Overview Of Security Types

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Question 1

Free

Multiple Choice

Which one of the following is the best definition of a money market instrument?

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corporate debt that matures in 90 days or less

bank savings account

investment issued by a financial institution that matures in 30 days or less

investment issued by a financial institution that matures in one year or less

debt issued by the government or a corporation that matures in one year or less

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Question 2

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Multiple Choice

A fixed-income security is defined as:

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a debt obligation that pays a fixed rate of return for a one-year period of time.

common or preferred stock that pays a fixed annual dividend.

a long-term debt obligation that pays scheduled fixed payments.

long-term debt issued solely by a federal or state government.

any security originally issued as either debt or equity that pays a fixed, pre-set payment.

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Question 3

Free

Multiple Choice

The annual interest payment divided by the current price of a bond is called the:

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coupon rate.

current yield.

yield-to-maturity.

yield-to-market.

market yield.

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Question 4

Free

Multiple Choice

A security originally sold by a business or government to raise money is called a(n):

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derivative.

primary asset.

primary debt.

futures contract.

option contract.

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Question 5

Free

Multiple Choice

A financial asset that represents a claim on another financial asset is classified as a _____ asset.

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secondary

optioned

contracted

derivative

primary

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Question 6

Multiple Choice

A futures contract is an agreement:

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that obligates a corporation to issue additional securities at a specified date in the future.

to exchange financial assets on a specified date in the future with the price determined on that date.

to deliver goods today in exchange for an agreed upon payment to be paid on a specified date in the future.

to exchange a specified quantity of goods on a specified date in the future at the current market price.

to exchange goods on a specified date in the future at a price that is agreed upon today.

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Question 7

Multiple Choice

An agreement that grants the owner the right,but not the obligation,to buy or sell a specific asset at a specified price during a specified time period is called a(n) _____ contract.

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futures

obligatory

quoted

fixed

option

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Question 8

Multiple Choice

A call option is an agreement that:

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obligates both the buyer and seller to a future transaction.

grants the seller the right to buy a security at a predetermined price.

gives the buyer the right to purchase an asset at some point in the future.

grants the seller the right, but not the obligation, to sell an asset.

presets a price but not a time period.

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Question 9

Multiple Choice

A contract that grants its buyer the right,but not the obligation,to sell an asset at a specified price is called a:

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futures contract.

call option.

preset contract.

put option.

primary contract.

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Question 10

Multiple Choice

The price paid to purchase an option contract is called the:

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strike price.

option premium.

exercise price.

future premium.

current yield.

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Question 11

Multiple Choice

The amount of money per share that will be received when a put option on stock is exercised is called the _____ price.

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market

stock

strike

future

obligated

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Question 12

Multiple Choice

Riverside Metals recently issued some debt that had an original maturity of nine months.This debt is best classified as a(n):

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option contract.

money market instrument.

fixed-income security.

derivative security.

futures contract.

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Question 13

Multiple Choice

Money market instruments:

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tend to be illiquid.

are generally sold in small denominations.

cannot be resold.

may be sold on a discount basis.

are quoted in terms of a spread.

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Question 14

Multiple Choice

Money market instruments issued by a corporation:

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are default-free.

are less liquid than those issued by the government.

must be held by the original purchaser until maturity.

can only be resold to the original issuer.

are risk-free.

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Question 15

Multiple Choice

Which one of the following is classified as a fixed-income security?

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U.S. Treasury bill

6-month municipal bond

common stock that pays regular quarterly dividends

2-year U.S. Treasury security

9-month bank certificate of deposit

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Question 16

Multiple Choice

Which one of the following sentences is correct concerning fixed-income securities?

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The coupon rate on a fixed-income security is equal to the current yield.

The price of a fixed-income security is inversely related to the current yield.

Fixed-income securities are default free.

Fixed-income securities tend to be more liquid than money market securities.

Fixed-income securities include all debt instruments issued by the U.S. government.

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Question 17

Multiple Choice

Assume a semi-annual coupon bond matures in 3 years,has a face value of $1,000,a current market price of $989,and a 5 percent coupon.Which one of the following statements is correct concerning this bond?

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The current coupon rate is greater than 5 percent.

The bond is a money market instrument.

The bond will pay less annual interest now than when it was originally issued.

The current yield exceeds the coupon rate.

The bond will pay semi-annual payments of $50 each.

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Question 18

Multiple Choice

Bond trades are reported:

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on a weekly basis only.

only when originally sold.

on TRACE.

by the SEC.

only on government issues.

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Question 19

Multiple Choice

The Alpha Industrial bonds pay an annual interest payment equal to 5.875 percent of:

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$999.90.

$1,000.00.

$1,000.13.

$1,033.54.

$1,034.07.

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Question 20

Multiple Choice

What was yesterday's closing price on the Beta Movers bond?

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$1,020.13

$1,033.54

$1,044.07

$1,053.54

$1,054.07

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