These are Multiple choice questions

5.In a merger, a white knight is:

a. a helpful investment banker that makes sure the merger is successful.

b. a third company that buys the acquisition target before an unwanted suitor can.

c. an investor who pays a high price to buy at least 5% of the shares of the acquisition target.

d. a commercial banker that provides a guarantee that the financing for the merger will be available.

ANS:

6. Duration is influenced by everything except:

a.maturity.b.market rate of interest.

c.coupon rate on the bond.d.the issuer of the bond.

7.The week-end effect indicates that stocks tend to ___________ on Friday and ___________ on Monday.

a. decline; peakb. decline; decline

c. peak; peakd. peak; decline

8.The semi-strong form of the efficient market hypothesis maintains that:

a. all public and private information is already impounded into the value of a security.

b. there is no relationship between past and future prices.

c. all public information is already impounded into the value of a security.

d. insider information is immediately impounded into the value of a security.

9.Inflation-indexed Treasury securities provide returns through

a.interest payments plus a conversion privilege

b.interest payments plus an increase in value due to inflation

c.tax exempt interest payments

d.cumulative interest payments

10.The yield spread between junk bonds and high-quality bonds is greatest when

a.there is weak confidence in the economy

b.there is strong confidence in the economy

c.the yield curve is flat

d.the Federal Reserve is refinancing

11. The duration of a 20-year, $1,000 bond at a COUPON rate of 8% is _________ the duration of an identical bond at a coupon rate of 6%.

a.greater thanb.less than

c.equal tod.there is not enough information to tell