominal rate of interest would be approximately
a. 6.2%.

b. 2.5%.

c.3.7%.

d.-1.2%.

38) Annual percentage rates (APRs) are computed using

a.best estimates of expected real costs.

b.either simple interest or compound interest.

c.simple interest.

d.compound interest.

e.None of the options

39) Which of the following statement(s) is(are) true?

a.The realized nominal rate of interest is always greater than the real rate of interest.

b.None of the options is true.

c.Certificates of deposit offer a guaranteed real rate of interest.

d.Inflation has no effect on the nominal rate of interest.

CHAPTER1
1.Financial assets permit all of the following except

a.elimination of risk.

b.consumption timing.

c.separation of ownership and control.

d.allocation of risk.

2. ............. are examples of financial intermediaries.

a.Investment companies

b.Commercial banks
c.Insurance companies
d.All of the options

e.Credit unions

3.Which of the following financial assets made up the greatest proportion of the
financial assets held by U.S. households?

a.Personal trusts

b.Debt securities

c.Mutual fund shares

d.Life insurance reserves

e.Pension reserves

4.Security selection refers to

a.the allocation of assets into broad asset classes.x

b.investing only in "safe" securities.

c.choosing which securities to hold based on their valuation.

d.top-down analysis.

5.The sale of a mortgage portfolio by setting up mortgage pass-through securities is

an example of
a.unbundling.

b.derivatives.

c.securitization.

d.credit enhancement.

6.............. are real assets.

a.Machines

b.Stocks and bonds

c.Knowledge

d.Land

e.Land, machines, and knowledge

7.Households are increasingly likely to both directly purchase securities (perhaps via
a broker) and also place some money with a bank or thrift to meet different needs.
Match up the given investor's desire with the appropriate intermediary or direct
security. I. Money likely to be needed within six months; II. Money to be set
aside for college in 10 years; III. Money to provide supplemental retirement
income; IV. Money to be used to provide for children in the event of death. 1.
Depository institutions; 2. Insurer; 3. Pension fund; 4. Stocks or bonds. a.1,
4, 2, 3
b.1, 4, 3, 2

c.3, 2, 1, 4

d.4, 2, 1, 3

e.2, 3, 4, 1

8.The material wealth of a society is a function of

a.all physical assets.

b.all financial assets.

c.all real assets.

d.all financial and real assets.

9............. are financial assets.

a.Bonds

b.Bonds, machines, and stocks

c.Machines

d.Stocks

e.Bonds and stocks

10.The value of a derivative security

a.is unrelated to the value of the related security.

b.is worthless today

c.is unable to be calculated.

d.has been enhanced due to the recent misuse and negative publicity regarding these
instruments.

e.depends on the value of the related security.

11.Asset allocation refers to

a.the allocation of assets into broad asset classes.

b.choosing which securities to hold based on their valuation.
c.investing only in "safe" securities.

d.bottom-up analysis.

12.The .......... refers to the potential conflict between management and

shareholders.
a.liquidity problem

b.solvency problem

c.regulatory problem

d.diversification problem

e.agency problem

13.The most diversified type of depository institutions is

a.credit unions.

b.commercial banks.

c.mutual funds.

d.finance companies.

e.savings associations.

14........... were designed to concentrate the credit risk of a bundle of loans on one
class of investor, leaving the other investors in the pool relatively protected from that
risk.
a.Collateralized debt obligations

b.Derivatives

c.Stocks

d.All of the options

e.Bonds

15.Financial intermediaries (FIs) can offer savers a safer, more liquid investment
than a capital market security, even though the intermediary invests in risky illiquid
instruments because

a.FIs can diversify away some of their risk and closely monitor the riskiness of their
assets.

b.FIs can diversify away some of their risk.

c.FIs closely monitor the riskiness of their assets.
d.FIs can diversify away some of their risk and the federal government requires them to
do so.

e.the federal government requires them to do so.

16.Which of the following is true about mortgage-backed securities? I) They

aggregate individual home mortgages into homogeneous pools. II) The purchaser
receives monthly interest and principal payments received from payments made on
the pool. III) The banks that originated the mortgages maintain ownership of them.
IV) The banks that originated the mortgages continue to service them.

a.I, III, and IV

b.II, III, and IV

c.II and IV

d.I, II, III, and IV

e.I, II, and IV

17.............. financial asset(s).

a.Land is a

b.Derivatives and U.S. agency bonds are

c.Buildings are

d.U.S. agency bonds are

e.Derivatives are

18.Depository institutions include

a.all of the options presented.

b.banks and thrifts.

c.finance companies.

d.banks.

e.thrifts.

19.The means by which individuals hold their claims on real assets in a well-
developed economy are

a.financial assets.

b.derivative assets.
c.depository assets.

d.investment assets.
e.exchange-driven assets.

20.Although derivatives can be used as speculative instruments, businesses most

often use them to

a.attract customers.

b.appease stockholders.

c.offset debt.

d.hedge risks.

e.enhance their balance sheets.