Quiz_2_FIN_353_Version_A_Answers[1]

Quiz_2_FIN_353_Version_A_Answers[1] - Quiz 2 Version A FALL...

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Quiz 2 Version A FALL 2010 Student: ___________________________________________________________________________ 1. What is the purpose of the money markets? A. To borrow in order to invest in long-term projects. B. To borrow in order to meet short-term expenses. C. To warehouse extra cash. D. All of the above. E. B and C 2. Commercial paper securities A. Never have a term to maturity that exceeds 270 days. B. Are issued only by the largest and most creditworthy corporations, as they are unsecured. C. Are issued by government agencies. D. All of the above. E. A and B. 3. If you pay $980 for a 91-day T-bill. It is worth $1,000 at maturity. What is the discount yield? A. 7.9% B. 8.1% C. 2.0% D. 2.1% 4. Which type of federal government security matures within 1 and 10 years? A. Treasury bill. B. Treasury note. C. Treasury bond. D. Municipal bond. 5. You purchase a Treasury Inflation Protected Securities, TIPS. What is the investment risk that you avoid? A. Default risk. B. Reinvestment risk. C. Purchasing power risk. D. Interest rate risk. E. A and C. 6. Who gets paid last in the event of a bankruptcy? A. Secured bond holder. B. Debenture bond holder. C. Subordinated bond holder. D. Preferred stock holder. 7. Lauren has a margin account and deposits $30,000. Assuming the margin requirement is 30% and Gentry Shoe Co. is selling at $23 how many whole shares can Lauren purchase using the maximum allowable margin? A. 1,863 B. 1,864 C. 4,347 D. 4,348
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Table 1 Issue Coupon Maturity YTM 1 7% 10 years 7.00% 2 7% 10 years 7.40% 3 6% 10 years 7.00% 4 6% 9 years 7.00% 8. Using Table 1 which issue has the greatest interest rate risk? A. Issue 1.
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Quiz_2_FIN_353_Version_A_Answers[1] - Quiz 2 Version A FALL...

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