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Question 1 of 10
1. Question
Regarding insured deposits, which of the following is false?
I. Insured deposits are those deposits that are held as cash in a bank or credit union that are insured against loss by another company.
II. The insurance of deposits held at credit unions are insured by the Federal Deposit Insurance Corporation, FDIC.
III. Insured deposits are cash deposits that should not receive interest payments.
IV. Insured deposits are mostly liquid deposits.Correct
The insurance of deposits held at credit unions are insured by the National Credit Union Administration, or the NCUA.
Insured deposits are cash deposits that may or may not receive interest payments. Given the cash nature of insured deposits, they are liquid deposits.Incorrect
The insurance of deposits held at credit unions are insured by the National Credit Union Administration, or the NCUA.
Insured deposits are cash deposits that may or may not receive interest payments. Given the cash nature of insured deposits, they are liquid deposits. -
Question 2 of 10
2. Question
The following are the two broad types of insured deposit accounts excluding:
I. Savings deposit account
II. Fixed deposits account
III. Demand deposit accounts
IV. Certificate of depositCorrect
The two types of insured deposit accounts are demand deposit accounts and certificates of deposit.
Incorrect
The two types of insured deposit accounts are demand deposit accounts and certificates of deposit.
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Question 3 of 10
3. Question
The following are false about demand deposit, except:
I. They are liquid deposits
II. The deposit can only be demanded after advance notice has been issued by the depositor
III. It is suitable for long periods because it can be easily withdrawn
IV. The interest rate does not usually exceed inflationCorrect
Demand deposit accounts are most closely associated with checking and savings accounts.
The name demand deposit refers to the liquidity of the instrument. The deposit may be
“demanded” at any time without advanced notice from the depositor. While an investor may receive a small amount of interest on a deposit in a demand deposit account, it is not suitable for any long period as the rate of interest paid usually does not exceed inflation, thereby losing purchasing power in the long run.Incorrect
Demand deposit accounts are most closely associated with checking and savings accounts.
The name demand deposit refers to the liquidity of the instrument. The deposit may be
“demanded” at any time without advanced notice from the depositor. While an investor may receive a small amount of interest on a deposit in a demand deposit account, it is not suitable for any long period as the rate of interest paid usually does not exceed inflation, thereby losing purchasing power in the long run. -
Question 4 of 10
4. Question
Which if the following is false about certificate of deposit?
I. They are closely associated with checking and savings accounts.
II. Deposit can be withdrawn at an earlier date without forfeiture of the accrued interest.
III. It is insured by the Federal Deposit Insurance Corporation.
IV. They have variable interest rate largely dependent on the rate of inflation.Correct
Certificates of deposit (CDs) take the form of savings certificates promising the holder of the CD a specific rate of interest. These savings certificates are cash deposits and therefore liquid and insured by the Federal Deposit Insurance Corporation. If a certificate is redeemed before the maturity date, however, there is usually some forfeiture of interest earned. CDs are characterized by maturity dates and a fixed rate of interest.
Incorrect
Certificates of deposit (CDs) take the form of savings certificates promising the holder of the CD a specific rate of interest. These savings certificates are cash deposits and therefore liquid and insured by the Federal Deposit Insurance Corporation. If a certificate is redeemed before the maturity date, however, there is usually some forfeiture of interest earned. CDs are characterized by maturity dates and a fixed rate of interest.
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Question 5 of 10
5. Question
The two most useful types of money market instruments are:
I. Commercial paper
II. Treasury bonds
III. Treasury bills
IV. Treasury notesCorrect
The two most common and most useful types of money market instruments are commercial paper and Treasury bills, or T-bills.
Incorrect
The two most common and most useful types of money market instruments are commercial paper and Treasury bills, or T-bills.
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Question 6 of 10
6. Question
The AAA rating is bonds is unique to which agency?
Correct
The three major bond rating agencies are Moody’s, Standard and Poor’s (S&P), and Fitch. An investor with the goal of capital preservation will most likely choose a highly rated bond such as the AAA rating issued by S&P.
Incorrect
The three major bond rating agencies are Moody’s, Standard and Poor’s (S&P), and Fitch. An investor with the goal of capital preservation will most likely choose a highly rated bond such as the AAA rating issued by S&P.
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Question 7 of 10
7. Question
The difference in value between two bonds with different credit ratings that are otherwise identical is known as:
Correct
Credit spread is the difference in value between two bonds with different credit ratings that are otherwise identical, with the comparison often made in comparison to a U.S. Treasury bond, as such a bond is deemed to be maximally secure.
Incorrect
Credit spread is the difference in value between two bonds with different credit ratings that are otherwise identical, with the comparison often made in comparison to a U.S. Treasury bond, as such a bond is deemed to be maximally secure.
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Question 8 of 10
8. Question
If a proposed 5-year corporate bond had a yield of 4.60% and the corresponding 5-year U.S. Treasury bond had a yield of 3.21%, what is the credit spread?
Correct
Credit spread is the difference in value between two bonds with different credit ratings that are otherwise identical, with the comparison often made in comparison to a U.S. Treasury bond, as such a bond is deemed to be maximally secure.
Thus, in this scenario;
Corporate bond yield – Treasury bond yield = Credit spread
460-321 = 139Incorrect
Credit spread is the difference in value between two bonds with different credit ratings that are otherwise identical, with the comparison often made in comparison to a U.S. Treasury bond, as such a bond is deemed to be maximally secure.
Thus, in this scenario;
Corporate bond yield – Treasury bond yield = Credit spread
460-321 = 139 -
Question 9 of 10
9. Question
Credit spread is measured or stated in terms of basis points, each of these points is equivalent to:
Correct
Credit spread is measured or stated in terms of basis points, each point equal to a hundredth of one percent, and all with reference to the bonds’ yield.
Incorrect
Credit spread is measured or stated in terms of basis points, each point equal to a hundredth of one percent, and all with reference to the bonds’ yield.
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Question 10 of 10
10. Question
Regarding factors affecting bond liquidity, which is the following does not apply?
Correct
The following affect bond liquidity:
a. how well-known or widely owned they are
the bond rating (higher rating easier trades)
b. the quality of the bond issuer
c. how mature the bond is
d. how high the interest rate is
e. whether it is trading at, above, or below par
f. whether it has any call featuresIncorrect
The following affect bond liquidity:
a. how well-known or widely owned they are
the bond rating (higher rating easier trades)
b. the quality of the bond issuer
c. how mature the bond is
d. how high the interest rate is
e. whether it is trading at, above, or below par
f. whether it has any call features