1. Question 1 Commercial paper is issued by ________.
2. corporations
3. small businesses
4. small commercial banks
5. money market mutual funds

1 points

Question 2

1. What is the feature of a corporate bond that protects the purchaser of the bond from moral hazard problems on the part of the borrower?
2. Call provision
3. Coupon payments
4. Conversion option
5. Restrictive covenants
6. all of the above

1 points

Question 3

1. Which of the following best explains why municipal bonds have lower interests than Treasury bonds?
2. The lower liquidity of municipal bonds.
3. The lower liquidity of Treasury bonds.
4. The lower tax rate associated with municipal bonds.
5. The lower tax rate associated with Treasury bonds.

1 points

Question 4

1. Which of the following is the mission of the Securities & Exchange Commission?
2. To protect investors and maintain the integrity of the securities markets.
3. To maintain good order on the country's stock exchanges through the use of specialists.
4. To regulate mutual funds and hedge funds.
5. To seek out and evaluate all disclosures of public U.S. corporations for correctness.

1 points

Question 5

1. Investors in mortgage securities are subject to ____ risk.
2. fixed-rate
3. interest-rate
4. prepayment
5. adjustable-rate

1 points

Question 6

1. Treaury Bills mature in _____.
2. 10 to 30 years
3. 1 to 10 years
4. Less than 1 year
5. 100 years

1 points

Question 7

1. If a borrower's down payment on a mortgage loan is less than 20%, the lender may require ______.
2. higher discount points.
3. higher collateral.
4. annual lines of credit.
5. private mortgage insurance.

1 points

Question 8

1. The cash flows from stock can include _______.
2. future sales price.
3. interest.
4. dividends.
5. both A and C.

1 points

Question 9

1. Funds raised by bonds issued by Ginnie Mae are used for ______.
2. student loans.
3. purchasing Fed Funds.
4. funding mortgage loans.
5. purchasing bank securities.

1 points

Question 10

1. Companies issue callable bonds because they may _____.
2. wish to alter the dividend payments
3. call bonds when interest rates fall.
4. like to keep in touch with the owners.

1 points

Question 11

1. Businesses use money markets to _____.
2. A. invest.
3. B. avoid reserve deposits.
4. C. borrow.
5. both A and C

1 points

Question 12

1. Money Market securities are used to "_____" funds until needed.
2. liquify
3. warehouse
4. deep market
5. discount

1 points

Question 13

1. The price of commercial paper will be computed using ______.
2. FV = PV x (1 + i)^n
3. FV = PV / (1 + i)^n
4. PV = FV / (1 + i)^n
5. PV = FV x (1 + i)^n

1 points

Question 14

1. Characteristics of stocks include _______.
2. A. fixed maturity.
3. B. voting rights.
4. C. variable dividend payments.
5. both B and C

1 points

Question 15

1. The value of a bond is _____ to market interest rates.
2. inversely related.
3. directly related.
4. proportionaly related.
5. equally related.

1 points

Question 16

1. Property and casualty insurance have large amounts of funds invested in money markets because _____.
2. money markets have higher returns than capital markets.
3. timing of payouts on policies is known with reasonable accuracy.
4. it is difficult to predict the natural disasters that cause large payouts on policies.
5. insurance companies don't really need to make money on their premiums.

1 points

Question 17

1. The most common use of proceeds from the sale of commercial paper by nonbank corporations is to ______.
2. increase long term liabilities.
3. improve credit worthiness.
4. increase reserves.
5. extend short-term loans to customers for the purchase of a company's products.

1 points

Question 18

1. The most liquid money market securities are ______.
2. U.S. Treasury Notes.
3. Corporate Bonds.
4. Federal Reserve Bonds.
5. U.S. Treasury Bills.

1 points

Question 19

1. Organized exchanges _______.
2. trade over telecommunications networks.
3. have a physical building where business is conducted.
4. are not regulated.

1 points

Question 20

1. ______ guarantee mortgage lenders against losses from home loans.
2. A.Veterans Administration
3. B.Federal Housing Administration
4. C.Federal Deposit Insurance Corporation
5. Both A and B

1 points

Question 21

1. Amortize loans are ______.
2. loans requiring a large final payment to pay off the loan.
3. a series of equal payments consisting of principal and interest such that when the last payment is made the principal is zero.
4. not frequently used for car loans.

1 points

Question 22

1. The issuer of an equity security receives funds paid for the security in the ______.
2. primary market.
3. secondary market.
4. tertiary market.
5. celestial market

1 points

Question 23

1. Money markets can be characterized by _______.
2. A.having securities that mature in one year or less.
3. B.having securities with low default risk.
4. C.having securities collateralized by houses
5. both A and B
6. none of the above

1 points

Question 24

1. ______ are auction markets.
2. Over-the-counter markets
3. Money markets
4. Organized exchanges

1 points

Question 25

1. Mortgage lenders file _____ to secure loans.
2. private mortgage insurance
3. liens
4. down payments
5. amortized loans

1 points

Question 26

1. Euro dollars ______.
2. are Euros denominated in U.S. dollars.
3. are dollar denominated deposits held in foreign banks.
4. is the Euro exchange for dollars.
5. are Euros held in U.S. banks.

1 points

Question 27

1. A buyer of property should have a _____ done to check for liens.
2. down payment
3. FICO scores
4. title search
5. discount point

1 points

Question 28

1. Stockholders have a(n) _______ risk of not being paid than bond holders.
2. equal
3. higher
4. lower
5. non-calculated

1 points

Question 29

1. When calculating bond cash flows for bond valuation, the bond interest payment is calculated by _______.
2. adding the market interest rates to the bond price.
3. dividing the current price by the yield to maturity.
4. dividing the maturity price by the current yield.
5. adding the current yield and the bond coupon.
6. multiplying the bond par value by the coupon rate.

1 points

Question 30

1. The stated rate on a mortgage loan is determined by three factors:
2. median stock returns; margin requirements; Fed Funds Rate
3. discount rate; reserve requirements; amount of excess reserves
4. T-Bills; average money market maturity; LIBOR
5. market rates (Treasury Bonds); term; discount points

1 points

Question 31

1. To generate cash to make new loans, the mortgage lender will _______.
2. borrow in the money markets.
3. sell additional stock.
4. immediately sell a mortgage loan to another investor.
5. take cash out of required reserves.

1 points

Question 32

1. ______securities have no default risk because _______.
2. corporate; corporations can sell more goods to obtain cash.
3. individuals; they can work at more than one job.
4. U.S. Treasury; the treasury can print more money.

1 points

Question 33

1. Agency debt _____ but ______.
2. is the lowest level of treasury debt; is guaranteed by Ginnie Mae.
3. is not U.S. Treasury Debt; has an "implicit" guarantee that the U.S. Goverment will not let it default.
4. is typically issued by MNCs; is guaranteed by the U.S. export agency
5. all of the above

1 points

Question 34

1. Stockholders have residual claim on all assets after debt is paid and therefore have ______ risk than bondholders.
2. equal
3. higher
4. lower

1 points

Question 35

1. In which of the following cases would direct use of the money markets be appropriate?
2. A.A firm has surplus cash on hand that it will not need for approximately six months.
3. B.The federal Government needs $5 billion to build a bridge.
4. C.Mellissa the investor has $5,000 in extra cash she would likr to invest for 10 years.
5. D.A commercial bank has an immediate need for additional cash to make a short term loan.
6. Both A and D of the above are correct.

1 points

Question 36

1. Which of the following money market securities are default free?
2. Federal funds.
3. Eurodollars.
4. Banker's acceptances.
5. U.S. Treasury bills.

1 points

Question 37

1. Which of the following financial institutions holds the largest percentage of U.S. govrenment securities?
2. Credit unions.
3. Savings and loans.
4. Commercial banks.
5. Finance companies.

1 points

Question 38

1. Which of the following statements is true about federal funds?
2. Most federal funds borrowed are secured loans.
3. Federal funds are usually formal written agreements between commercial banks.
4. The term to maturity of federal funds is overnight.

1 points

Question 39

1. Investors who put funds into the money market are usually ____.
2. trying to avoid taxes
3. holding onto funds while earning a higher rate than the bank pays
4. attempting to earn low returns while increasing risk

1 points

Question 40

1. The largest organized exchange in the United States is the _____.
2. American Stock Exchange
3. Philidelphia Stock Exchange
4. New York Stock Exchange
5. Boston Stock Exchange

1 points

Question 41

1. What type of security has no voting rights and pays a fixed dividend for the life of the security?
2. Common stock
3. Warrants
4. Preferred stock
5. Variable-rate preferred stock

1 points

Question 42

1. Why might a firm have a high P/E ratio?
2. A.The firm's earnings are expected to grow quickly in the future.
3. B.The firm is considered high risk.
4. C.The firm is considered low risk.
5. D.Investors are willing to pay a premium for the stock.
6. A, C and D above

1 points

Question 43

1. As a group the largest mortgage lenders are ____.
2. mutual funds
3. pension funds
4. credit unions
5. commercial banks

1 points

Question 44

1. Of the following statements, which one is corect about second mortgages?
2. The interest payments are not tax deductable.
3. The second mortgage has the same priority in default as the primary mortgage.
4. It gives property owners an easy way to get cash from the equity in their homes.
5. The mortgae is generally more costly to obtain than it would be to refinance.

1 points

Question 45

1. Which of the following types of mortgage loans has the lower payment during the first few years of the loan then the payments increase?
2. Graduated-payment mortgages.
3. Growing equity mortgages.
4. Shared appreciation mortgages.
5. Equity participation mortgages.

1 points

Question 46

1. Loan discount points, when a loan is initiated, will ____.
2. be used as collateral
3. result in balloon payments
4. result in a reduced interest rate for the loan
5. eliminate the requirement for a large down payment

1 points

Question 47

1. Which of the following was a problem faced by mortgage lenders in trying to sell their mortgages in the secondary market prior to the creation of mortgage backed securities?
2. The large dollar amounts of most single mortgages made finding a buyer difficult.
3. Mortgages were not standardized making them harder to sell.
4. The lack of default risk made the returns too low, resulting in fewer buyers.
5. Due to their simple design, mortgages were easy to service and lenders frequently charges too much for the loan, resulting in fewer buyers.

1 points

Question 48

1. Which of the following does not influence the size of the interest rate on a mortgage loan?
2. The specific location of the property.
3. The length of time the mortgage is outstanding.
4. The number of discount points paid by the buyer at closing.
5. The current level of interest rates in the economy.

1 points

Question 49

1. Of the following, which one will increase the risk to the lender?
2. The purchase of private mortgage insurance.
3. A large downpayment,
4. The higher the mortgage payment relative to the monthly income of the borrower.
5. The abaility to put the loan in the mortgage pool and sell it in the secondary market.

1 points

Question 50

1. ____ are crucial to international trade.
2. Banker's acceptance
3. Bank CDs
4. Fed funds
5. Commercial paper

1 points

Question 51

1. [Extra credit question]Applicants for VA or FHA loans have to meet certain special qualifications.All of the following may apply except ____.
2. having served in the military
3. a specific income level or lower
4. a limit on the size of the loan that is guaranteed
5. must work for a federal or state government agency

2 points (Extra Credit)

Question 52

1. [Extra credit]___ are a type of agency bond.
2. U.S. Treasuries
3. Municipal bonds
4. Ginnie Mae bonds
5. Junk bonds

2 points (Extra Credit)

Question 53

1. [Extra credit question]___ bonds are backed by the full faith and credit of the issuing municipality.
2. Revenue
3. General obligation
4. Fannie Mae

2 points (Extra Credit)

Question 54

1. A bond indenture _____.
2. A.lists the terms of the bond
3. B.describes the current yield
4. C.describes the collateral offered as security
5. Both A. and C.

2 points (Extra Credit)

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