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Asset Classes and Financial Instruments Exam Questions and Answers 2024, Exams of Financial Accounting

The American College of Financial ServicesFinancial Accounting

Multiple-choice questions and answers related to asset classes and financial instruments. It covers topics such as money market instruments, Treasury Inflation-Protected Securities (TIPS), securities, indices, and bonds. The questions are designed to test the reader's knowledge of these topics and their understanding of the financial markets. useful for students studying finance, economics, or business, as well as for professionals working in the financial industry.

Typology: Exams

2023/2024

Available from 11/26/2023

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Asset Classes and Financial Instruments Exam
Questions and Answers 2024
Multiple Choice Questions
1.
Which of the following is not a characteristic of a money market
instrument?
A. Liquidity
B. Marketability
C. Long maturity
D. Liquidity premium
E. Long maturity and liquidity premium
2.
The money market is a subsector of the
A. commodity market.
B. capital market.
C. derivatives market.
D. equity market.
E. None of the options
3.
Treasury Inflation-Protected Securities (TIPS)
A. pay a fixed interest rate for life.
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Asset Classes and Financial Instruments Exam

Questions and Answers 2024

Multiple Choice Questions

  1. Which of the following is not a characteristic of a money market instrument? A. Liquidity B. Marketability C. Long maturity D. Liquidity premium E. Long maturity and liquidity premium
  2. The money market is a subsector of the A. commodity market. B. capital market. C. derivatives market. D. equity market. E. None of the options
  3. Treasury Inflation-Protected Securities (TIPS) A. pay a fixed interest rate for life.

B. pay a variable interest rate that is indexed to inflation, but maintain a constant principal. C. provide a constant stream of income in real (inflation-adjusted) dollars. D. have their principal adjusted in proportion to the Consumer Price Index. E. provide a constant stream of income in real (inflation-adjusted) dollars and have their principal adjusted in proportion to the Consumer Price Index.

  1. Which one of the following is not a money market instrument? A. Treasury bill B. Negotiable certificate of deposit C. Commercial paper D. Treasury bond E. Eurodollar account
  2. T-bills are financial instruments initially sold by to raise funds. A. commercial banks B. the U.S. government C. state and local governments D. agencies of the federal government E. the U.S. government and agencies of the federal government
  1. The smallest component of the bond market is debt. A. Treasury B. other asset-backed C. corporate D. tax-exempt E. mortgage-backed
  2. The largest component of the bond market is debt. A. Treasury B. asset-backed C. corporate D. tax-exempt E. mortgage-backed
  1. Which of the following is not a component of the money market? A. Repurchase agreements B. Eurodollars C. Real estate investment trusts D. Money market mutual funds E. Commercial paper
  2. Commercial paper is a short-term security issued by to raise funds. A. the Federal Reserve Bank B. commercial banks C. large, well-known companies D. the New York Stock Exchange E. state and local governments
  1. The interest rate charged by banks with excess reserves at a Federal Reserve Bank to banks needing overnight loans to meet reserve requirements is called the A. prime rate. B. discount rate. C. federal funds rate. D. call money rate. E. money market rate.
  1. Which of the following statement(s) is(are) true regarding municipal bonds? I) A municipal bond is a debt obligation issued by state or local governments. II) A municipal bond is a debt obligation issued by the federal government. III) The interest income from a municipal bond is exempt from federal income taxation. IV) The interest income from a municipal bond is exempt from state and local taxation in the issuing state. A. I and II only B. I and III only C. I, II, and III only D. I, III, and IV only E. I and IV only
  1. Which of the following is true regarding a firm's securities? A. Common dividends are paid before preferred dividends. B. Preferred stockholders have voting rights. C. Preferred dividends are usually cumulative. D. Preferred dividends are contractual obligations. E. Common dividends usually can be paid if preferred dividends have been skipped.
  2. Which of the following is true of the Dow Jones Industrial Average? A. It is a value-weighted average of 30 large industrial stocks. B. It is a price-weighted average of 30 large industrial stocks. C. The divisor must be adjusted for stock splits. D. It is a value-weighted average of 30 large industrial stocks and the divisor must be adjusted for stock splits. E. It is a price-weighted average of 30 large industrial stocks and the divisor must be adjusted for stock splits.
  1. Which of the following indices is(are) market-value weighted? I) The New York Stock Exchange Composite Index II) The Standard and Poor's 500 Stock Index III) The Dow Jones Industrial Average A. I only B. I and II only C. I and III only D. I, II, and III E. II and III only
  2. The Dow Jones Industrial Average (DJIA) is computed by A. adding the prices of 30 large "blue-chip" stocks and dividing by 30. B. calculating the total market value of the 30 firms in the index and dividing by 30. C. adding the prices of the 30 stocks in the index and dividing by a divisor. D. adding the prices of the 500 stocks in the index and dividing by a divisor. E. adding the prices of the 30 stocks in the index and dividing by the value of these stocks as of some base date period.
  1. Consider the following three stocks: The value-weighted index constructed with the three stocks using a divisor of 100 is A. 1.2. B. 1200. C. 490. D. 4900. E. 49.
  1. Consider the following three stocks: Assume at these prices that the value-weighted index constructed with the three stocks is 490. What would the index be if stock B is split 2 for 1 and stock C 4 for 1? A. 265 B. 430 C. 355 D. 490 E. 1000
  1. An investor purchases one municipal and one corporate bond that pay rates of return of 8% and 10%, respectively. If the investor is in the 20% marginal tax bracket, his or her after-tax rates of return on the municipal and corporate bonds would be and , respectively. A. 8% and 10% B. 8% and 8% C. 6.4% and 8% D. 6.4% and 10% E. 10% and 10%
  2. An investor purchases one municipal and one corporate bond that pay rates of return of 7.5% and 10.3%, respectively. If the investor is in the 25% marginal tax bracket, his or her after-tax rates of return on the municipal and corporate bonds would be and , respectively. A. 7.5% and 10.3% B. 7.5% and 7.73% C. 5.63% and 7.73% D. 5.63% and 10.3% E. 10% and 10%
  1. If a Treasury note has a bid price of $975, the quoted bid price in the Wall Street Journal would be A. 97:50. B. 97:16. C. 97:80. D. 94:24. E. 97:75.
  2. If a Treasury note has a bid price of $995, the quoted bid price in the Wall Street Journal would be A. 99:50. B. 99:16. C. 99:80. D. 99:24. E. 99:32.
  1. The index that includes the largest number of actively traded stocks is A. the NASDAQ Composite Index. B. the NYSE Composite Index. C. the Wilshire 5000 Index. D. the Value Line Composite Index. E. the Russell Index.
  2. A 5.5% 20 - year municipal bond is currently priced to yield 7.2%. For a taxpayer in the 33% marginal tax bracket, this bond would offer an equivalent taxable yield of A. 8.20%. B. 10.75%. C. 11.40%. D. 4.82%.
  1. If the market prices of each of the 30 stocks in the Dow Jones Industrial Average (DJIA) all change by the same percentage amount during a given day, which stock will have the greatest impact on the DJIA? A. The stock trading at the highest dollar price per share B. The stock having the greatest amount of debt in its capital structure C. The stock having the greatest amount of equity in its capital structure D. The stock having the lowest volatility
  2. The stocks on the Dow Jones Industrial Average A. have remained unchanged since the creation of the index. B. include most of the stocks traded on the NYSE. C. are changed occasionally as circumstances dictate. D. consist of stocks on which the investor cannot lose money. E. include most of the stocks traded on the NYSE and are changed occasionally as circumstances dictate.