Practice Questions with Answers

Practice Questions with Answers - Practice Questions...

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Practice Questions 1.Which of the following is CORRECT regarding zero-coupon securities? a. They eliminate re-investment rate risk. b. They are attractive to investors in high tax brackets. c. They are only issued by corporations. d. They offer minimum price volatility. 2. Select the INCORRECT statement concerning bonds. a. Bond prices are quoted as a percentage of par value. b. Bonds trade on an accrued interest basis. c. Bonds sell at discounts when the stated coupons are less than the prevailing interest rate on a comparable new issue. d. The most common type of secured bond is the debenture. 3. Which of the following statements about bond prices is INCORRECT ? a. Bond price volatility and time to maturity are directly related. b. A decrease in yields raises bond prices more than a corresponding increase in yields lowers prices. c. Bond price fluctuations and bond coupons are directly related. d. Bond prices move inversely to bond yields. 4. Which of the following bond relationship is NOT inverse? a. Coupon and duration. b. Duration and yield to maturity. c. Interest rate changes and bond prices. d. Duration and maturity. 5. Jensen’s alpha for a particular fund for a particular period a. can be either negative or positive but not zero b. can be either positive or zero but not negative c. could be zero, negative or positive with significance not an issue d. could be zero, negative, or positive, with or without significance 6. The degree of diversification of a portfolio is measured by a. calculating the correlation coefficient between a stock’s returns with those of the market. b.
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Practice Questions with Answers - Practice Questions...

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