1. Below are the current bid and ask prices of stock Xyzz: Bid Ask $45.25 $45.50 Suppose you have submitted a limit sell order at $45.20, what will happen?

A. The order will be executed at the price of $45.25

B. The order will be executed at the price of $45.50

C. The order will be executed at the price of $45.20

D. The order will not be executed

2. Real assets in the economy include all but which one of the following?

A. Computer software

B. Leasing contacts

C. Buildings

D. Education

3. If you thought prices of a stock would fall over the next few months and wanted to profit from the information, you might want to __________________ on the stock.

A. Buy on margin

B. Place a sell at market order

C. Place a buy at market order

D. Place a short-sale order

4. Which of the following is not a money market instrument?

A. Treasury bills

B. Corporate bonds

C. Federal funds

D. CD

5. The margin requirement on a stock purchase is 50%. You use the full margin allowed to purchase 100 shares of MSFT at the price of $100 per share. If the price drops to $80, what is your percentage loss?

A. 10%

B. 30%

C. 40%

D. 50%

6. Suppose the interest rate is 6% for a municipal bond and is 8% for a corporate bond. If an investors marginal tax rate is 25%, which of the following statements is correct?

A. Municipal bond offers a higher after-tax rate of return

B. Corporate bond offers a higher after-tax rate of return

C. Municipal bond and corporate bond have the same after-tax rate of return

D. Insufficient information to determine which bond offers a higher after-tax rate of return

7. Which of the following is not a characteristic of common stock ownership?

A. Residual claimant

B. Limited liability

C. Unlimited liability

D. Voting rights to elect a board of directors

8. Which of the following is a characteristic of corporate bonds?

A. Liquidity

B. Limited liability

C. Unlimited Liability

D. Default risk

9. Which of the following funds have the lowest risk?

A. Equity funds

B. Money market funds

C. Asset Allocation funds

D. Balance funds

10. You purchase a call option on Xyzz stocks today with one-month expiration and the strike price of $1,000. The option price is $20 per share. The Xyzz stock price is $1,000 per share. Suppose that the Xyzz stock price decrease to $900 at the expiration. What is the rate of return on your investment?

A. -100%

B. -11.76%

C. -12%

D. 400%