Complete the mcq:
1.Which of the following is not true about bond indexes?
Bond indexes is another name for the Dow Jones Industrial Average.
There is more than one kind of bond index.
Bond indexes are made up only of indexed stock funds.
Bond indexes include all different kinds of corporate bonds.
2. What does the reward to variability ratio refer to?
The amount of added return that investors expect for an added amount of risk
A measure of a security's variability of returns
Profit as a percentage of sales
A measure of profit/standard deviation of returns Instructor Explanation
3. The degree of risk of a particular investment is a function of ______.
its average return
its variability of return as measured by the variance or standard deviation of returns
its maximum return over many periods
market conditions affecting one industry more than another
4. Which of the following sets of terms mean about the same thing?
Systematic risk,
diversifiable risk,
unique risk Market risk and nondiversifiable risk
Firm-specific risk and diversifiable risk Two of the
5. Which of the following can be said about
average bond versus stock returns over the long run?
They have been about equal.
Bonds have averaged about a 6% return and stocks about 5%.
Bonds have averaged about 11.2% and stocks 10.2%.
Bonds have averaged about 6% and stocks about 11
6. An investor's investment opportunity set _______.
is a list of the all good stocks he or she has the opportunity to buy below par
is always lowest when risk is maximized
contains numerous combinations of risk and return on bonds
contains numerous combinations of risk and return from the securities available to the investor
7. The degree of risk of a particular investment is a function of
its average return
its variability of return as measured by the variance or standard deviation of returns
its maximum return over many periods
market conditions affecting one industry more than another
8. A disadvantage of just-in-time inventory techniques is __
increased cycle time and lower inventories
increased frequency of restocking and reduced inventory levels
problems affecting many people
None of the above
9. In the purchase and sale of securities, the "spread" refers to the difference between _______.
the IPO offering price and what larger investors are willing to pay
a stock's par value and its strike price
a preferred stock's par value and its conversion value
what a dealer pays for a share and what he or she sells it for:
10. Serial bonds _______:
increase risks for the investor
are retired on a schedule
increase risks for the company
None of the above
11. What does the derivative market refer to? Student Answer:
Securities that always have a fixed income
The market for international securities
A special kind of bonds
Securities whose value is determined by the value of another asset
12. Preferred stock has similarities to both common stock and bonds. How is it similar to bonds?
Preferred stockholders do not get a vote as common shareholders would on important issues pertaining to the company.
The interest received on preferred is taxed just like interest on debt.
The payments of both are fixed in dollar amount assuming the board of directors authorizes payment of preferred dividends.
None of the above
13. A sinking fund bond would be of particular interest to ____
risk-loving investors
risk-averse investors
common stockholders
None of the above
14. Which is true about callable bonds?
They are of great benefit to the bondholder and the investor.
They could be of great value to the bondholder during a time of rising interest rates
They could be of benefit to the issuing company during a time of falling interest rates.
None of the above
15. The statement of cash flows _______.
is based on historical asset values
tells you what your revenues were describes
the sources of and uses of cash
tells you how much cash is needed for next months payment of bills
16. To what does the term structure of interest rates refer?
The fact that long-term interest rates are always higher than short-term interest rates
The relationship between bond maturities and interest rates
Why the expectations theory and liquidity preference theory are contradictory
None of the above
17. Which of the following is true about preferred stock
It is considered as a liability on the balance sheet
It almost always has voting privileges like common stockholders
It is always used in stock option plans
It will always be given dividend preference over common stockholders
18. The balance sheet ________.
Gives a list of the company's assets and who owns them: creditors or owners
Is usually done in the middle of an accounting period
lists assets at their true market value
tells you if the company is profitable
19. Fiscal policy ________.
refers to the Federal Government's adjusting of taxes and government spending
is the best way to always handle unemployment
is usually less cumbersome to implement than monetary policy
usually takes years to have an
20. A bond's yield is determined from what?
Actual price paid/par value
Coupon/par value
Coupon/actual price paid
None of the above