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practice_exam1_answer - Finance 367 Spring 2008 Practice...

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Finance 367 Spring 2008 Practice Exam 1 (Solution) Multiple Choices: 1. Which of the following is not a money market instrument? ____C________ A) treasury bill B) commercial paper C) preferred stock D) banker's acceptance 2. _____D_____ is not a characteristic of a money market instrument. A) liquidity B) marketability C) low risk D) long maturity 3. Today is September 24, 2006. If you buy a 1-year T-bill issued on June 15, 2006, you will receive the first coupon payment at: _____E_______ A) September 24, 2007 B) March 24, 2007 C) June 15, 2007 D) December 15, 2006 E) None of the above 4. __A__ is not a derivative security. A) A share of common stock B) A call option C) A futures contract D) all of the above are derivative securities.
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5. The interest rate charged by banks with excess reserves at a Federal Reserve Bank to banks needing overnight loans to meet reserve requirements is called the _______C___. A) prime rate B) discount rate C) federal funds rate D) Libor rate 6. Preferred stock is like long-term debt in that __B___. A) it gives the holder voting power regarding the firm's management B) it promises to pay to its holder a fixed stream of income each year C) the dividend is a tax-deductible expense for the firm
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