2. Inflation rose to 7%. Most economists expected 8%. Holding everything else constant, How do you think the bond market would react to this news?

a. Market Rally (prices up / rates down)

b. Market Sell-Off (prices down / rates up)

c. no change expected

d. not enough information provided

3. Of the investments listed below, which security is generally expected to perform best in time of high inflation? (1 Point)

a. Commodities

b. Fixed Income

c. Equities

d. Currencies

4.You decide to purchase an equity interest in Piston Industries, Inc.. What rate of return should you require for your investment relative to a bank's return on a secured loan to the same company?

a. higher return than the loan

b. lower return than the loan

c. the same return as the loan

d. not enough information provided

5. For performance measurement and wealth creation computation, Total Return excludes

a. dividend and interest Income

b. opportunity cost of sitting in cash

c. unrealized market value change at the horizon

d. realized gains during horizon

6. When the money supply increases, market rates generally move ______ and banks are_______ to make loans.

a. higher | disincentivized

b. higher | Incentivized

c. lower | disincentivized

d. lower | Incentivized

7. If a bond's price increases, its market yield will _______.

a. stay the same

b. increase

c. rise

d. decrease

8. What are the first 3 factors identified in equity Investing?

a. Beta, Market and Value

b. Size, Value, and Market

c. Beta, Liquidity and Momentum

d. Market, Size and Quality

9. ________ is an unavoidable risk in a fixed rate US Treasury note.

a. Credit Risk

b. Optionality Risk

c. Liquidity Risk

Inflation Risk

10. An option provides the owner with the _______ to purchase or sell a specified asset at a specified price on or before a specified date.

a. ability

b. financing

c. right

d. obligation

11. A graphic depiction of the ex-ante risk-reward tradeoff for investments with risk on the X-axis and expected return on the Y-axis.

a. can be inverted sloping shawing rationale investors do not always expect higher return for higher risk because returns don't always follow expectations.

b. should always be upward sloping for rationale Investors who expect higher return for higher risk. c. is based on the pure expectations theory which shows that investors will predict future rates in determining return.

d. is inconsistent with long term historical returns

12. Thinking about the "Present Value of Cash Flows" valuation model, holding everything else constant what policy initiative(s) taken by the Federal Reserve would be more likely to cause a security's price to decline?

a. Fed Easing Policy

b.Decrease Discount Rate

c. Quantitative Tightening

d. Open Market Operations that reduce the Fed Funds rate

13. Which of the following is an example of idiosyncratic risk?

a. The Fed's current policy could push the economy into a recesssion.

b. Higher interest rates may make all companies underperform vs. their earnings estimates.

c. A recession may cause consumers to buy only basic necessities.

d. A firm recalls a product that accounts for 80% of its sales.

114. Indirect investing involves

a. mutual funds and ETFs

b. mutual funds but not ETFs

c. ETFS but not mutual funds

d. none of the above