e-Bubble in the scantron sheet. 14 questions 1. At a given point in time, the interest rate offered on a new interest rate o the initial ffered on a new adjustable-rate fixed-rate mortgage. a. below b. above c. equal to d. all of the above are very common 2. he monthly payment and the ny given interest rate, the shorter the life of the mortgage, the the total payments over the life of the mortgage. a. greater; greater b. greater; lower c. lower; greater d. lower; lower Pv Pm 3. During the early years of a mortgage, a. most of the monthly payment reflects principal reduction. b. most of the monthly payment reflects interest. c. about half of the monthly payment reflects interest. d. Cannot answer without more information. 109 4. The first-time issuance of shares by a specific firm to the public is referred to as a(n) a. stock repurchase. b. secondary stock offering. c. initial rights issue. d. initial public offering (IPO). 5. An institution that originates and holds a fixed-rate mortgage is adversely affected by the borrower who was provided the mortgage is adversely affected by interest rat a. stable; decreasing b. increasing; stable c. increasing; decreasing d. decreasing; increasing 3. 6. The largest organized exchange, listing the largest firms, is the a. New York Stock Exchange. b. American Stock Exchange. c. Midwest Stock Exchange. d. Pacific Stock Exchange. The s a price weighted average of stock prices of 30 large U.S.frms . The a. Dow Jones Industrial Average b. Standard and Poor's 500 c. New York Stock Exchange Index d. Nasdaq Treasur dividend 8. A firm is expected to generate earnings of $2.22 per share next year. The mean ratio of share price to expected earnings of competitors in the same industry is 15. Based on this information, the valuation of the firm's shares based on the price-earnings (PE) method is a. $2.22. b. $6.76. c. $33.30. d. none of the above 9. Theis commonly used as a proxy for the risk-free rate in the Capital Asset Pricing Model. a. Treasury bond rate b. prime rate c. discount rate d. federal funds rate 10. A higher beta of an asset reflects a. lower risk. b. lower covariance between the asset's returns and market returns c. higher covariance between the asset's returns and the market returns d. none of the above 11. At any given time, the yield on commercial paper is_the yield on ia with the same maturity a. slightly less than b. slightly higher than c. equal to d. A and B both occur with about equal frequency 12. Which of the following is not a money market security? a. Treasury bill b. negotiable certificate of deposit c. common stock d. federal funds 13. Which of the following is a money market security? a. Treasury note b. municipal bond C. mortgage d. commercial paper expected return than most long-term debt securities, and they exhibit 14. Equity securities have a a degree of risk. a. higher; higher b. lower; lower c. lower; higher d. higher; lower