1. Which of the following bonds generally has the lowest interest rate?
Treasury bonds
Corporate Baa bonds
Municipal Aaa bonds
Corporate Aaa bonds
2. The expectation of accelerating inflation and rising interest rates could logically be expected to:
raise short term interest rates relative to long term rates
raise bond prices
flatten the yield curve
cause borrowers to shun/avoid short term borrowing
3. "An approximation of the yield to maturity that equals the yearly coupon payment divided by the price of a coupon bond" --- this definition best describes:
yield on a discount basis
current yield
actual return to investors
truncated annual return
none of the above
4. The explicit cost incurred in making an exchange is called:
waiting costs
fiat costs
transactions cost
seignoriage
5. The difference in yields of a corporate Aaa bond versus a Treasury bond is due primarily to:
default risk
interest rate risk
reinvestment risk
6. To say that stock prices follow a "random walk" is to argue that:
stock prices rise, then fall, then rise again-sequentially
stock prices rise, then fall in a predictable pattern
stock prices tend to follow trends
stock prices cannot be predicted based on past trends
7. Your full service stock broker would (assuming that he knows some finance):
prefer to have you think that financial markets are highly efficient
prefer to have you think that financial markets are inefficient
not care any whether you think financial markets are efficient or inefficient
prefer that you believe there is no way that a "January effect" could exist
8. Mean reversion refers to the observation that
stock prices overreact to news announcements
stock prices are more volatile than fluctuations in their fundamental value would predict
stocks with low returns are likely to have high returns in the future
stocks with low returns are likely to have even lower returns in the future
9. According to the efficient market hypothesis, the current price of a financial security
is the discounted net present value of future interest payments
is determined by the highest successful bidder
fully reflects all available relevant information
is the result of none of the above