BKM – QUESTIONS WEEK 1

In the event of a firm's bankruptcy:

 the most shareholders can lose is their original investment in the firm's stock.
 common shareholders are the first in line to receive their claims on the firm's
assets.
 bondholders have claim to what is left from the liquidation of the firm's assets
after paying the shareholders.
 the claims of preferred shareholders are honored before those of the common
shareholders.
 Both the first and last statement
You sold JCP stock short at $80 per share. Your losses could be minimized by placing a:

 limit-sell order.
 limit-buy order.
 stop-buy order.
 day-order.
 None of the options
Assume you purchased 200 shares of GE common stock on margin at $70 per share from
your broker. If the initial margin is 55%, how much did you borrow

 $6,000
 $4,000
 $7,700
 $7,000
 $6,300

 I and II
 III and IV
 I and III
 II and IV
 All statements are correct

Chapter 01 MCQs
QUESTION 1
 1. ________ are, in essence, an insurance contract against the default of one or
more borrowers.
CMOs
ETFs
Credit default swaps
Collateralized debt obligations
All of the options
1 points   
QUESTION 2
1. Theoretically, takeovers should result in
improved management and increased stock price.
increased stock price.
improved management.
increased benefits to existing management of the taken-over firm.
All of the options.
1 points   
QUESTION 3
1. In 2018, ____________ was(were) the least significant liability(ies) of U.S.
nonfinancial businesses in terms of total value.
bank loans
inventories
bonds and mortgages
marketable securities
trade debt
1 points   
QUESTION 4
1. Investment bankers perform which of the following role(s)?
Market new stock and bond issues for firms
All of the options
None of the options
Provide advice to the firms as to market conditions, price, etc.
Design securities with desirable properties
1 points   
QUESTION 5
1. In 2018, ____________ was(were) the most significant financial asset(s) of U.S.
commercial banks in terms of total value.
investment securities
deposits
cash
loans and leases
real estate
1 points   
QUESTION 6
1. Asset allocation refers to
investing only in "safe" securities.
choosing which securities to hold based on their valuation.
bottom-up analysis.
the allocation of assets into broad asset classes.
1 points   
QUESTION 7
1. Although derivatives can be used as speculative instruments, businesses most
often use them to
appease stockholders.
offset debt.
enhance their balance sheets.
hedge risks.
attract customers.
1 points   
QUESTION 8
1. _________ financial asset(s).
Derivatives are
Buildings are
Land is a
U.S. agency bonds are
Derivatives and U.S. agency bonds are
1 points   
QUESTION 9
1. New issues of securities are sold in the ________ market(s).
primary
secondary
primary and secondary
over-the-counter
1 points   
QUESTION 10
1. The means by which individuals hold their claims on real assets in a well-
developed economy are
financial assets.
exchange-driven assets.
investment assets.
derivative assets.
depository assets.
Chapter 02 MCQs
QUESTION 1
1. With regard to a futures contract, the short position is held by
the trader who bought the contract at the largest discount.
the trader who commits to purchasing the commodity on the delivery date.
the trader who has to travel the farthest distance to deliver the commodity.
the trader who plans to hold the contract open for the lengthiest time period.
the trader who commits to delivering the commodity on the delivery date.
1 points   
QUESTION 2
1. T-bills are financial instruments initially sold by ________ to raise funds.
state and local governments
the U.S. government and agencies of the federal government
agencies of the federal government
the U.S. government
commercial banks
1 points   
QUESTION 3
 1. If a Treasury note has a bid price of $995, the quoted bid price in
the Wall Street Journal would be
99:32.
99:80.
99:24.
99:50.
99:16.
1 points   
QUESTION 4
1. A corporate bond is listed in the Wall Street Journal and shows an ask price of
98.62. If the corporate bonds have a par value of $1,000, what dollar amount
should a buyer expect to pay?
$986.20
$1,140.40
$1,081.25
$98.62
$1,000.00
1 points   
QUESTION 5
1. Which of the following statement(s) is (are) true regarding municipal bonds?
1. I) A municipal bond is a debt obligation issued by state or local
governments.
2. II) A municipal bond is a debt obligation issued by the federal
government.
3. III) The interest income from a municipal bond is exempt from federal
income taxation.
4. IV) The interest income from a municipal bond is exempt from state and
local taxation in the issuing state.
5.I and IV only
I and III only
I, III, and IV only
I and II only
I, II, and III only
1 points   
QUESTION 6
1. Deposits of commercial banks at the Federal Reserve Bank are called
federal funds.
time deposits.
bankers' acceptances.
repurchase agreements.
reserve requirements.
1 points   
QUESTION 7
1. In order for you to be indifferent between the after-tax returns on a corporate
bond paying 8.5% and a tax-exempt municipal bond paying 6.12%, what would
your tax bracket need to be?
72%
15%
33%
Cannot be determined from the information given.
28%
1 points   
QUESTION 8
1. The ultimate stock index in the U.S. is the
Russell 2000.
Wilshire 5000.
S&P 500.
DJIA.
1 points   
QUESTION 9
1. With regard to a futures contract, the long position is held by
the trader who commits to delivering the commodity on the delivery date.
the trader who bought the contract at the largest discount.
the trader who commits to purchasing the commodity on the delivery date.
the trader who plans to hold the contract open for the lengthiest time period.
the trader who has to travel the farthest distance to deliver the commodity.
1 points   
QUESTION 10
1. The ____ is an example of a U.S. index of large firms.
Russell 2000
DAX
DJIA
Wilshire 5000
All of the options.
Chapter 03 MCQs
QUESTION 1
1. Which one of the following statements regarding orders is false?
If stock ABC is selling at $50, a limit-buy order may instruct the broker to buy the stock if and
when the share price falls below $45.
A market order is simply an order to buy or sell a stock immediately at the prevailing market
price.
A market order is an order to buy or sell a stock on a specific exchange (market).
A limit-sell order is where investors specify prices at which they are willing to sell a security.
1 points   
QUESTION 2
1. You purchased 100 shares of common stock on margin at $40 per share. Assume the
initial margin is 50%, and the stock pays no dividend. What would the maintenance
margin be if a margin call is made at a stock price of $25? Ignore interest on margin.
0.55
0.25
0.33
0.23
0.20
1 points   
QUESTION 3
1. In a "firm commitment," the investment banker
finds the best marketing arrangement for the investment-banking firm.
buys the stock from the company and resells the issue to the public.
agrees to help the firm sell the stock at a favorable price.
agrees to help the firm sell the stock at a favorable price and finds the best marketing
arrangement for the investment-banking firm.
1 points   
QUESTION 4
1. You sold short 200 shares of common stock at $60 per share. The initial margin is 60%.
Your initial investment was
$12,000.
$7,200.
$5,600.
$4,800.
1 points   
QUESTION 5
1. Which of the following orders instructs the broker to sell at or above a specified price?
Stop-buy order
Discretionary order
Limit-sell order
Limit-buy order
Market order
1 points   
QUESTION 6
1. Which of the following orders instructs the broker to sell at or below a specified price?
Stop-buy order
Market order
Stop-loss
Limit-buy order
Limit-sell order
1 points   
QUESTION 7
1. A program trade is
not feasible with current technology but is expected to be popular in the near future.
a trade of many shares of one stock for one other stock.
a coordinated purchase or sale of an entire portfolio of stocks.
a trade of 10,000 (or more) shares of a stock.
a trade of analytic programs between financial analysts.
1 points   
QUESTION 8
 1. Assume you sold short 100 shares of common stock at $70 per share. The initial margin
is 50%. What would be the maintenance margin if a margin call is made at a stock price
of $85?
23.5%
35.5%
20.5%
40.5%
1 points   
QUESTION 9
1. The trading of stock that was previously issued takes place
in the secondary market.
in the primary market.
in the secondary and primary markets.
usually with the assistance of an investment banker.
1 points   
QUESTION 10
1. You sold short 300 shares of common stock at $55 per share. The initial margin is 60%.
At what stock price would you receive a margin call if the maintenance margin is 35%?
$40.36
$35.22
$51.00
$65.19
Chapter 04 MCQs

QUESTION 1
1. The fee that mutual funds use to help pay for advertising and promotional
literature is called a
front-end load fee.
operating expense fee.
structured fee.
12b-1 fee.
back-end load fee.
1 points   
QUESTION 2
1. Which of the following would increase the net asset value of a mutual fund
share, assuming all other things remain unchanged?
An increase in the value of one of the fund's stocks
An increase in the fund's accounts payable
An increase in the number of fund shares outstanding
A change in the fund's management
1 points   
QUESTION 3
1. Which of the following characteristics apply to unit investment trusts?

1. I) Most are invested in fixed-income portfolios.

2. II) They are actively-managed portfolios.
3. III) The sponsor pools securities, then sells public shares in the trust.
4. IV) The portfolio is fixed for the life of the fund.
5.I, II, III, and IV
I, II, and III
I and II
I, III, and IV
I and IV
1 points   
QUESTION 4
1. Compared to mutual funds, hedge funds may require investors to
_______________.
Invest in a mixture of equities, debt, and international securities
Lock-up their investment for an extended period of time
Use specific trading protocols
Cover transaction costs
1 points   
QUESTION 5
1. Which of the following is true regarding equity mutual funds?
1. I) They invest primarily in stock.
2. II) They may hold fixed-income securities, as well as stock.
3. III) Most hold money market securities, as well as stock.
4. IV) Two types of equity funds are income funds and growth funds.
5.I, III, and IV
I, II, and IV
I, II, and III
I, II, III, and IV
I and IV
1 points   
QUESTION 6
1. A mutual fund had NAV per share of $23.00 on January 1, 2018. On December
31 of the same year, the fund's NAV was $23.15. Income distributions were
$0.63, and the fund had capital gain distributions of $1.26. Without considering
taxes and transactions costs, what rate of return did an investor receive on the
fund last year?
11.26%
9.63%
10.54%
8.87%
8.26%
1 points   
QUESTION 7
 1. Most actively-managed mutual funds, when compared to a market index such as
the Wilshire 5000,
beat the market return in all years.
exceed the return on index funds.
do not outperform the market.
beat the market return in most years.
1 points   
QUESTION 8
1. A mutual fund had NAV per share of $26.25 on January 1, 2018. On December
31 of the same year, the fund's rate of return for the year was 16.4%. Income
distributions were $1.27, and the fund had capital gain distributions of $1.85.
Without considering taxes and transactions costs, what ending NAV would you
calculate?
$33.88
$24.69
$16.62
$27.44
$42.03
1 points   
QUESTION 9
1. Growth Fund had year-end assets of $862,000,000 and liabilities of
$12,000,000. There were 32,675,254 shares in the fund at year end. What was
Growth Fund's net asset value?
$26.01
$19.62
$21.56
$28.17
$25.24
1 points   
QUESTION 10
1. Of the following types of ETFs, an investor who wishes to invest in a diversified
portfolio that tracks the Nasdaq 100 should choose
QQQ.
VTI.
SPY.
DIA.
IWM.