QUESTION Mutual funds offer the opportunity for greater diversity of investment, so they present very little risk to clients. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: Mutual funds include a diverse array of stocks, bonds, and other securities; however, they may focus on a particular industry sector or investment […]
QUESTION Which of the following terms does NOT reflect a method to retire bonds? A) convertible bonds B) revenue bonds C) sinking-fund bonds D) callable bonds E) serial bonds ANSWER Answer: B Explanation: B) Convertible, sinking-fund, callable, and serial are all ways of paying off, or retiring, bonds. Revenue bonds are a type of […]
QUESTION What is the term for an investment bank’s practice of buying new issues of corporate securities and selling them to the public? A) syndication B) underwriting C) initial public offering D) auctioning E) institutional investing ANSWER Answer: B Explanation: B) The activity of buying new issues of stocks or bonds from issuing corporations […]
QUESTION The Massive Steel Corporation issued bonds to finance upgrades to its aging plants. The upgrades are costly, and the bond issue is a substantial amount. To ensure its ability to pay the bonds on maturity, Massive Steel makes annual payments to a dedicated fund. What type of bonds did the company issue? A) convertible […]
QUESTION Which of the following, if true, weakens the argument of Domino Grace’s management? A) Competitors of Domino Grace have lured new customers by offering access to exotic new investment options. B) A new political administration is expected to pass new financial regulations affecting derivative investments. C) Derivative investments are similar to most investments in […]
QUESTION Which of the following, if true, might make the option more appealing to a prospect? A) In recent months, the stock market has become more bullish, making mutual funds a better bet. B) The firm pays the maintenance fees for the investments. C) Employees may choose the amount set aside each month, up to […]
QUESTION Douglas & Reynolds, an American financial firm, has recently fallen on hard times. Its CEO notes that the firm has lost money for three straight years. Over the same period, the euro has lost 15 percent of its value while the Chinese yuan has increased its value by 15 percent. He, therefore, concludes that […]
QUESTION Wall Street CEO: “Deregulation of the banking and financial industry in the 1990s and early 2000s would not have led to recession if it hadn’t been accompanied by the wide availability of cheap credit.” Which of the following, if true, weakens the CEO’s claim? A) Historical and worldwide studies have shown that deregulation accompanied […]
QUESTION In underwriting, investment bankers buy new issues of corporate stocks and bonds and resell them to the public. Indicate whether the statement is true or false. ANSWER Answer: TRUE Explanation: Most new issues of stocks and bonds are sold to the public through investment bankers.
QUESTION The secondary securities market is an auction where institutional investors buy U.S. Treasury securities. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: The secondary securities market is the financial market where existing stocks and bonds are bought and sold by investors. The original securities issuers are usually not involved.
