QUESTION Which of the following would NOT be appropriate for the portfolio of someone practicing an investing-for-income strategy? A) preferred stocks B) municipal bonds C) corporate secured bonds D) bank certificates of deposit E) junk bonds ANSWER Answer: E Explanation: E) Junk bonds are considered highly speculative. The issuer could default and the investor […]
QUESTION Which of the following indicates the amount of debt a city takes on by issuing a particular bond? A) interest rate B) dividend C) yield D) denomination E) rating ANSWER Answer: D Explanation: D) Bonds are issued in denominations, in multiples of $1,000. A city that issues one $10,000 bond has taken on […]
QUESTION A conservative investor would buy bonds that receive which of the following Standard & Poor’s rating? A) AA B) BBB C) B D) CCC E) C ANSWER Answer: A Explanation: A) Bond ratings measure the quality and safety of a bond. The AA rating is Standard & Poor’s second highest rating: high quality. […]
QUESTION What do the Standard & Poor’s and Moody’s bond ratings provide an assessment of? A) book value B) risk C) dividends D) convertibility E) SEC compliance ANSWER Answer: B Explanation: B) Standard & Poor’s and Moody’s, the two principal rating services, issue bond ratings that reflect the issuer’s potential to default. A high […]
QUESTION When is taking out a subprime loan to buy a house most likely to be a reasonable financial decision? A) Qualifying for a conventional loan is impossible. B) Owning a home is an important life goal for the borrower. C) Adjustable rates are likely to be higher than fixed rates. D) The borrower reasonably […]
QUESTION A no-load mutual fund can still have costs for its investors. Indicate whether the statement is true or false. ANSWER Answer: TRUE Explanation: No-load mutual fees have no sales charges for investors; however, they may charge management fees to cover operating costs.
QUESTION Which of the following, if true, strengthens the argument of Domino Grace’s management? A) Higher revenues would lead to higher profits for Domino Grace. B) If the derivative investments perform poorly, managers at Domino Grace will not pay any financial penalties. C) Domino Grace financial advisors are well-trained in handling complicated investment options. D) […]
QUESTION Suppose that investments in derivatives generated $5 million of revenue for Domino Grace during this calendar year. The managers who proposed offering derivatives contend that this statistic demonstrates that offering derivatives increased Domino Grace revenues this calendar year by $5 million. Which of the following points out a flaw in this argument? A) It […]
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 […]
