Chapter 02 MC - CHAPTER TWO Multiple Choice Questions 2-1....

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CHAPTER TWO Multiple Choice Questions 2-1. Stocks that are not traded on national or regional exchanges but instead are offered for sale in a secondary market that consists of a network of dealers trading over computers are: a. not liquid b. riskier than exchange listed stocks c. traded on the “over-the-counter market” d. more expensive than exchange listed stocks 2-2. Junk bonds are: a. bonds that have been rated investment grade b. bonds that have been rated below investment grade c. very liquid d. low interest-rate debt 2-3. Which of the following risk premiums might be included in a corporation’s commercial paper yield? a. currency risk premium b. political risk c. volatility risk d. inflation, default, and liquidity risk premiums 2-4. Which of the following are traded in money markets? a. banker’s acceptances b. all Treasury securities c. corporate bonds d. junk bonds 2-5. A zero-coupon bond: a. usually pays interest semi-annually b. is usually issued with a maturity of less than five years c. makes no periodic interest payments d. is illegal to sell 11
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2-6. With respect to spreads, a dealer: a. quotes the bid price on a security higher than the ask price b. trades liquid securities only c. has a spread representing his/her fee d. and a broker both profit directly from spreads 2-7. The Treasury bill auction: a. issues T-bills in minimum denominations of $1,000 b. uses competitive bidding only c. issues T-bills where interest is paid semi-annually d. issues T-bills which can only be purchased in $1,000,000 lots 2-8. The expected inflation is 4% and the nominal risk-free rate is 6%; the real rate of interest is: a. 10% b. 2% c. 6% d. 4% 2-9. The real rate of interest is 3%: a. the inflation rate is 3% and the nominal risk-free rate is 6% b. the inflation rate is 6% and the nominal risk-free rate is 3%
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This note was uploaded on 01/21/2011 for the course ACC 452 taught by Professor Mr.cula during the Spring '10 term at Abraham Baldwin Agricultural College.

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Chapter 02 MC - CHAPTER TWO Multiple Choice Questions 2-1....

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