Question 1

Briefly compare and contrast options and futures.

Accepted Answer

Options and futures are both types of fi...

Question 2

At the time a futures contract is written:

Accepted Answer

A)  the underlying asset is specifically identified.
B)  the buyer pays a good faith deposit to the seller.
C)  the current market price of the underlying asset becomes the contract price.
D)  the current market price of the underlying asset must be less than the agreed upon futures price.
E)  the buyer is granted the right, but not the obligation, to exercise the contract.F) B) and C)
G) None of the above

Question 3

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) All of the above
G) A) and B)

Question 4

What was the total price fluctuation on one November 08 soybeans contract today?

Accepted Answer

A)  $1,537.50
B)  $1,540.00
C)  $1,612.50
D)  $1,660.00
E)  $1,682.50F) C) and D)
G) A) and B)

Question 5

Which one of the following is the best definition of a money market instrument?

Accepted Answer

A)  corporate debt that matures in 90 days or less
B)  bank savings account
C)  investment issued by a financial institution that matures in 30 days or less
D)  investment issued by a financial institution that matures in one year or less
E)  debt issued by the government or a corporation that matures in one year or lessF) B) and C)
G) None of the above

Question 6

Preferred stock is sometimes considered to be a cross between debt and equity.Describe the characteristics of preferred stock that make it similar to debt as well as the characteristics that make it similar to equity.

Accepted Answer

Preferred stock is considered to be a cr...

Question 7

You purchased three call option contracts with a strike price of $22.50 and an option premium of $0.45.You held the option until the expiration date.On the expiration date,the stock was selling for $21.70 a share.What is the total profit or loss on your option position?

Accepted Answer

A)  -$45
B)  $0
C)  -$240
D)  -$120
E)  -$135F) C) and D)
G) B) and E)

Question 8

You will earn a profit as the owner of a call option if the price of the underlying asset:

Accepted Answer

A)  decreases.
B)  remains constant or decreases.
C)  remains constant.
D)  remains constant or increases.
E)  increases.F) A) and C)
G) D) and E)

Question 9

What was yesterday's closing price on the Beta Movers bond?

Accepted Answer

A)  $1,020.13
B)  $1,033.54
C)  $1,044.07
D)  $1,053.54
E)  $1,054.07F) B) and C)
G) A) and E)

Question 10

The price you will pay (per underlying share) to buy the 50 call option on JL stock is:

Accepted Answer

A)  $4.75.
B)  $4.80.
C)  $5.00.
D)  $5.90.
E)  $6.00.F) A) and E)
G) A) and D)

Question 11

If you are willing to sell a stock and wish to receive the option premium 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) D) and E)
G) A) and E)

Question 12

If you purchase five Zeus bonds,the cost will be _____ and the annual interest income will be _____.

Accepted Answer

A)  $5,000.00; $388.75
B)  $5,000.00; $412.50
C)  $5,000.00; $460.00
D)  $5,101.50; $412.50
E)  $5,101.50; $460.00F) B) and E)
G) B) and D)

Question 13

What are the basic differences between a T-Bill and a T-Bond?
 Which security(ies)are considered risk-free?

Accepted Answer

The basic differences between a T-Bill a...

Question 14

Why would you purchase a call option?
 What is your maximum profit or loss on such a position?

Accepted Answer

You would purchase a call option if you ...

Question 15

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)  futures contract.
D)  money market security.
E)  fixed-income security.F) None of the above
G) D) and E)

Question 16

You want the right,but not the obligation,to sell 600 shares of ZZ Industries stock at a price of $35 a share.How much will it cost you to establish this option position?

Accepted Answer

A)  $422
B)  $408
C)  $360
D)  $378
E)  $382F) A) and B)
G) A) and C)

Question 17

Futures contracts:

Accepted Answer

A)  require payment in full at the time the contract is written.
B)  can be resold.
C)  establish the quantity to be exchanged but not the date of the exchange.
D)  establish both the quantity to be exchanged and the exchange date but not the price.
E)  are primary financial assets.F) B) and D)
G) B) and C)

Question 18

You own twelve (12) 6.25 percent coupon bonds with a total maturity value of $12,000.How much will you receive every six months as an interest payment?

Accepted Answer

A)  $213.50
B)  $375.00
C)  $427.00
D)  $540.00
E)  $750.00F) None of the above
G) A) and B)

Question 19

Aldridge,Inc.pays an annual dividend of $1.18.What is the dividend yield on this stock?

Accepted Answer

A)  2.09 percent
B)  3.42 percent
C)  4.60 percent
D)  7.20 percent
E)  8.04 percentF) A) and D)
G) C) and E)

Question 20

Options expire on the _____ of the expiration month.

Accepted Answer

A)  last trading day
B)  3rd Friday
C)  last Friday
D)  Saturday following the 3rd Friday
E)  Saturday following the last FridayF) D) and E)
G) A) and E)

Exam 3: Overview of Security Types

What was yesterday's closing price on the Beta Movers bond?

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Briefly compare and contrast options and futures.

Correct AnswerAnswered by ExamLex AIOptions and futures are both types of fi...View AnswerShow Answer

You want the right,but not the obligation,to sell 600 shares of ZZ Industries stock at a price of $35 a share.How much will it cost you to establish this option position?

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You own twelve (12) 6.25 percent coupon bonds with a total maturity value of $12,000.How much will you receive every six months as an interest payment?

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Aldridge,Inc.pays an annual dividend of $1.18.What is the dividend yield on this stock?

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Futures contracts:

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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:

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Which one of the following is the best definition of a money market instrument?

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The price you will pay (per underlying share) to buy the 50 call option on JL stock is:

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You purchased three call option contracts with a strike price of $22.50 and an option premium of $0.45.You held the option until the expiration date.On the expiration date,the stock was selling for $21.70 a share.What is the total profit or loss on your option position?

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You will earn a profit as the owner of a call option if the price of the underlying asset:

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At the time a futures contract is written:

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Options expire on the _____ of the expiration month.

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

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What was the total price fluctuation on one November 08 soybeans contract today?

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If you purchase five Zeus bonds,the cost will be _____ and the annual interest income will be _____.

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Why would you purchase a call option? What is your maximum profit or loss on such a position?

Correct AnswerAnswered by ExamLex AIYou would purchase a call option if you ...View AnswerShow Answer

If you are willing to sell a stock and wish to receive the option premium you should:

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Preferred stock is sometimes considered to be a cross between debt and equity.Describe the characteristics of preferred stock that make it similar to debt as well as the characteristics that make it similar to equity.

Correct AnswerAnswered by ExamLex AIPreferred stock is considered to be a cr...View AnswerShow Answer

What are the basic differences between a T-Bill and a T-Bond? Which security(ies)are considered risk-free?

Correct AnswerAnswered by ExamLex AIThe basic differences between a T-Bill a...View AnswerShow Answer

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If you purchase five Zeus bonds,the cost will be _ and the annual interest income will be _.

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You would purchase a call option if you ...
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Preferred stock is considered to be a cr...
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The basic differences between a T-Bill a...
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