Question 1

Preferred stock:

Accepted Answer

A)  represents the residual ownership of a corporation.
B)  is generally issued only by new, small firms.
C)  has a fixed maturity date similar to a bond.
D)  dividends can be skipped at the discretion of the company president.
E)  may or may not be cumulative.F) B) and E)
G) None of the above

Question 2

A 7 percent coupon bond has a face value of $1,000 and pays interest annually. The current yield is 7.3 percent. What is the current price of this bond?

Accepted Answer

A)  $958.90
B)  $978.41
C)  $1,068.00
D)  $1,029.41
E)  $1,104.00F) A) and B)
G) A) and C)

Question 3

Which one of the following is classified as a fixed-income security?

Accepted Answer

A)  U.S. Treasury bill
B)  6-month municipal bond
C)  common stock that pays regular quarterly dividends
D)  2-year U.S. Treasury security
E)  9-month bank certificate of depositF) A) and B)
G) C) and D)

Question 4

Which one of the following sentences is correct concerning fixed-income securities?

Accepted Answer

A)  The coupon rate on a fixed-income security is equal to the current yield.
B)  The price of a fixed-income security is inversely related to the current yield.
C)  Fixed-income securities are default free.
D)  Fixed-income securities tend to be more liquid than money market securities.
E)  Fixed-income securities include all debt instruments issued by the U.S. government.F) A) and D)
G) C) and D)

Question 5

Use the following soybean futures quotes to answer this question.
Soybeans: 5,000 bushels, cents and 1/8ths of a cent per bushel
 Exp⁡ Last  Net Chg  Open  High  Low  Settle 08 Sep 1314′0−3′41340′21340′61313′41314′0 08 Nov 1285′2+4′21306′01312′21280′01285′2\begin{array}{ccccc} \operatorname{Exp} & 	ext { Last } & 	ext { Net Chg } & 	ext { Open } & 	ext { High } & 	ext { Low }& 	ext { Settle} \ 	ext { 08 Sep } & 1314^{\prime}0 & -3^{\prime} 4 & 1340^{\prime} 2 & 1340^{\prime} 6 & 1313^{\prime} 4 &1314^{\prime}0\	ext { 08 Nov }  & 1285^{\prime }2 & +4{ }^{\prime}2 & 1306^{\prime}0 & 1312 ^{\prime}2&1280 ^{\prime}0&1285^{\prime}2 \\end{array}Exp 08 Sep  08 Nov ​ Last 1314′01285′2​ Net Chg −3′4+4′2​ Open 1340′21306′0​ High 1340′61312′2​ Low 1313′41280′0​ Settle1314′01285′2​ 
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Last week, you purchased four November 08 soybean futures contracts when the price quote was 1300?6. What is your current profit or loss on this investment?

Accepted Answer

A)  -$3,100.00
B)  -$2,625.00
C)  -$31.00
D)  $987.50
E)  $3,350.00 F) A) and B)
G) B) and E)

Question 6

Use the following bond quotes to answer this question:
  Company Coupon Maturity High Low Last Change Yield Falliru 7.60 Nov 2012100.0599.6899.89.02? Co.  Zeus 8.25 Apr 2016102.41101.87102.03−.10?\begin{array}{cccccccc}	ext { Company}&	ext { Coupon}&	ext { Maturity }&	ext {High}&	ext { Low }&	ext {Last }&	ext {Change}&	ext { Yield }\	ext {Falliru } & 7.60 & 	ext { Nov } 2012 & 100.05 & 99.68 & 99.89 & .02 & ? \	ext { Co. } & & & & & & & \	ext { Zeus } & 8.25 & 	ext { Apr } 2016 & 102.41 & 101.87 & 102.03 & -.10 & ?\end{array} CompanyFalliru  Co.  Zeus ​ Coupon7.608.25​ Maturity  Nov 2012 Apr 2016​High100.05102.41​ Low 99.68101.87​Last 99.89102.03​Change.02−.10​ Yield ??​

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If you purchase eight Talliru bonds, the cost will be ________ and the annual interest income will be ________.

Accepted Answer

A)  $8,000.00; $388.75
B)  $8,000.00; $412.50
C)  $8,000.00; $460.00
D)  $7,991.20; $608.00
E)  $7,991.20; $998.9 F) A) and B)
G) A) and C)

Question 7

Use the following stock quotes to answer this question:
  52-WEEK 	ext { 52-WEEK } 52-WEEK  
  Company Volume Close Chg  High  Low  Aldridge, Inc.32,653,08034.50−.2041.6033.90 Baker Co.11,508,90078.10−2.3082.3074.60 Chelsea, Inc. 51.873,45048.204.1048.6029.40\begin{array}{lccccc}  	ext{ Company} & 	ext{  Volume} &  	ext{ Close} &  	ext{ Chg }&  	ext{ High }& 	ext{ Low } \ 	ext{ Aldridge, Inc.} &  32,653,080 & 34.50 & -.20 & 41.60 & 33.90 \ 	ext{ Baker Co.} & 11,508,900 & 78.10 & -2.30 & 82.30 & 74.60 \ 	ext{ Chelsea, Inc. }& 51.873,450 & 48.20 & 4.10 & 48.60 & 29.40\end{array} Company Aldridge, Inc. Baker Co. Chelsea, Inc. ​ Volume32,653,08011,508,90051.873,450​ Close34.5078.1048.20​ Chg −.20−2.304.10​ High 41.6082.3048.60​ Low 33.9074.6029.40​

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Baker Co. has 198,000 shares of stock outstanding and a PE ratio of 22. What was the net income for the most recent four quarters?

Accepted Answer

A)  $590,089
B)  $678,003
C)  $702,900
D)  $1,306,900
E)  $1,405,800 F) C) and E)
G) A) and B)

Question 8

You purchased four call option contracts with a strike price of $24.00 and a premium of $1.30. At expiration, the stock was selling for $25.50 a share. What is the total amount it cost you to acquire your shares?

Accepted Answer

A)  $8,620
B)  $10,000
C)  $10,500
D)  $11,860
E)  $10,120F) A) and E)
G) D) and E)

Question 9

You purchased four call option contracts with a strike price of $40 and an option premium of $1.25. You closed your contract on the expiration date when the stock was selling for $42.50 a share. What is your total profit or loss on your option position?

Accepted Answer

A)  −$50
B)  −$10
C)  $135
D)  $385
E)  $500F) B) and E)
G) A) and C)

Question 10

Assume a semi-annual coupon bond matures in 3 years, has a face value of $1,000, a current market price of $1,089, and a 5 percent coupon. Which one of the following statements is correct concerning this bond?

Accepted Answer

A)  The current coupon rate is greater than 5 percent.
B)  The bond is a money market instrument.
C)  The bond will pay less annual interest now than when it was originally issued.
D)  The current yield is less than the coupon rate.
E)  The bond will pay semi-annual payments of $50 each.F) A) and B)
G) None of the above

Question 11

The annual interest payment divided by the current price of a bond is called the:

Accepted Answer

A)  coupon rate.
B)  current yield.
C)  yield-to-maturity.
D)  yield-to-market.
E)  market yield.F) D) and E)
G) None of the above

Question 12

An American call option grants the holder the right to:

Accepted Answer

A)  sell the underlying security at the strike price on or before the expiration date.
B)  sell the underlying asset at the strike price only on the expiration date.
C)  buy the underlying asset at or below the exercise price on or before the expiration date.
D)  buy the underlying asset at the exercise price only on the expiration date.
E)  buy the underlying security at a stated price on or before the expiration date.F) C) and D)
G) B) and C) E

Question 13

You own thirteen 7.0 percent coupon bonds with a total maturity value of $13,000. How much will you receive every six months as an interest payment?

Accepted Answer

A)  $213.50
B)  $375.00
C)  $455.00
D)  $540.00
E)  $750.00F) B) and C)
G) A) and E)

Question 14

Great Lakes Farm agreed this morning to sell General Mills 25,000 bushels of wheat six months from now at a price per bushel of $9.75. This is an example of a:

Accepted Answer

A)  call option.
B)  put option.
C)  forward contract
D)  money market security.
E)  fixed-income security.F) A) and E)
G) B) and D)

Question 15

If Jamie purchases a corporate bond for $960, she is said to have bought it at:

Accepted Answer

A)  the current coupon rate.
B)  par value.
C)  a premium.
D)  a discount.
E)  the current yield.F) A) and B)
G) A) and C)

Question 16

Use the following soybean futures quotes to answer this question.
Soybeans: 5,000 bushels, cents and 1/8ths of a cent per bushel
 Exp⁡ Last  Net Chg  Open  High  Low  Settle 08 Sep 1314′0−3′41340′21340′61313′41314′0 08 Nov 1285′2+4′21306′01312′21280′01285′2\begin{array}{ccccc} \operatorname{Exp} & 	ext { Last } & 	ext { Net Chg } & 	ext { Open } & 	ext { High } & 	ext { Low }& 	ext { Settle} \ 	ext { 08 Sep } & 1314^{\prime} 0& -3^{\prime} 4 & 1340^{\prime} 2 & 1340^{\prime} 6 & 1313^{\prime} 4 &1314^{\prime}0\	ext { 08 Nov }  & 1285^{\prime }2 & +4{ }^{\prime}2 & 1306^{\prime}0 & 1312 ^{\prime}2&1280 ^{\prime}0&1285^{\prime}2 \\end{array}Exp 08 Sep  08 Nov ​ Last 1314′01285′2​ Net Chg −3′4+4′2​ Open 1340′21306′0​ High 1340′61312′2​ Low 1313′41280′0​ Settle1314′01285′2​

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You purchased four November 08 futures contracts on soybeans when they first became available this morning. Your investment has been worth as little as ________ and as much as ________.

Accepted Answer

A)  $255,350; $265,500
B)  $255,350; $265,020
C)  $257,440; $265,500
D)  $257,440; $265,020
E)  $257,440; $265,520 F) None of the above
G) All of the above A

Question 17

The amount of money per share that will be received when a put option on stock is exercised is called the ________ price.

Accepted Answer

A)  market
B)  stock
C)  strike
D)  future
E)  obligatedF) A) and B)
G) A) and C)

Question 18

You would like to lock in the selling price on 50,000 bushels of wheat, which you plan to harvest and deliver to the market in September. The September futures price quote is currently 899΄4. If you write September futures contracts on your wheat, you will be guaranteed a total price of ________ for your crop. Each contract is quoted in cents and 1/8ths of a cent per bushel with a contract size of 5,000 bushels.

Accepted Answer

A)  $45,637.50
B)  $541,650.00
C)  $449,750.00
D)  $297,700.50
E)  $2,977,000.25F) A) and B)
G) C) and E)

Question 19

You own one futures contract on gold that you purchased at a quoted price of 1,448.5. The current price quote is 1,405.5. The contract size is 100 ounces and the quotes are expressed in dollars and cents per ounce. What is your current profit or loss on this investment?

Accepted Answer

A)  −$43.00
B)  −$912.00
C)  −$4,300.00
D)  $912.00
E)  $4,300.00F) B) and D)
G) A) and D) C

Question 20

If you want the right, but not the obligation, to buy a stock at a specified price you should:

Accepted Answer

A)  buy a call.
B)  sell a call.
C)  buy a put.
D)  sell a put.
E)  either sell a call or buy a put.F) C) and E)
G) B) and E)

Exam 3: Overview of Security Tips

Preferred stock:

Correct Answer
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A 7 percent coupon bond has a face value of $1,000 and pays interest annually. The current yield is 7.3 percent. What is the current price of this bond?

Correct Answer
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Which one of the following is classified as a fixed-income security?

Correct Answer
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Which one of the following sentences is correct concerning fixed-income securities?

Correct Answer
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You purchased four call option contracts with a strike price of $24.00 and a premium of $1.30. At expiration, the stock was selling for $25.50 a share. What is the total amount it cost you to acquire your shares?

Correct Answer
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You purchased four call option contracts with a strike price of $40 and an option premium of $1.25. You closed your contract on the expiration date when the stock was selling for $42.50 a share. What is your total profit or loss on your option position?

Correct Answer
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Assume a semi-annual coupon bond matures in 3 years, has a face value of $1,000, a current market price of $1,089, and a 5 percent coupon. Which one of the following statements is correct concerning this bond?

Correct Answer
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The annual interest payment divided by the current price of a bond is called the:

Correct Answer
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An American call option grants the holder the right to:

Correct Answer
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E

You own thirteen 7.0 percent coupon bonds with a total maturity value of $13,000. How much will you receive every six months as an interest payment?

Correct Answer
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Great Lakes Farm agreed this morning to sell General Mills 25,000 bushels of wheat six months from now at a price per bushel of $9.75. This is an example of a:

Correct Answer
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If Jamie purchases a corporate bond for $960, she is said to have bought it at:

Correct Answer
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Correct Answer
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A

The amount of money per share that will be received when a put option on stock is exercised is called the ________ price.

Correct Answer
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Correct Answer
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You own one futures contract on gold that you purchased at a quoted price of 1,448.5. The current price quote is 1,405.5. The contract size is 100 ounces and the quotes are expressed in dollars and cents per ounce. What is your current profit or loss on this investment?

Correct Answer
verified
C

If you want the right, but not the obligation, to buy a stock at a specified price you should:

Correct Answer
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Exam 3: Overview of Security Tips

Preferred stock:

Correct AnswerverifiedShow Answer

A 7 percent coupon bond has a face value of $1,000 and pays interest annually. The current yield is 7.3 percent. What is the current price of this bond?

Correct AnswerverifiedShow Answer

Which one of the following is classified as a fixed-income security?

Correct AnswerverifiedShow Answer

Which one of the following sentences is correct concerning fixed-income securities?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

You purchased four call option contracts with a strike price of $24.00 and a premium of $1.30. At expiration, the stock was selling for $25.50 a share. What is the total amount it cost you to acquire your shares?

Correct AnswerverifiedShow Answer

You purchased four call option contracts with a strike price of $40 and an option premium of $1.25. You closed your contract on the expiration date when the stock was selling for $42.50 a share. What is your total profit or loss on your option position?

Correct AnswerverifiedShow Answer

Assume a semi-annual coupon bond matures in 3 years, has a face value of $1,000, a current market price of $1,089, and a 5 percent coupon. Which one of the following statements is correct concerning this bond?

Correct AnswerverifiedShow Answer

The annual interest payment divided by the current price of a bond is called the:

Correct AnswerverifiedShow Answer

An American call option grants the holder the right to:

Correct AnswerverifiedE

You own thirteen 7.0 percent coupon bonds with a total maturity value of $13,000. How much will you receive every six months as an interest payment?

Correct AnswerverifiedShow Answer

Great Lakes Farm agreed this morning to sell General Mills 25,000 bushels of wheat six months from now at a price per bushel of $9.75. This is an example of a:

Correct AnswerverifiedShow Answer

If Jamie purchases a corporate bond for $960, she is said to have bought it at:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA

The amount of money per share that will be received when a put option on stock is exercised is called the ________ price.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

You own one futures contract on gold that you purchased at a quoted price of 1,448.5. The current price quote is 1,405.5. The contract size is 100 ounces and the quotes are expressed in dollars and cents per ounce. What is your current profit or loss on this investment?

Correct AnswerverifiedC

If you want the right, but not the obligation, to buy a stock at a specified price you should:

Correct AnswerverifiedShow Answer

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E

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A

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C

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