1. Your broker quotes you an ask price of $21 for Stock XYZ and a bid price of $20. Which of the following is a FALSE statement?
A. It would cost you $20 to purchase one share of the stock.
B. You could sell one share of the stock for $20.
C. The bid-ask spread is $1.
D. It would cost you $21 to purchase one share of the stock.
E. Your broker makes money by selling the stock for more than she is willing to buy it for.
2. A bond whose coupon is determined, typically each quarter, based on market interest rates is called a________ bond:
A. putable
B. zero-coupon
C. floating rate
D. cat
E. convertible
3. If the interest rate (discount rate) increases, then
A. The present value of an annuity goes up but the future value of an annuity goes down.
B. The present value and future value of an annuity must go down.
C. The present value of an annuity goes down but the future value of an annuity goes up.
D. The present value and future value of an annuity must go up.
E. The present value and future value of an annuity will remain the same.