Security and investment problem

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Please select the correct response in these multiple-choice questions. Highlight in yellow. No further actions needed aside from highlighting the correct response.

1. What entity guarantees up to $500,000 in securities in a brokerage account, $250,000 of which can be cash, from loss due to theft or fraud?

A. FIDC

B. SEC

C. Federal Reserve

D. SIPC

2. You invested $25,000 in a mutual fund three years ago when the NAV of the fund was $38. Today, the NAV has appreciated to $40.22. You've gained an additional 89.32 shares by reinvesting fund distributions. The fund levies a contingent deferred sales charge of 5 percent the first year with the charge decreasing by 1 percent each year. How much money will you receive if you redeem your shares today?

A. $30,883.98

B. $29,451.73

C. $27,652.12

D. $28.872.41

3. You purchased five call option contracts with a strike price of $60 and an option premium of $2.14. You closed your contract on the expiration date when the stock was selling for $64 per share. What's your total profit or loss on the investment?

A. –$524

B. $1860

C. –$811

D. $930

4. What's the term for an investment company that stands ready to repurchase shares at any time?

A. Hedge fund

B. Special purpose vehicle

C. Open-end fund

D. Closed-end fund

5. Of the decisions listed below, which would best be categorized as asset allocation?

A. Deciding to buy a stock on margin instead of using cash

B. Opening an account with a full service broker

C. Changing a portfolio so that it's invested in 70 percent bonds and 30 percent stocks instead of 60 percent bonds and 40 percent stocks

D. Purchasing a stock of a company you're familiar with over one that you know nothing about

6. You purchased 1,500 shares of stock at $68 a share. The stock is currently selling for $72 a share. The initial margin was 60 percent and the maintenance margin is 40 percent. What's your current margin equity?

A. 72.44%

B. 61.82%

C. 66.41%

D. 62.22%

7. A stock has an average historical risk premium of 6.5 percent. The expected risk-free rate for next year is 3.2 percent. What's the expected rate of return on the stock next year?

A. 3.3 percent

B. 8.4 percent

C. 6.5 percent

D. 9.7 percent

8. Nine months ago, you bought 500 shares of a mutual fund at an offering price of $28 per share. The fund charges a front-end load of 3.5 percent and has total annual expenses of 1.24 percent. The fund's NAV today is $26.89. There were no fund distributions during these nine months. What's your holding period return on this investment?

A. –4%

B. 4%

C. 3.2%

D. –2%

9. A year ago, you bought 500 shares of Apple stock at $98.44 a share. Over the past year, you received a total of $823 in dividends from the stock. Today, you sold your shares for $112.24 per share. What's your total return on this investment?

A. 15.69%

B. 12.44%

C. 18.32%

D. 16.21%

10. The capital gains yield is equal to

A. (Pt + 1 - Pt + Dt)/Pt.

B. Dt + 1/Pt.

C. (Pt + 1 - Pt)/Pt.

D. (Pt - Pt + 1 + Dt + 1)/Pt + 1.

11. What type of asset is an option?

A. Future

B. Private equity

C. Fixed-income

D. Derivative

12. You purchased 1,200 shares of stock on margin for $53 per share and sold the shares 3 months later for $58.60 per share. The initial margin requirement was 55 percent and the maintenance margin was 35 percent. The interest rate on the margin loan was 8 percent. You received no dividend income. What was your holding period return?

A. 17.62%

B. 16.87%

C. 15.48%

D. 18.92%

13. A taxable money market fund has an annual return of 3.85 percent. What's the equivalent after-tax yield if the tax rate is 32 percent?

A. 2.62%

B. 2.87%

C. 4.51%

D. 4.23%

14. An asset had annual returns of 13, 12, 8, and –5 percent over the last four years. What's the variance of these returns?

A. .00782

B. .02342

C. .01234

D. .00687

15. What is often used as a proxy for the risk-free rate?

A. High quality corporate bonds

B. U.S. Treasury bills

C. Money market instruments

D. Large-cap stocks

16. You own one futures contract on gold that you bought at a quoted price of 954.2. The current price quote is 989.3. The contract size is 100 ounces, and the quotes take the form of dollars and cents per ounce. What's your current profit or loss on this investment?

A. ($3,120)

B. $2,824

C. ($2,462)

D. $3,510

17. Which of the following is a commonly used measure of volatility?

A. The risk premium

B. Total return

C. Standard deviation

D. Dividend yield

18. A company's stock had the following returns over the past five years: 12.1, 15, 7.2, 9, and 5 percent. What's the geometric average return?

A. 7.14%

B. 10.45%

C. 8.23%

D. 9.60%

19. How is a stock in a margin account typically held?

A. In the name of the company whose stock was purchased

B. In the name of the client

C. In the name of the account from which the stock was borrowed

D. In street name

20. A year ago, you bought 800 shares of a stock for a total of $13,200. The stock paid a dividend of $2.15 per share. Today, you sold those shares for $24.25 per share. What was your capital gains yield on this investment?

A. 52.15%

B. 32.15%

C. 46.97%

D. 42.73%

1. Which of the following is the subject of event study?

A. The analysis of company earnings reports

B. The analysis P/E ratios

C. How stock prices react when two firms merge

D. The ratio of stock price movement to the movement of the market as a whole

2. What's the third market?

A. The CME

B. The NASDAQ

C. The market where initial public offerings are conducted.

D. The off-exchange market where exchange-listed securities trade

3. Which of the following pricing patterns indicates a potential reversal from the main trend line according to technical analysis?

A. Hook and ladder

B. Cup and handle

C. Support and resistance

D. Head and shoulders

4. Which of the following statements about the Free Cash Flow model is true?

A. It can be used to value a company with negative earnings

B. It directly estimates a value for a firm's equity

C. It's based on firms having positive or negative cash flows

D. It requires that a firm pay a dividend

5. Which of the following best describes a support level?

A. The maximum price which the market can bear for a stock

B. The minimum expected return amount for a stock

C. The minimum price at which a stock is expected to trade

D. The maximum point of a range in which a stock is expected to trade

6. What are investors who use the MACD indicator most likely to do when the MACD rises above the signal line?

A. Take no action

B. Buy a put on the security

C. Buy the security

D. Sell the security

7. What is a floor trader?

A. A futures market maker

B. A specialist who makes a market in stocks on the NYSE

C. A NYSE member who trades solely for his or her own account

D. A NASDAQ market maker

8. The process of purchasing newly issued shares from the issuer and reselling those shares to the general public is called

A. brokering.

B. securing.

C. underwriting.

D. capitalizing.

9. Marco Painting Supplies is a publicly-traded firm with 250,000 shares of stock outstanding. If the firm issues an additional 10,000 shares, those shares will be referred to as a/an

A. supplemental offering.

B. initial public offer.

C. seasoned equity offering.

D. market expansion offer

10. A firm has a dividend payout ratio of 55 percent and annual dividends of $1.82 per share. What's the firm's retention ratio?

A. .45

B. .55

C. .38

D. .10

11. A company just announced that it will pay an annual dividend equal to $2.45 one year from now. Two years from now, it expects to pay a $35 a share liquidation dividend, after which the company will end operations. What's the current value per share if the discount rate is 9 percent?

A. $29.58

B. $31.71

C. $22.45

D. $33.84

12. Where do sales of newly issued shares by the issuer to a shareholder occur?

A. Primary market

B. NASDAQ

C. Secondary market

D. Third market

13. Which of the following technical trading techniques signals changes in the market's primary direction?

A. Fibonacci numbers

B. Elliot Wave theory

C. Dow theory

D. Relative strength

14. A company recently paid an annual dividend of $.65 a share and plans to increase future dividends by three percent annually. The discount rate is 12 percent. What will the value of this stock be four years from now?

A. $6.93

B. $9.52

C. $7.61

D. $8.37

15. The following are the daily returns for both the overall market and for Super Duper Travel, Inc.

Date	R(m)	Super Duper Travel
December 12	1.40%	1.20%
December 13	0.80%	1.35%
December 14	–0.25%	–0.35%
December 15	–0.80%	–1.20%
December 16	0.32%	0.54%
December 17	1.12%	2.20%

What's the cumulative abnormal return on Super Duper Travel, Inc. over these 6 days?

A. 0.85

B. –0.63

C. 0.42

D. –0.95

16. What does the retention ratio measure?

A. The percentage of a firm's net income which is retained to pay debt

B. The proportion of a firm's income which is devoted to paying dividends

C. The percentage of a company's net income that's reinvested in the company

D. The percentage of a firm's EBITDA used to fund dividend payments

17. What concept theorizes that investors value money differently depending on its source?

A. House money

B. Money illusion

C. Clustering effect

D. Law of small numbers

18. Taking credit for investment wins and blaming the losses on bad luck is characteristic of

A. self-attribution bias.

B. money illusion.

C. clustering effect.

D. law of large numbers.

19. How do the geometric and arithmetic average dividend growth rates compare when the annual growth rates are positive?

A. The arithmetic average dividend growth rate is generally larger than the geometric average growth rate

B. The arithmetic average dividend growth rate is generally smaller than the geometric average growth rate

C. The arithmetic average dividend growth rate is approximately equal to the geometric average growth rate

D. The two rates are unrelated

20. An index consists of the following securities and has an index divisor of 2.5.

Stock	Shares Outstanding	Beginning Share Price	Ending Share Price
A	4,000	$52	$45
B	8,000	$18	$26
C	2,000	$33	$39
D	12,000	$51	$57

What's the price-weighted index return?

A. 8.44%

B. 10.33%

C. 11.54%

D. 9.32%

1. A bond pays semiannual interest payments of $85.40. What's the coupon rate if the par value is $1,000?

A. 14.55%

B. 16.23%

C. 15.89%

D. 17.08%

2. Money market rates are generally one or the other of which two rates? I. bank discount rate II. bond equivalent rate III. annual percentage rate IV. effective annual rate

A. I and IV only

B. II and III only

C. II and IV only

D. I and III only

3. The following premiums apply to a 9-month bond:

Interest rate risk premium	0.43 percent
Liquidity premium	0.58 percent
Default premium	2.35 percent
Inflation premium	4.11 percent
Real rate	4.49 percent

What's the expected nominal interest rate on a 9-month risky security given these values?

A. 11.62%

B. 10.86%

C. 10.51%

D. 11.96%

4. What's the expected future interest rate implied by current interest rates?

A. Real rate

B. Forward rate

C. Nominal rate

D. Discount rate

5. A Treasury bill has 50 days left to maturity. The bank discount yield on the bill is 4.23 percent. What's the effective annual rate?

A. 4.87%

B. 5.11%

C. 4.40%

D. 4.59%

6. What's the one-year interest rate one year from now if the current one-year interest rate is 3.87 percent and the two-year interest rate is 4.53 percent? Assume the rates are effective annual rates.

A. 5.27%

B. 4.65%

C. 5.19%

D. 4.87%

7. What's the risk that the bonds in a dedicated portfolio will decrease in value in response to an increase in interest rates?

A. Systematic risk

B. Inflation risk

C. Reinvestment risk

D. Price risk

8. A bond has 6 years to maturity, a 12 percent coupon, a $1,000 face value, and pays interest semiannually. What's the bond's current price if the yield to maturity is 8.52 percent?

A. $1,232.45

B. $987.19

C. $1,161.52

D. $993.52

9. A $100,000 face value STRIPS matures in 8 years and has a yield to maturity of 5.80 percent. What's the current dollar price of this security?

A. $59,587.23

B. $59,945.84

C. $58.872.13

D. $58.561.54

10. Which of the following statements best describes immunization?

A. Creating a portfolio that has the lowest possible reinvestment risk

B. Building a portfolio in a way that maximizes its total return while minimizing risk.

C. Building a portfolio that has minimal interest rate risk

D. Creating a portfolio that minimizes the uncertainty of the portfolio's maturity target date value

11. Why might you want to match bond durations to the target date of your portfolio?

A. To reduce its duration

B. To immunize it

C. To maximize total return

D. To reduce interest rate risk

12. What term is used to describe a postdated check with payment guaranteed by a bank?

A. Construction loan

B. Banker's acceptance

C. Certificate of deposit

D. Commercial paper

13. A Treasury bill has a face value of $200,000, a price of $198,632.15, and matures in 52 days. What's the asked yield?

A. 5.32%

B. 4.98%

C. 5.11%

D. 4.83%

14. A Treasury bill has 65 days left to maturity. The bank discount yield on the bill is 4.25 percent. What's the effective annual rate?

A. 4.42%

B. 4.37%

C. 5.16%

D. 4.23%

15. A coupon rate exceeds both the yield to maturity and the current yield for which type of bond?

A. Par value

B. Callable

C. Discount

D. Premium

16. Which one of the following applies to "Yankee bonds"?

A. Foreign-issued bonds sold in the U.S.

B. U.S. government bonds that are sold internationally

C. U.S. corporate bonds denominated in a foreign currency

D. Any bond that is denominated in U.S. dollars

17. What's the yield to call?

A. The yield that a bond earns when it's held beyond the call date

B. The bonus yield paid to bondholders when a bond is called

C. The yield that a bond earns when it's bought back at the earliest possible date

D. The current yield plus the risk-free yield

18. A zero-coupon bond has a par value of $1,000 and matures in 8.6 years. The yield to maturity is 7.3 percent. What's the Macaulay duration?

A. 4.3 years

B. 2.1 years

C. 6.9 years

D. 8.6 years

19. What's the invoice price of a bond called?

A. Bid price

B. Dirty price

C. Clean price

D. Quoted price

20. What are Eurodollars?

A. Foreign currency deposited in U.S. banks

B. U.S dollar-denominated deposits held in a foreign bank

C. European currency that's used to purchase goods in the U.S.

D. Banker's acceptances issued by U.S. banks for use overseas

1. You have a portfolio which has an average return of 13.8 percent. In any given year, you have a 5.0 percent probability of earning either a zero or a negative annual return. What's the approximate standard deviation of your portfolio given the following information?

Probability of Loss	"z" Value
1.0%	2.326
2.5%	1.960
5.0%	1.645

A. 7.56%

B. 8.39%

C. 8.58%

D. 7.89%

2. Your portfolio actually earned 9.3 percent for the year. You were expecting to earn 12.5 percent based on the CAPM formula. What's Jensen's alpha if the portfolio standard deviation is 15.2 and beta is .84?

A. 2.8%

B. 3.2%

C. –3.2%

D. –2.8%

3. How can unsystematic risk be eliminated?

A. By reducing a portfolio's standard deviation

B. By increasing a portfolio's beta

C. Through portfolio immunization

D. Through portfolio diversification

4. The extent to which the returns on two assets move together is called

A. covariance.

B. standard deviation.

C. diversification.

D. correlation.

5. If a security plots above the security market line (SML),

A. it's considered to be a poor purchase because it is overpriced.

B. it's considered to have a high degree of risk in relation to the market average.

C. it's considered to be a good purchase because it is underpriced.

D. it's considered to have low degree of risk in relation to the market average.

6. Which of the following statements best describes a performance evaluation?

A. An analysis of current market trends to determine future investment opportunities

B. An assessment of a money manager's ability to balance high returns with an acceptable level of risk

C. An assessment of the level of risk in a portfolio to determine whether immunization is necessary

D. An accounting of a portfolio's raw return

7. Which formula's primary purpose is to evaluate the probability of a significant loss?

A. Treynor ratio

B. Value-at-Risk

C. Asset intensity

D. Jensen's alpha

8. If the reward-to-risk ratio for two individual securities is equal, what does this mean according to the capital asset pricing model?

A. The risk involved in investing in the securities does not justify the potential reward.

B. The securities are priced lower than they should be.

C. The securities are priced higher than they should be.

D. The securities are correctly priced.

9. What does the Sharpe ratio measure?

A. A security's return relative to the return of the market

B. A security's expected return as compared to its standard deviation

C. The amount of risk associated with a security as a function of its correlation to the market

D. A security's return relative to the total risk associated with that security

10. Which of the following values would be the best Sharpe ratio to have?

A. –0.56

B. .98

C. –1.03

D. 1.12

11. Your portfolio has a standard deviation of 18.8 percent and an average return of 12.2 percent. Given the following information, you have a 2.5 percent chance of losing what percentage in a given year?

Probability of Loss	"z" Value
1.0%	2.326
2.5%	1.960
5.0%	1.645

A. –12.348%

B. –15.324%

C. –23.491%

D. –24.648%

12. You have one risk-free asset and one risky stock in your portfolio. The risk-free asset has an expected return of 5.8 percent. The risky stock has a beta of 1.8 and an expected return of 12.3 percent. What's the expected return on the portfolio if the portfolio beta is .958?

A. 08.54%

B. 12.95%

C. 10.63%

D. 09.26%

13. Which one of the following is eliminated, or at least greatly reduced, by increasing the number of individual securities held in a portfolio?

A. Various expected returns caused by changing economic states

B. Non-diversifiable risk

C. Number of economic states

D. Diversifiable risk

14. Which one of the following statements best describes an investment opportunity set?

A. A grouping of market sectors based upon their levels of risk

B. An efficient portfolio that provides the highest possible return given its risk profile

C. A portfolio consisting of only stocks with above-average betas

D. A collection of possible risk-return combinations available from portfolios consisting of individual assets

15. What type of security has a beta of 0?

A. High-risk security

B. Moderate-risk security

C. Fixed-income security

D. Risk-free security

16. A stock has an expected return of 18 percent in a boom economy and 11 percent in a normal economy. The probability of a boom is 25 percent and the probability of a normal economy is 75 percent. What's the variance of the expected returns?

A. 9.19

B. 12.34

C. 5.81

D. 7.59

17. To reduce risk as much as possible, you should combine assets which have one of the following correlation relationships?

A. Strongly negative

B. Strongly positive

C. Slightly negative

D. Slightly positive

18. The one-year standard deviation of your portfolio is 11.3 percent. What's the two-year standard deviation?

A. 15.98%

B. 15.72%

C. 16.54%

D. 16.21%

19. The market has a standard deviation of 13.4 percent (0.134) while a risky security has a standard deviation of 27.2 percent (0.272). The covariance of the stock with the market is .0173. What's the beta of the stock?

A. 1.15

B. .96

C. .89

D. 1.04

20. You own a stock that will produce varying rates of return based upon the state of the economy. Which one of the following will measure the risk associated with owning that stock?

A. Rate of return for a given economic state

B. Correlation between the returns give the various states of the economy

C. Variance of the returns given the multiple states of the economy

D. Weighted average return given the multiple states of the economy

1. Which of the following best explains why many corporations issue employee stock options?

A. To replace employer-provided insurance benefits

B. To align management and shareholder interests

C. To provide an employee benefit in place of a retirement plan

D. To reduce the cost of employee compensation

2. Your broker requires an initial margin of $7,050 per futures contract on wheat and a maintenance margin of $5,000 per contract. Wheat futures contracts are based on 5,000 bushels and quoted in cents per bushel. You sold one wheat futures contract yesterday at the closing settlement price quote of 723. Today, the settlement quote is 854. Will you receive a margin call and if so, for what amount? All margin calls restore the margin level to its initial level.

A. No

B. Yes; $4,500

C. Yes; $550

D. Yes; $6,550

3. A 3-month put option has a strike price of $55.50. The price of the underlying stock is $53.48. What's the intrinsic value of this put?

A. $0

B. $1.98

C. $1.02

D. $2.02

4. Silver is currently trading for $18.32 an ounce, while the six- month futures price is $18.54. If you believe that silver will actually sell for $18.89 in six months, which of the following positions in silver should you take today?

A. Take a short position in the futures market

B. Take a long position in the future market

C. Take a short position in the spot market

D. Sell in the future market

5. Which of the following statements defines a European-style option?

A. An option that can be exercised at any time

B. An option that can only be exercised at expiration

C. An option that's in-the-money

D. An option that's out-of-the-money

6. Suppose you purchase 5 put option contracts on a stock when the strike price is $65.00 and the option premium is $2.45. On the expiration date the stock is valued at $63.65 a share. What's the payoff on the option contracts?

A. $675

B. $400

C. $0

D. $525

7. Suppose you have an equity portfolio valued at $15.6 million with a beta of 1.57. You decide to hedge the portfolio using SPX call option contracts. The S&P 500 index is currently 1946. The option delta is .823. How many option contracts must you write to effectively hedge the portfolio?

A. 138 contracts

B. 153 contracts

C. 128 contracts

D. 146 contracts

8. A stock is currently priced at $44 a share while the $45 call option is priced at $1.22. The call option delta is .86. What is the approximate call price if the stock increases in value to $45?

A. $2.08

B. $1.98

C. $0.96

D. $0.26

9. What's the difference between the cash and futures price of a commodity?

A. Spot

B. Margin

C. Basis

D. Forward

10. How are stock prices and call options related?

A. Directly

B. Negatively correlated

C. Not related

D. Inversely

11. In 2007, the Chicago Mercantile Exchange merged with which one of the following exchanges?

A. Chicago Board of Trade

B. New York Board of Trade

C. Intercontinental Exchange

D. New York Futures Exchange

12. You write a covered call with a strike price of $65 and an option premium of $2.35. Assume the stock price is $65.22 currently and that it falls to $64 and remains there until the option expires. What will be the result?

A. Keep your stock but lose the option premium

B. Lose your stock and the option premium

C. Keep both your stock and the option premium

D. Lose your stock and keep the option premium

13. Time value is calculated by which of the following?

A. Strike price minus the option premium

B. Option premium plus the intrinsic value

C. Strike price plus the option premium

D. Option premium minus the intrinsic value

14. How does the Black-Scholes option model express time?

A. Semi-annually

B. In two-year periods

C. On a quarterly basis

D. In terms of years

15. The 6-month futures price on a non-dividend-paying stock is $54.42. The risk-free rate is 3.52 percent and the market rate is 12.51 percent. What's the spot rate for this stock if spot-futures parity exists?

A. $48.37

B. $55.12

C. $52.81

D. $53.49

16. Sugar is currently selling for $0.201 a pound while the 6-month futures price is $0.208. You take a long position in the 6-month sugar futures. Which one of the following prices would cause you the greatest loss if that price turns out to be the actual price of sugar per pound 6 months from now?

A. $0.198

B. $0.208

C. $0.205

D. $0.201

17. Given a set of variables, the Black-Scholes option pricing formula has a call option delta of .496. What is the put delta given these same variables?

A. -.504

B. 1.496

C. -1.496

D. .504

18. Suppose you own 300 shares of a stock which is currently worth $18 a share. You just paid an option premium of $.65 to buy one put contract on this stock with a strike price of $15. What's the maximum loss per share you are avoiding by purchasing the option contract?

A. $15

B. $15.65

C. $18

D. $13

19. Which of the following best describes a speculator?

A. An investor who invests only in risk-free securities

B. An investor who purchases Treasury bills

C. An investor who accepts the risk of loss for the chance to earn a profit

D. An investor who purchases government bonds

20. Which one of the following statements is true regarding futures contracts?

A. The seller of a futures contract has the option to deliver cash in an amount equal to the contract value in lieu of the underlying asset.

B. Futures contracts generally grant the buyer the option to accept only a portion of the contract.

C. Cost and convenience are the two key considerations when establishing the settlement procedures.

D. Futures prices are generally set equal to the spot price on the delivery date.

1. Which of the following is one of Michael Porter's Five Forces?

A. Inflation risk

B. Bargaining power of buyers

C. Threat of new technology

D. Interest rate risk

2. A corporate bond yields 8.5 percent and a municipal bond yields 5.2 percent. What's the critical marginal tax rate?

A. 40.23%

B. 38.82%

C. 41.78%

D. 39.35%

3. Which of the following is a characteristic of a defensive sector?

A. Rapid growth

B. Low dividend yield

C. High payout ratio

D. Low sensitivity to the business cycle

4. A conversion provision enables a bondholder to

A. exchange a bond for cash after a certain amount of time.

B. exchange a bond for government bonds of equal value after a certain amount of time.

C. sell a bond back to the company at par at any time.

D. exchange a bond for a prescribed number of shares of the same issuer.

5. What's the discount basis?

A. Buying Treasury bonds at a premium to face value

B. Buying a corporate bond for less than par value

C. Buying STRIPS at a discount

D. Selling Treasury bills at less than face value

6. Consider the following information on GDP and CPI for an economy over the last 4 years:

	GDP	CPI
2012	112.4	101.2
2013	118.3	102.1
2014	118.3	102.9
2015	122.8	103.8

Based on the table, calculate nominal GDP growth for 2015.

A. 2.51%

B. 3.80%

C. 2.89%

D. 3.95%

7. Which of the following is best described by a situation of rapid income growth, low unemployment and low inflation?

A. Recession

B. Trough

C. Goldilocks scenario

D. Bubble

8. Which of the following best describes a private activity bond?

A. A federal government agency bond comprised of mortgage securities

B. A taxable municipal bond used to finance a facility used by a private business

C. A tax-free municipal bond used to finance public facilities

D. A municipal bond that is backed by the full faith and credit of a municipality

9. Regulation FD requires companies to do which one of the following when disclosing material non-public information?

A. Only disclose the information after a 7-day advance notice of an announcement

B. Disclose the information without preference to any party or parties

C. Advise the SEC 7 working days prior to such disclosure

D. Disclose the information only after a 24-hour delay

10. Which of the following is operating cash flow generally used for?

A. Computing earnings per share

B. Calculating the payout ratio

C. Calculating cash flow per share

D. Computing the asset retention ratio

11. What's an indenture agreement?

A. The summary of the prospectus agreement for an IPO

B. The entire formal contract between a bond issuer and the bondholders

C. A summary of the agreement between a bond issuer and the bondholders

D. A red herring

12. A sinking fund is an account used for which of the following purposes?

A. To provide for scheduled redemptions of outstanding bonds

B. To store stock certificates to be used for convertible bonds

C. To provide funds to make interest payments if a corporation experiences financial distress

D. To make dividend payments to shareholders

13. When a bond is called, you're paid the present value of all bond payments that won't be paid because of the call only if what provision is present?

A. Conversion

B. Call

C. Make-whole

D. Most favored nation

14. What does a negative clause do?

A. It prevents a bond issuer from calling bonds without paying a premium to the bondholders.

B. It forces the issuer to establish a sinking fund to redeem bonds as they come due.

C. It prohibits the issuing of any further bonds without the permission of the existing bondholders.

D. It prevents a bond issuer from issuing new debt with seniority over current debt.

15. Which of the following is cash generated by a firm's normal business activities?

A. Net income

B. Retained earnings

C. Operating cash flow

D. Paid-in capital

16. What's the stop-out bid in a U.S Treasury auction?

A. The highest bid placed

B. The imputed bid

C. The lowest bid placed

D. The lowest accepted competitive bid

17. Which of the following best describes an exchangeable bond?

A. A bond that can be converted into shares of stock of a firm other than the bond issuer

B. A bond that can be exchanged for another bond by the same issuer with a higher yield

C. A convertible bond that allows bondholders to exchange their shares into the company's stock at a time of their choosing

D. A bond that can be converted into shares of stock of the firm issuing their bonds at a specified rate

18. What's the Fed Funds Rate?

A. The rate at which commercial banks borrow from the Federal Reserve discount window

B. The discount rate minus the rate of inflation

C. The short-term rate at which banks lend to each other

D. The prime rate plus the CPI

19. A credit rating is based on which of the following?

A. The financial condition of the bond issuer

B. An analysis of the Value-at-Risk of a portfolio

C. Current value of a stock

D. Future growth prospects of a stock

20. Of the following uses of proceeds from private activity bonds, which will most likely qualify as exempt from federal taxes?

A. Football stadium

B. Public transportation hub

C. Dance hall

D. Office building