3) What is the effective yield the investor would expect if the tax rate of the investor is 30% & the nominal yield offered on a taxable investment is 12%?

4. The securities that are considered default risk free referred to as the Risk Free Investment (the past is an indication of the future, but not a guarantee):

a. USA government Treasury issue (Bills, Notes or Bonds)s;

b. USA Agency issue;

c. USA Municipal government issue;

d. USA Corporate AAA Bond issue.

5. The store of value purpose for money:

a. is aided by inflation b. is harmed by inflation

c. is not considered a serious issue d. implies automatic growth.

6. Given a 50% tax bracket and 9% offered on a traditional 20^th Century municipal issue, the effective rate of return is (taxable municipal issue was introduced in the 21^st Century). ?

7. Given a 40% federal tax bracket and 6% offered on a treasury issue, the nominal rate on a corporate issue to equal the treasury rate is?

8. The initial issuer of securities normally receives funds in which market:

a. secondary b. primary c. derivative d. surplus

9. Money market securities generally have _________; capital market instruments are typically expected to have ________.

a. less liquidity; lower annualized return b. more liquidity; lower annualized return

c. less liquidity; higher annualized return d. more liquidity; higher annualized return

10. Which of the following is traditionally a major investor in stocks?

a. commercial banks b. insurance companies c. thrifts d. pension funds

11. Which of the following would be considered a primary market transaction:

1. An individual purchases existing shares of stock in IBM through a broker.
2. Microsoft issues a seasoned offering of common stock using an underwriter.
3. An institutional investor sells some Disney stock through its broker.
4. You arrange to sell a portfolio of stock from an inheritance.

12. With the participation of financial intermediaries in financial market transactions, _______ than they otherwise would be.

1. information and transaction costs are lower;
2. transaction costs are higher, but information costs are unchanged;
3. information costs are higher, but transaction costs are unchanged;
4. information and transaction costs are both higher.