ch02- Which of the following is not a characteristic of a money market instrument

41. The
yield to maturity reported in the financial pages for Treasury securities
A. is
calculated by compounding the semiannual yield.
B. is
calculated by doubling the semiannual yield.
C. is
also called the bond equivalent yield.
D. is
calculated as the yield-to-call for premium bonds.
E. Both
B and C are true.

42. Which
of the following is not a mortgage-related government or government
sponsored agency?
A. The
Federal Home Loan Bank
B. The
Federal National Mortgage Association
C. The
U.S. Treasury
D. Freddie
Mac
E. Ginnie
Mae

43. In
order for you to be indifferent between the after tax returns on a corporate
bond paying 8.5% and a tax-exempt municipal bond paying 6.12%, what would your
tax bracket need to be?
A. 33%
B. 72%
C. 15%
D. 28%
E. Cannot
tell from the information given

44. What
does the term “negotiable” mean with regard to negotiable
certificates of deposit?
A. The
CD can be sold to another investor if the owner needs to cash it in before its
maturity date.
B. The
rate of interest on the CD is subject to negotiation.
C. The
CD is automatically reinvested at its maturity date.
D. The
CD has staggered maturity dates built in.
E. The
interest rate paid on the CD will vary with a designated market rate.

45. Freddie
Mac and Ginnie Mae were organized to provide
A. a
primary market for mortgage transactions.
B. liquidity
for the mortgage market.
C. a
primary market for farm loan transactions.
D. liquidity
for the farm loan market.
E. a
source of funds for government agencies.

46. The
type of municipal bond that is used to finance commercial enterprises such as
the construction of a new building for a corporation is called
A. a
corporate courtesy bond.
B. a
revenue bond.
C. a
general obligation bond.
D. a
tax anticipation note.
E. an
industrial development bond.

47. Suppose
an investor is considering a corporate bond with a 7.17% before-tax yield and a
municipal bond with a 5.93% before-tax yield. At what marginal tax rate would
the investor be indifferent between investing in the corporate and investing in
the muni?
A. 15.4%
B. 23.7%
C. 39.5%
D. 17.3%
E. 12.4%

48. Which
of the following are characteristics of preferred stock?
I)
It pays its holder a fixed amount of income each year, at the discretion of its
managers.
II)
It gives its holder voting power in the firm.
III)
Its dividends are usually cumulative.
IV)
Failure to pay dividends may result in bankruptcy proceedings.
A. I,
III, and IV
B. I,
II, and III
C. I
and III
D. I,
II, and IV
E. I,
II, III, and IV

49. Bond
market indexes can be difficult to construct because
A. they
cannot be based on firms’ market values.
B. bonds
tend to trade infrequently, making price information difficult to obtain.
C. there
are so many different kinds of bonds.
D. prices
cannot be obtained for companies that operate in emerging markets.
E. corporations
are not required to disclose the details of their bond issues.

50. With
regard to a futures contract, the long position is held by
A. the
trader who bought the contract at the largest discount.
B. the
trader who has to travel the farthest distance to deliver the commodity.
C. the
trader who plans to hold the contract open for the lengthiest time period.
D. the
trader who commits to purchasing the commodity on the delivery date.
E. the
trader who commits to delivering the commodity on the delivery date.

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