(TCOs 3, 4) Which of the following is not true about bond indexes? Bond indexes is another name for the Dow Jones Industrial Average. There is more than one kind of bond index. Bond indexes are made up only of indexed stock funds. Bond indexes include all different kinds of corporate bonds. 2. Question : (TCO 2) What does the reward to variability ratio refer to? The amount of added return that investors expect for an added amount of risk A measure of a security’s variability of returns Profit as a percentage of sales A measure of profit/standard deviation of returns Instructor Explanation 3. Question : (TCO 2) The degree of risk of a particular investment is a function of ______. its average return its variability of return as measured by the variance or standard deviation of returns its maximum return over many periods market conditions affecting one industry more than another 4. Question : (TCO 2) Which of the following sets of terms mean about the same thing? Systematic risk, diversifiable risk, unique risk Market risk and nondiversifiable risk Firm-specific risk and diversifiable risk Two of the 5. Question : (TCO 2) Which of the following can be said about average bond versus stock returns over the long run? They have been about equal. Bonds have averaged about a 6% return and stocks about 5%. Bonds have averaged about 11.2% and stocks 10.2%. Bonds have averaged about 6% and stocks about 11 6. Question : (TCO 2) An investor’s investment opportunity set _______. is a list of the all good stocks he or she has the opportunity to buy below par is always lowest when risk is maximized contains numerous combinations of risk and return on bonds contains numerous combinations of risk and return from the securities available to the investor 7. Question : (TCO 2) The degree of risk of a particular investment is a function of its average return its variability of return as measured by the variance or standard deviation of returns its maximum return over many periods market conditions affecting one industry more than another 8. Question : (TCO 8) A disadvantage of just-in-time inventory techniques is __ : increased cycle time and lower inventories increased frequency of restocking and reduced inventory levels problems affecting many people None of the above 9. Question : (TCO 1) In the purchase and sale of securities, the “spread” refers to the difference between _______. the IPO offering price and what larger investors are willing to pay a stock’s par value and its strike price a preferred stock’s par value and its conversion value what a dealer pays for a share and what he or she sells it for: 10. Question : (TCO 1) Serial bonds _______: increase risks for the invest
or are retired on a schedule increase risks for the company None of the above 11. Question : (TCO 1) What does the derivative market refer to? Student Answer: Securities that always have a fixed income The market for international securities A special kind of bonds Securities whose value is determined by the value of another asset : 12. Question : (TCO 1) Preferred stock has similarities to both common stock and bonds. How is it similar to bonds? Preferred stockholders do not get a vote as common shareholders would on important issues pertaining to the company. The interest received on preferred is taxed just like interest on debt. The payments of both are fixed in dollar amount assuming the board of directors authorizes payment of preferred dividends. None of the above 13. Question : (TCO 1) A sinking fund bond would be of particular interest to ____ risk-loving investors risk-averse investors common stockholders None of the above 14. Question : (TCO 5) Which is true about callable bonds? They are of great benefit to the bondholder and the investor. They could be of great value to the bondholder during a time of rising interest rates . They could be of benefit to the issuing company during a time of falling interest rates. None of the above 15. Question : (TCO 5) The statement of cash flows _______. is based on historical asset values tells you what your revenues were describes the sources of and uses of cash tells you how much cash is needed for next months payment of bills 16. Question : (TCO 5) To what does the term structure of interest rates refer? The fact that long-term interest rates are always higher than short-term interest rates The relationship between bond maturities and interest rates Why the expectations theory and liquidity preference theory are contradictory None of the above 17. Question : (TCO 5) Which of the following is true about preferred stock It is considered as a liability on the balance sheet It almost always has voting privileges like common stockholders It is always used in stock option plans It will always be given dividend preference over common stockholders 18. Question: (TCO 5) The balance sheet ________. Is usually done in the middle of an accounting period lists assets at their true market value tells you if the company is profitable 19. Question : (TCO 5) Fiscal policy ________. refers to the Federal Government’s adjusting of taxes and government spending is the best way to always handle unemployment is usually less cumbersome to implement than monetary policy usually takes years to have an 20. Question : (TCO 5) A bond’s yield is determined from what? Actual price paid/par value Coupon/par value Coupon/actual price paid None of the