PART2: Multiple Choice Questions (3*15-45') 1) Which of the following types of risk affect bonds? I. call risk II. business risk III. purchasing power risk IV. liquidity risk A) III and IV only B) II, III and IV only C) I, III and IV only D) I, II, III and IV Answer: 2) The efficient frontier A) is represented by the rightmost boundary of the feasible set of portfolios. B) represents the best attainable tradeoff between risk and return. C) includes all feasible sets of portfolios based on risk and return characteristics. D) provides the highest level of risk for the lowest level of return. Answer: 3) When a company offers the investing public a certain number of shares of its stock at a certain price, the company is making what is known as a A) public offering. B) rights offering. C) stock spin-off. D) treasury offering. Answer: 4) When interest rates are falling, most of the return on bonds will come from A) inflation gains. B) interest income. C) capital gains. D) risk premiums. Answer: 5) Top-down security analysis A) starts with the fundamental analysis of a firm. B) includes economic, industry, and fundamental analysis. C) concentrates on the competency of the senior management of a firm. D) centers on the past performance of a firm. Answer: 3