1

1. Which one of the following is the primary difference between operating cash flow and net income?

   interest expense

   indirect costs

   taxes

   fixed costs

   depreciation

0.5 points

QUESTION 2

1. A firm has a price-cash flow ratio of 12.5 and a price-book value ratio of 7.6. If the cash flow per share is $4.67, what is the book value per share?

   $2.84

   $3.55

   $4.44

   $6.45

   $7.68

0.5 points

QUESTION 3

1. What is the investment cash flow, given the following information?

   -$20

   -$10

   $10

   $20

   $100

0.5 points

QUESTION 4

1. Which one of the following represents the amounts owed by a firm to other parties?

   assets

   cash inflows

   equities

   liabilities

   expenses

0.5 points

QUESTION 5

1. Which one of the following is most apt to vary directly with sales?

   current assets

   long-term debt

   shareholders' equity

   paid-in capital

   retained earnings

0.5 points

QUESTION 6

1. What is the investment cash flow?

   -$220

   -$140

   -$120

   -$20

   -$10

QUESTION 1

1. Which one of the following is a mortgage-backed security that has first priority to scheduled principal payments?

   priority strip bond

   principal strip

   amortized principal strip

   protected amortization class bond

   principal priority tranche

0.5 points

QUESTION 2

1. How are the cash flows allocated when actual prepayments fall below a PAC collar's lower bound?

   The entire cash flow is paid to the non-PAC support bonds until those bonds are paid in full.

   The cash flows are divided between PAC and non-PAC bonds on a pro-rata basis.

   PAC payments are recomputed to a reduced fixed amount.

   The entire cash flow is paid to the PAC bondholders.

   The interest income is paid to the non-PAC bondholders with all principal amounts paid to the PAC bondholders.

0.5 points

QUESTION 3

1. Which one of the following correctly applies to a mortgage passthrough bond?

   The primary collateral for the bond is the underlying pool of mortgages.

   All interest received is immediately passed through while principal payments are held until the bond matures.

   Each bond represents one home mortgage.

   These bonds are created via a process known as mortgage collaring.

   All of these bonds are guaranteed by the full faith and credit of the U.S. government.

0.5 points

QUESTION 4

1. You just purchased a GNMA mortgage-backed security. Which one of the following should you expect to receive?

   fixed monthly payments

   fixed quarterly payments

   variable monthly payments

   variable quarterly payments

   quarterly payments that decrease at a constant rate

0.5 points

QUESTION 5

1. Which one of the following is the measure of interest rate risk for fixed-income securities?

   standard deviation

   Macaulay duration

   variance

   Jensen's alpha

   beta

0.5 points

QUESTION 6

1. Which one of the following set of mortgage terms will cause the borrower to pay the most interest, assuming the mortgage is paid according to the amortization schedule?

   10-year, 6.5 percent

   10-year, 7.0 percent

   15-year, 7.0 percent

   30-year, 6.5 percent

   30-year, 7.0 percent

0.5 points

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