Question 1

Which of the following is not a money market instrument?
A)Treasury bond
B)Commercial paper
C)Preferred share
D)Banker's acceptance

Accepted Answer

Preferred shares are not money market instruments because they are not short-term debt instruments.

Question 2

Treasury notes are financial instruments issued by ________ to raise funds.
A)commercial banks
B)the Australian Commonwealth Government
C)large corporations
D)state and city governments

Accepted Answer

Treasury notes are issued by governments, in this case specifically by the Australian Commonwealth Government, as a way to borrow money from the public or institutional investors. Commercial banks, large corporations, state and city governments, do issue different types of financial instruments, but not necessarily treasury notes.

Question 3

Money market securities are sometimes referred to as 'cash equivalent' because ________.
A)they are safe and marketable
B)they are not liquid
C)they are high risk
D)they are low denomination

Accepted Answer

Money market securities are safe and marketable, making them easily convertible to cash and therefore considered 'cash equivalent.'

Question 4

The most actively traded money market security is
A)Treasury notes
B)Bankers' Acceptances
C)Certificates of Deposit
D)Common shares

Accepted Answer

The answer of The most actively traded money market security...

Question 5

Which of the following is not a characteristic of a money market instrument?
A)Liquidity
B)Marketability
C)Low risk
D)Maturity greater than one year

Accepted Answer

A maturity greater than one year is not a characteristic of a money market instrument. Money market instruments have short maturities, typically less than one year, and are known for their liquidity, marketability, and low risk.

Question 6

Commercial paper is a short-term security issued by ________ to raise funds.
A)the Federal Reserve
B)commercial banks
C)large well-known companies
D)the New York Stock Exchange

Accepted Answer

Commercial paper is usually issued by large, well-known companies to raise short-term funds. The other options (A, B, and D) are not correct as they do not issue commercial paper.

Question 7

A dollar-denominated deposit at a London bank is called ________.
A)eurodollars
B)LIBOR
C)fed funds
D)banker's acceptance

Accepted Answer

A dollar-denominated deposit at a London bank is called eurodollars. LIBOR refers to London Interbank Offered Rate, which is the rate at which London banks lend to each other. Fed funds refer to the funds that banks hold at the Federal Reserve, and banker's acceptance is a time draft drawn on a bank.

Question 8

Which of the following mortgage scenarios will benefit the homeowner the most?
A)Adjustable rate mortgage when interest rate increases.
B)Fixed rate mortgage when interest rates falls.
C)Fixed rate mortgage when interest rate rises.
D)None of the answers given, as banker's interest will always be protected.

Accepted Answer

With a fixed rate mortgage, the homeowner is protected from interest rate increases, which can save them money in the long run.

Question 9

________ is considered to be an emerging market country.
A)France
B)Norway
C)Brazil
D)Canada

Accepted Answer

Brazil is considered to be an emerging market country due to its rapidly growing economy, increasing middle class, and large population.

Question 10

An investor in a T-note earns interest by ________.
A)receiving interest payments every 90 days
B)receiving dividend payments every 30 days
C)converting the T-note at maturity into a higher valued government bond
D)buying the note at a discount from the face value received at maturity

Accepted Answer

Investors in T-notes earn interest through semi-annual interest payments and by buying the note at a discount from the face value, which is received at maturity.

Question 11

________ voting of common share gives minority shareholders the most representation on the board of directors.
A)Majority
B)Cumulative
C)Rights
D)Proxy

Accepted Answer

Cumulative voting allows minority shareholders to concentrate their votes onto one candidate, potentially giving them more representation on the board of directors. With cumulative voting, a shareholder can use all of their votes for one candidate or distribute them among multiple candidates. This can help ensure that minority shareholders have a say in the composition of the board.

Question 12

Which one of the following is a true description of the Dow Jones Industrial Average?
A)A value-weighted average of 30 large industrial shares
B)A price-weighted average of 30 large industrial shares
C)A price-weighted average of 100 large shares traded on the New York Stock Exchange
D)A value-weighted average of all shares traded on the New York Stock Exchange

Accepted Answer

The Dow Jones Industrial Average is a price-weighted average of 30 large industrial shares. This means that the price of each stock in the index is given a weight based on its price per share, not based on the market capitalization or total value of the company.

Question 13

When setting the interest rate on loans, the commonly used measure is the ________-day bank bond rate.
A)120
B)90
C)60
D)30

Accepted Answer

The 90-day bank bond rate is a commonly used benchmark for setting interest rates on loans.

Question 14

Treasury notes are offered for sale generally on a ________ basis.
A)daily
B)weekly
C)monthly
D)quarterly

Accepted Answer

Treasury notes are offered for sale on a weekly basis, typically on Tuesdays. Other types of Treasury securities may be offered on different schedules, but notes specifically are typically sold weekly.

Question 15

An individual who goes short in a futures position ________.
A)commits to delivering the underlying commodity at contract maturity
B)commits to purchasing the underlying commodity at contract maturity
C)has the right to deliver the underlying commodity at contract maturity
D)has the right to purchase the underlying commodity at contract maturity

Accepted Answer

Going short in a futures position means the individual has committed to delivering the underlying commodity at the contract's maturity, not purchasing it.

Question 16

Which one of the following is a true statement?
A)Dividends on preferred shares are tax-deductible to individual investors but not to corporate investors.
B)Common dividends cannot be paid if preferred dividends are in arrears on cumulative preferred share.
C)Preferred shareholders have voting power.
D)Investors can sue managers for nonpayment of preferred dividends.

Accepted Answer

This is a fundamental feature of cumulative preferred shares. If the preferred dividends are not paid, they continue to accumulate and must be paid before common dividends can be distributed. The other options are false statements. Preferred dividends are not tax-deductible to individual or corporate investors, preferred shareholders generally do not have voting rights, and investors cannot usually sue managers for nonpayment of preferred dividends.

Question 17

The maximum maturity of certificate of deposits is
A)185 days
B)100 days
C)95 days
D)30 days

Accepted Answer

Certificate of deposits (CDs) are time deposits offered by banks and financial institutions. The maximum maturity of CDs generally ranges from 7 days to 10 years. Among the given options, A) 185 days is the longest maximum maturity option for CDs, making it the best choice for longer-term investment.

Question 18

A bond that has no collateral is called ________.
A)a callable bond
B)a debenture
C)a junk bond
D)a mortgage

Accepted Answer

A debenture is an unsecured bond that does not have any collateral backing it. A callable bond can have collateral, a junk bond is a high-risk bond that can have either secured or unsecured debt, and a mortgage bond is a bond that uses a specific property as collateral.

Question 19

Which of the following are true statements about T-notes?
I. T-notes are typically issued in denominations of $1 000 000
II. Income earned on T-notes is exempt from all taxes
III. T-notes are issued at a discount
A)I only
B)I and II only
C)I and III only
D)I, II and III

Accepted Answer

I: This statement is true. T-notes are typically issued in denominations of $1,000, but can be bought and sold in smaller denominations on the secondary market.
II: This statement is false. The income earned on T-notes is subject to federal income tax, but exempt from state and local income taxes.
III: This statement is false. T-notes are not issued at a discount, but rather at their face value, and pay interest semi-annually.

Question 20

A transaction where a dealer agrees to sell and subsequently repurchase a security from another deal is called ________.
A)a bank accepted bond
B)a repurchase agreement
C)a Treasury note
D)a time deposit

Accepted Answer

A repurchase agreement (also known as a repo) is a transaction where one party sells a security to another party with a promise to repurchase it at a later date at a higher price, typically within a few days or weeks. This allows the seller to obtain short-term financing while the buyer earns a return in the form of interest.

Quiz 2: Asset Classes and Financial Instruments

Which of the following is not a money market instrument?

Treasury notes are financial instruments issued by ________ to raise funds.

Money market securities are sometimes referred to as 'cash equivalent' because ________.

The most actively traded money market security is

Which of the following is not a characteristic of a money market instrument?

Commercial paper is a short-term security issued by ________ to raise funds.

A dollar-denominated deposit at a London bank is called ________.

Which of the following mortgage scenarios will benefit the homeowner the most?

________ is considered to be an emerging market country.

An investor in a T-note earns interest by ________.

________ voting of common share gives minority shareholders the most representation on the board of directors.

Which one of the following is a true description of the Dow Jones Industrial Average?

When setting the interest rate on loans, the commonly used measure is the ________-day bank bond rate.

Treasury notes are offered for sale generally on a ________ basis.

An individual who goes short in a futures position ________.

Which one of the following is a true statement?

The maximum maturity of certificate of deposits is

A bond that has no collateral is called ________.

Which of the following are true statements about T-notes? I. T-notes are typically issued in denominations of $1 000 000 II. Income earned on T-notes is exempt from all taxes III. T-notes are issued at a discount

A transaction where a dealer agrees to sell and subsequently repurchase a security from another deal is called ________.