Question 1

What are some advantages of asset-backed securities to investors?

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Question 2

Who benefits from a futures contract, a call contract, and a put contract, if prices fall?

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Question 3

The par value of Blaze, Inc. common stock is $0.50, the earnings per share is $4, the market price is $60, the dividend per share is $1. Calculate the dividend yield.

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Question 4

What stated coupon rate would a taxable corporate bond have to have to be comparable to a municipal bond with a coupon rate of 7 percent if the investor is in the 28 percent tax bracket?

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Question 5

The par value of Blaze, Inc. common stock is $0.50, the earnings per share is $4, the market price is $60, the dividend per share is $1. Calculate the payout ratio.

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Question 6

Explain how writing option contracts (both puts and calls) can generate income for owners of the underlying stock.

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Question 7

What are two direct and one indirect method for individuals to invest in foreign stocks?

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Question 8

The par value of Inferno, Inc. common stock is $0.50, the earnings per share is $6,
and it trades at a P/E of 15. What is Inferno, Inc.'s stock price?

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Question 9

How do asset-backed securities improve the flow of funds from savers to borrowers?

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Question 10

Do the stock options markets help stabilize or destabilize the stock markets? Explain.

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Question 11

Rank (lowest to highest) the following securities in terms of the risk-expected return tradeoff from the investors' viewpoint: common stock, corporate bonds, U. S. Treasury bonds, options, preferred stock..

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Question 12

A corporate investor in a 34% marginal income tax bracket can buy bonds issued by a petroleum exploration company yielding 10.606%. The investor should be willing to buy tax-exempt municipal bonds of similar quality yielding what percent or higher?

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Question 13

In what sense is a stock selling for 12 times earnings "cheaper" than a stock with a P/E ratio of 20?

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Question 14

How is the total book value of equity affected by stock splits?

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Question 15

How is the earnings retention rate related to the dividend payout rate?

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Quiz 2: Investment Alternatives: Generic Principles All Investors Must Know