ch02 - Chapter Two INVESTMENT ALTERNATIVES Multiple Choice...

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Chapter Two INVESTMENT ALTERNATIVES Multiple Choice Questions Organizing Financial Assets 1. The largest single institutional owner of common stocks is: a. mutual funds. b. insurance companies. c. pension funds d. commercial banks (c, moderate) Nonmarketable Financial Assets 2. Which of the following is not one of the characteristics of the primary nonmarketable financial assets owned by most individuals? a. high liquidity b. high return c. often issued by the U.S. government d. low risk (b, moderate) 3. Savings accounts are ---------- but are not------------. a. negotiable; liquid. b. marketable; liquid. c. liquid; personal d. liquid; marketable (d, easy) 10 Chapter Two Investment Alternatives
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Money Market Securities 4. Series EE bonds must be held at least ------- years in order to receive the guaranteed minimum rate. a. 3 b. 5 c. 8 d. 10 (b, difficult) 5. Treasury bills are traded in the --------------------- . a. money market. b. capital market. c. government market. d. regulated market. (a, easy) 6. Which of the U.S. Treasury securities is always sold at a discount? a. Treasury bills b. Treasury notes c. Treasury bonds d. All of the Treasury securities are sold at a discount. (a, moderate7) 7. Which of the following statements regarding money market instruments is not true? a. They tend to be highly marketable. b. They tend to require a small dollar investment. c. They tend to have a low probability of default. d. Their rates tend to move together. (b, moderate) 11 Chapter Two Investment Alternatives
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Fixed Income Securities 8. Which of the following would not be considered a capital market security? a. a 20-year corporate bond b. a common stock c. a 6-month Treasury bill d. a mutual fund share (c, moderate) 9. The coupon rate is another name for the: a. market interest rate. b. current yield. c. stated interest rate. d. yield to maturity (c, easy) 10. Zero-coupon bonds are similar to Treasury bills in that both: a. are issued exclusively by the U.S. Treasury. b. are money-market securities. c. are capital-market securities. d. are sold at less than par. (d, moderate) 11. Each point on a bond quote represents: a. $100 b. 1 percent of $100 c. 1 percent of $1000 d. $1000 (c, easy) 12. Zero coupon Treasury securities are known as: a. TIGERS b. LYONS c. STRAPS d. STRIPS (d, moderate) 12 Chapter Two Investment Alternatives
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13. Bonds trade on an accrual interest basis. This means an investor: a. can sell a bond at any time without losing the interest that has accrued. b. can buy a bond at any time and gain the interest accrued from the time of the last payment. c. can sell a bond at any time and retain the interest portion of the bond. d. buy a bond at any time and receive an immediate interest check.
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ch02 - Chapter Two INVESTMENT ALTERNATIVES Multiple Choice...

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