QUESTION Investment banks can take a financial loss when new issues of stocks they purchase are sold to investors at a lower price. How can they decrease their risk? What will be an ideal response? ANSWER Answer: Investment banks can form a syndicate to purchase and sell a particular stock issue. Rather than one […]
Date: September 3rd, 2020
QUESTION What is the difference between investment-grade bonds and speculative-grade bonds? What will be an ideal response? ANSWER Answer: Investment-grade bonds are relatively safe with little chance the issuer will default on them. Speculative-grade bonds are considered higher risk with a greater probability of default. Due to their higher level of risk, they pay […]
Date: September 3rd, 2020
QUESTION What does it mean for a bond issuer to default? What will be an ideal response? ANSWER Answer: When a bond issuer defaults, it cannot make the scheduled interest payments on the bonds or repay the principal on the bonds. Explanation: A bond issuer that defaults is unable to meet scheduled interest payments […]
Date: September 3rd, 2020
QUESTION Which of the following is NOT a benefit of a mutual fund? A) They can be traded by investors at will. B) They are managed by professionals with investment expertise. C) They distribute risk across a variety of securities. D) They offer a wide range of investment strategies. E) They are an economical way […]
Date: September 3rd, 2020
QUESTION What is the difference between a stock’s par value and its market value? What will be an ideal response? ANSWER Answer: The par value of a stock is set by the issuing corporation; it is an arbitrary figure. The market value of a stock is the price it is currently selling for. The […]
Date: September 3rd, 2020
QUESTION Which of the following lists mutual fund types from lowest potential risk to highest potential risk? A) balanced < index < sector < money market B) index < balanced < money market < sector C) money market < index < balanced < sector D) sector < index < balanced < money market E) money […]
Date: September 3rd, 2020
QUESTION What are serial bonds, and what benefit do they offer the issuer? What will be an ideal response? ANSWER Answer: Serial bonds are bonds that mature at different dates. By not maturing at the same time, the issuer does not have to repay the bonds all at once. This helps the issuer avoid […]
Date: September 3rd, 2020
QUESTION What type of mutual fund reflects an investment strategy focused on achieving the highest yield? A) growth B) income C) index D) specialty E) global ANSWER Answer: B Explanation: B) The strategy seeking to obtain the highest yield is investing for income. Income mutual funds invest in securities that pay high dividends and […]
Date: September 3rd, 2020
QUESTION When placing an order regarding a particular security, what three points of information must be specified? What will be an ideal response? ANSWER Answer: 1. whether you want to buy or sell the security 2. how many shares to buy or sell 3. the conditions for the order Explanation: When placing an order […]
Date: September 3rd, 2020
QUESTION Ron has entered the high-stakes world of commodities trading. On April 1, he signed a futures contract to buy 200 metric tons of soybeans on October 1 at $526 per metric ton. The current price is $485 per metric ton. What will the price be on October 1 for Ron to join the rarefied […]
Date: September 3rd, 2020
