Details of this Paper

finance homework mcq all correct




Question;1. Bond A has a yield to maturity of 7.90%, while bond B has;a YTM of 7.60%. This difference would be described by a bond trader as:a. there-tenths of a percentb. three percentage pointsc. 30 basis pointsd. 3 basis points2. By examining bond prices, coupons, and maturities, it is;relatively straightforward to determine _____ interest rates.a. realb. nominalc. expectedd. preferred3. The current yield of a bond is far more useful than just;looking at the coupon rate, because it utilizes the ____ instead of the;of a bond.a. par value, forward rateb. market price, face valuec. maturity date, coupon rated. cash flows, estimated payments4. Susan has selected an appropriate bond to fill a gap in;her portfolio. She has calculated the yield to maturity to be 8.3 percent, but;she knows that this yield will only be realized if:a. coupons received are reinvested at the YTMb. interest rates remain constantc. the bond is sold before the maturity dated. the bond is called5. A bond investor has three possible sources of dollar;returns. These are coupon payments, capital gains or losses, and:a. repayment of principalb. call provisionsc. risk premiumsd. interest on interest6. You can say with certainty that holding all factors;affecting bond prices constant, the price of a bond currently trading over face;value will:a. gradually decline over timeb. remain the samec. fluctuate up and downd. trend towards its arithmetic mean7. John is considering buying bonds because he expects;interest rates to decline over the next 12 months. To maximize his capital gain;potential he decides to invest in a:a. Treasury noteb. short maturity bondc. long maturity bondd. inflation indexed bond8. When bond traders fear that interest rates are heading;up, they know they can reduce their exposure to the interest rate change by;holding bonds with:a. high yieldsb. low couponsc. high couponsd. low yields9. The most accurate measure of the economic life of a bond;can be found by calculating the bond's:a. coupon yieldb. yield to maturityc. maturity horizond. duration10. Central to the concept of bond duration is the fact that;the duration of a bond that pays coupon interest will always be ______ the;bonds maturity.a. not related tob. the same asc. more thand. less than11. Consider two bonds that mature on the same date. Bond A;has a shorter duration than bond B because Bond A has a:a. higher couponb. lower couponc. higher yield to maturityd. lower yield to maturity12. Bonds appeal to a wide variety of investors because they;can offer bother _______ and ________.a. certainty of income, protection against inflationb. low risk premiums, large capital gainsc. high dividends, return of principald. liquidity, earnings growth upside13. Individual investors who want to diversify with foreign;bonds may choose a bond fund because many issues of foreign bonds do not have:a. credit ratingsb. a liquid resale marketc. redeemable couponsd. fixed maturities14. The bond market favors the Federal Reserve pursuing a;tight monetary policy because it will likely reduce the potential of bond price;declines due to:a. economic growthb. demand for Treasury securitiesc. inflationd. investors' appetite for stocks15. A yield curve graphically displays the term structure of;interest rates because it shows interest rates for bonds that are identical;EXCEPT for:a. maturityb. couponc. ratingd. yield16. You observe that the yield curve has a steep upward;slope. The liquidity preference theory explains this shape as being the result;of investors' expectations of future interest rates, combined with a/an:a. rate inversionb. market segmentationc. impending recessiond. risk premium17. Two companies have bonds outstanding that have identical;maturities and coupon rates. The bond of company A are trading at a yield to;maturity 100 basis points higher than the bonds of company B. The MOST LIKELY;explanation for this yield spread is that since the date of issue, company A;has had a change in its:a. taxable statusb. credit ratingc. expected growth rated. market position18. You have chosen a passive bond investment strategy and;are building a portfolio of bonds with a variety of maturities. These types of;strategies are most common among investors who prefer NOT to:a. utilize the yield curveb. invest in Treasury issuesc. time the marketd. be subject to credit risk19. Becky has chosen to use an immunization strategy to;structure her bond portfolio. Her primary reason for this decision is to offset;with__________.a. price risk, reinvestment rate riskb. price risk, liquidity riskc. maturity risk, coupon riskd. maturity risk, liquidity risk20. Under an active bond investment strategy, the investor;who expects interest rates to decline will MOST LIKELY seek to generate capital;gains by making what change to his bond portfolio?a. Shift to low coupon bondsb. Reduce maturitiesc. Decrease weighting of high yield bondsd. Increase durationPlease rate my solution by clicking smiley face so that I;get paid.;1. A single;option contract represents the right to buy or sell ______ share(s) of the;underlying stock. a. 1b. 10c. 100d. 10002. Options grant the holder the right to either buy or sell;shares within a certain time period at an established price, also known as the;price. a. Premiumb. Strikec. Targetd. Option3. The vast majority of options contracts held by investors;are ultimately closed out:a. Through being exercisedb. By the investor selling them in the secondary marketc. Through termination by the options clearinghoused. By assignment to another investor4. For the holder of a call option, the contract will have;value at the expiration date if the price of the underlying stock is _____ the;strike price. For a put, the economics are ______. a. Above, reversedb. Below, reversedc. Above, the samed. Below, the same5. Assume you own a call option on IBM stock. The strike;price is $50, you paid a $2 premium for the option, and at expiration the price;of IBM stock is $47. Your gain/loss on this option contract will be: a. $(5)b. $(2)c. $0d. $36. Assume you own 200 shares of Wal-Mart stock, with today?s;market price at $38. You decide to write two covered calls on this stock;position, at a strike price of $40, receiving a premium of $3 per share. At;expiration the price of Wal-Mart stock is $41. Your gain/(loss) per share from;today until expiration date on the stock and the option contract is: a. $2b. $3c. $4d. $57. An investor who buys 100 shares of a stock, plus one put;option on the stock, owns a position where her per share downside risk;is______, while her per share upside potential is ________. a. Minimal, largeb. Zero, moderatec. Limited, infinited. Large, finite8. You own a call option contract. The strike price is $25;and the underlying stock is currently trading at $27.50. The option has 60 days;until the expiration date. Without looking up the current trading price of the;option you know it is greater than $2.50 because option values are determined;by intrinsic value plus _______value. a. Excessb. Speculativec. Tradingd. Time9. A key point in the use of options is that their impact on;the returns and risks of a stock portfolio are NOT: a. Symmetricalb. Magnifiedc. Leveragedd. Measurable10. A primary difference between options on individual;stocks and stock-index options is that stock-index options are always:a. Settled with cashb. Less volatilec. Higher pricedd. Written on the S&P 500 index11. The primary reason forward and futures markets exist is;to give investors more choices to: a. Speculateb. Manage riskc. Traded. Control commodities12. Futures markets can be distinguished from forward;markets primarily by the standardized nature of contract size, delivery date;and conditions, leaving only _____ and ______ for traders to negotiate. a. Terms, priceb. Settlement, cash valuec. Price, number of contractsd. Clearing procedures, settlement13. Assume you own five contracts for delivery of gold at a;specified price. Eventually you will close out the position. Settling your;obligation with: a. A counterpartyb. The securities and exchange commissionc. The national futures associationd. The clearinghouse14. Although it is acceptable to close out a futures;position by delivery of the underlying item, the great majority of futures are;closed through: a. Swapb. Redemptionc. Reversald. Offset15. Every day all futures contracts are revalued. This;provides investors with a reckoning of profits or losses on positions and;determines margin requirements through a process called:a. Market to the marketb. Daily settlementc. Re-valuationd. Continuous pricing16. Hedging is a critically important reason for futures;markets to exist, allowing the owner of an underlying item to establish a known;future sales price for that item. The basic procedure a futures hedger uses to;control risk is to establish a futures position:a. Similar to the ownership ratiob. Opposite to the position in the cash marketc. That is long, when inventory is ownedd. That is short, when inventory is anticipated17. Futures markets would not be nearly as efficient without;the presence of speculators, who provide the markets with:a. Risk inversionb. Variabilityc. Liquidityd. Hedge bandwidth18. One of the primary reasons for the growth in financial;futures is that portfolio managers seeks opportunities to protect themselves;against: a. Extended bear marketsb. Risk of defaultc. Movements in interest ratesd. Political uncertainty19. Assume you are a portfolio manager with treasury bonds;you intend to sell in two months. You are concerned that price movements will;erode the value of your bonds. A likely financial choice to reduce your risk is;a/an ______hedge. a. Shortb. Longc. Anticipatoryd. Net-price20. As a stock portfolio manager, your frequently use stock;index futures to hedge your downside risk. You know that a stock index future;is only a partial hedge, meaning your portfolio will still be subject to;risk. a. Time valueb. Interest ratec. Systematicd. Basis;="msonormal">="msonormal">


Paper#49983 | Written in 18-Jul-2015

Price : $32