T-bills are financial instruments initially sold by ________ to raise funds.

Question 1 options:

1) commercial banks

2) the U. S. government

3) state and local governments

4) agencies of the federal government

5) B and D

The bid price of a T-bill in the secondary market is

Question 2 options:

1) the price at which the dealer in T-bills is willing to sell the bill.

2) the price at which the dealer in T-bills is willing to buy the bill.

3) greater than the asked price of the T-bill.

4) the price at which the investor can buy the T-bill.

5) never quoted in the financial press.

The Dow Jones Industrial Average (DJIA) is computed by:

Question 3 options:

1) adding the prices of 30 large "blue-chip" stocks and dividing by 30.

2) calculating the total market value of the 30 firms in the index and dividing by 30.
 3) adding the prices of the 30 stocks in the index and dividing by a divisor.

4) adding the prices of the 500 stocks in the index and dividing by a divisor.

5) adding the prices of the 30 stocks in the index and dividing by the value of these stocks as of some base d

Consider the following three stocks:

Stock A, price $40 shares 200

Stock B, price $70, shares 500

Stock C, price $10, shares 600

The price-weighted index constructed with the three stocks is

Question 4 options:

1) 30

2) 40

3) 50

4) 60

5) 70

Consider the following three stocks:

Stock A, Price $40, shares 200

Stock B, Price $70, shares 500

Stock C, Price $10, shares 600

The value-weighted index constructed with the three stocks using a divisor of 100 is

Question 5 options:

1) 1.2

2) 1200

3) 490

4) 4900

5) 49

The price quotations of Treasury bonds in the Wall Street Journal show an ask price of 104:08
and a bid price of 104:04. As a buyer of the bond what is the dollar price you expect to pay?

Question 6 options:

1) $10,480.00

2) $10,425.00

3) $10,440.00

4) $10,412.50

5) $10,404.00

An investor purchases one municipal and one corporate bond that pay rates of return of 8%
and 10%, respectively. If the investor is in the 20% marginal tax bracket, his or her after tax
rates of return on the municipal and corporate bonds would be ________ and ______,
respectively.
Question 7 options:

1) 8% and 10%

2) 8% and 8%

3) 6.4% and 8%

4) 6.4% and 10%

5) 10% and 10%

The index that includes the largest number of actively traded stock is:

Question 8 options:

1) the NASDAQ Composite Index.

2) the NYSE Composite Index.

3) the Wilshire 5000 Index.

4) the Value Line Composite Index.

5) the Russell Index.

A 5.5% 20-year municipal bond is currently priced to yield 7.2%. For a taxpayer in the 33%
marginal tax bracket, this bond would offer an equivalent taxable yield of:

Question 9 options:

1) 8.20%.

2) 10.75%.
 3) 11.40%.

4) 4.82%.

5) none of the above.

With regard to a futures contract, the long position is held by

Question 10 options:

1) the trader who bought the contract at the largest discount.

2) the trader who has to travel the farthest distance to deliver the commodity.

3) the trader who plans to hold the contract open for the lengthiest time period.

4) the trader who commits to purchasing the commodity on the delivery date.

5) the trader who commits to delivering the commodity on the delivery date.

With regard to a futures contract, the short position is held by

Question 11 options:

1) the trader who bought the contract at the largest discount.

2) the trader who has to travel the farthest distance to deliver the commodity.

3) the trader who plans to hold the contract open for the lengthiest time period.

4) the trader who commits to purchasing the commodity on the delivery date.

5) the trader who commits to delivering the commodity on the delivery date
A call option allows the buyer to

Question 12 options:

1) sell the underlying asset at the exercise price on or before the expiration date.

2) buy the underlying asset at the exercise price on or before the expiration date.

A put option allows the holder to

Question 13 options:

1) buy the underlying asset at the striking price on or before the expiration d

2) sell the underlying asset at the striking price on or before the expiration

Initial margin requirements are determined by

Question 14 options:

1) the Securities and Exchange Commission.

2) the Federal Reserve System.

3) the New York Stock Exchange.

4) B and C.

5) A and B

You purchased XYZ stock at $50 per share. The stock is currently selling at
$65. Your gains may be protected by placing a __________

Question 15 options:

1) stop-buy order
 2) limit-buy order

3) market order

4) limit-sell order

5) none of the above.

Which one of the following statements regarding orders is true?

Question 16 options:

1) A market order is simply an order to buy or sell a stock immediately at the pre
price.

2) A limit sell order is where investors specify prices at which they are willing to s

3) If stock ABC is selling at $50, a limit-buy order may instruct the broker to bu
and when the share price falls below $45.

4) A day order expires at the close of the trading day.

5) All of the above.

Assume you purchased 200 shares of XYZ common stock on margin at $70 per
share from your broker. If the initial margin is 55%, how much did you borrow
from the broker?

Question 17 options:

1) $6,000

2) $4,000

3) $7,700
 4) $7,000

5) $6,300

You sold short 200 shares of common stock at $60 per share. The initial margin is
60%. Your initial investment was

Question 18 options:

1) $4,800.

2) $12,000.

3) $5,600.

4) $7,200.

5) none of the above.

You purchased 100 shares of ABC common stock on margin at $70 per
share. Assume the initial margin is 50% and the maintenance margin is
30%. Below what stock price level would you get a margin call? Assume the stock
pays no dividend; ignore interest on margin.

Question 19 options:

1) $21

2) $50

3) $49

4) $80

5) none of the above

You purchased 300 shares of common stock on margin for $60 per share. The
initial margin is 60% and the stock pays no dividend. What would your return on
equity if you sell the stock at $45 per share? Ignore interest on margin.

Question 20 options:

1) 25%

2) -33%

3) 44%

4) -42%

5) –54%

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%?

Question 21 options:

1) $51

2) $65

3) $35

4) $40

5) none of the above

You want to purchase XYZ stock at $60 from your broker using as little of your own
money as possible. If initial margin is 50% and you have $3000 to invest, how
many shares can you buy?

Question 22 options:
 1) 100 shares

2) 200 shares

3) 50 shares

4) 500 shares

5) 25 shares

You sold short 100 shares of common stock at $45 per share. The initial margin is
50%. Your initial investment was

Question 23 options:

1) $4,800.

2) $12,000.

3) $2,250.

4) $7,200.

Which one of the following statements regarding open-end mutual funds is false?

Question 24 options:

1) The funds redeem shares at net asset value.

2) The funds offer investors professional management.

3) The funds offer investors a guaranteed rate of return.

 4) A and B.

Which one of the following statements regarding closed-end mutual funds is false?

Question 25 options:

1) The funds always trade at a discount from NAV.

2) The funds redeem shares at their net asset value.

3) The funds offer investors professional management.

4) A and B.

Which of the following functions do mutual fund companies perform for their
investors?

Question 26 options:

1) Record keeping and administration

2) Diversification and divisibility

3) Professional management

4) Lower transaction costs

5) All of the above.

Multiple Mutual Funds had year-end assets of $457,000,000 and liabilities of

$17,000,000. There were 24,300,000 shares in the fund at year-end. What was
Multiple Mutual's Net Asset Value?

Question 27 options:
 1) $18.11

2) $18.81

3) $69.96

4) $7.00

5) $181.07

Most actively managed mutual funds, when compared to a market index such as the
Wilshire 5000,

Question 28 options:

1) beat the market return in all years.

2) beat the market return in most years.

3) exceed the return on index funds.

4) do not outperform the market

5) None of the above is a correct statement.

Investors in closed-end funds who wish to liquidate their positions must

Question 29 options:

1) sell their shares through a broker.

2) sell their shares to the issuer at a discount to Net Asset Value.

3) sell their shares to the issuer at a premium to Net Asset Value.

 4) sell their shares to the issuer for Net Asset Value.

5) hold their shares to maturity.

Assume that you purchased shares of High Flying mutual fund at a net asset value
of $12.50 per share. During the year you received dividend income distributions of
$0.78 per share and capital gains distributions of $1.67 per share. At the end of the
year the shares had a net asset value of $13.87 per share. What was your rate of
return on this investment?

Question 30 options:

1) 29.43%

2) 30.56%

3) 31.19%

4) 32.44%

5) 29.18%