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Question 1 of 10
1. Question
What is separate trading of registered interest and principal securities?
Correct
Treasury STRIPS (separate trading of registered interest and principal securities) are zero coupon bonds that constitute direct obligations of the federal government. STRIPS do not pay a coupon, but the interest will be taxed as it accrues. These are considered more risky than other government bonds during periods in which interest rates fluctuate widely.
Incorrect
Treasury STRIPS (separate trading of registered interest and principal securities) are zero coupon bonds that constitute direct obligations of the federal government. STRIPS do not pay a coupon, but the interest will be taxed as it accrues. These are considered more risky than other government bonds during periods in which interest rates fluctuate widely.
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Question 2 of 10
2. Question
Mark the types of Investment grade bonds:
I. Secured bonds
II. Zero coupon bonds
III. Debentures
IV. Taxable coupon bondsCorrect
Investment grade bonds are those that offer debt of high quality. There are a few different types. Secured bonds have a claim to the assets of a corporation in the event of insolvency, liquidation, or default. Unsecured bonds, on the other hand, are not backed by collateral. Debentures are promissory notes not backed by collateral but by the reputation of the firm.
Incorrect
Investment grade bonds are those that offer debt of high quality. There are a few different types. Secured bonds have a claim to the assets of a corporation in the event of insolvency, liquidation, or default. Unsecured bonds, on the other hand, are not backed by collateral. Debentures are promissory notes not backed by collateral but by the reputation of the firm.
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Question 3 of 10
3. Question
Bonds which give the holder the right to convert a bond into shares of common stock are:
Correct
Convertible bonds are those that give the holder the right to convert a bond into shares of common stock. Investors will have to pay for this privilege. Investors like these bonds because they offer the safety of debt along with the potential for capital gains.
Incorrect
Convertible bonds are those that give the holder the right to convert a bond into shares of common stock. Investors will have to pay for this privilege. Investors like these bonds because they offer the safety of debt along with the potential for capital gains.
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Question 4 of 10
4. Question
Securities sold to pension plans by insurance companies are called:
Correct
Guaranteed investment contracts, commonly known as stable value funds, are securities sold to pension plans by insurance companies. The rate of return for these is guaranteed over a certain amount of time.
Incorrect
Guaranteed investment contracts, commonly known as stable value funds, are securities sold to pension plans by insurance companies. The rate of return for these is guaranteed over a certain amount of time.
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Question 5 of 10
5. Question
Identify the categories of common stock:
I. Cyclical stock
II. Growth stock
III. Expenses stock
IV. Income stockCorrect
There are six basic categories of common stock. Blue chip stocks are those that are highly regarded for investment. Blue chip stocks will consistently pay dividends. Income stocks pay regular and steady dividends and typically appreciate enough to keep up with inflation. Growth stocks are those for firms whose sales, earnings, and market shares tend to grow at an above-average pace. Cyclical stocks are those that perform in a manner consistent with the market. Interest-sensitive stocks are affected greatly by changes in interest rates. Insurance companies, utilities, and banks all have interest-sensitive stock. Defensive stocks are generally unaffected by changes in the market.
Incorrect
There are six basic categories of common stock. Blue chip stocks are those that are highly regarded for investment. Blue chip stocks will consistently pay dividends. Income stocks pay regular and steady dividends and typically appreciate enough to keep up with inflation. Growth stocks are those for firms whose sales, earnings, and market shares tend to grow at an above-average pace. Cyclical stocks are those that perform in a manner consistent with the market. Interest-sensitive stocks are affected greatly by changes in interest rates. Insurance companies, utilities, and banks all have interest-sensitive stock. Defensive stocks are generally unaffected by changes in the market.
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Question 6 of 10
6. Question
Contracts that give the owner the right to trade in an asset for a predetermined price at a later date are called:
Correct
Options are contracts that give the owner the right to trade in an asset for a predetermined price at a later date. The price paid for an option is referred to as a premium. Options may be classified as either a call or a put.
Incorrect
Options are contracts that give the owner the right to trade in an asset for a predetermined price at a later date. The price paid for an option is referred to as a premium. Options may be classified as either a call or a put.
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Question 7 of 10
7. Question
How many types of options are there?
Correct
Options may be classified as either a call or a put. A call gives the holder of the option the right to buy an asset at a predetermined price; a put gives the holder the right to sell the asset at a predetermined price.
Incorrect
Options may be classified as either a call or a put. A call gives the holder of the option the right to buy an asset at a predetermined price; a put gives the holder the right to sell the asset at a predetermined price.
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Question 8 of 10
8. Question
Which option gives the holder the right to sell the asset at predetermined price?
Correct
A call gives the holder of the option the right to buy an asset at a predetermined price; a put gives the holder the right to sell the asset at a predetermined price.
Incorrect
A call gives the holder of the option the right to buy an asset at a predetermined price; a put gives the holder the right to sell the asset at a predetermined price.
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Question 9 of 10
9. Question
Mark the three categories of options:
I. Out-of-the-money
II. On-the-money
III. In-the-money
IV. At-the-moneyCorrect
An option with value is said to be in-the-money; an option with negligible value is said to be out-of- the-money; and an option with minimal value is said to be at-the-money.
Incorrect
An option with value is said to be in-the-money; an option with negligible value is said to be out-of- the-money; and an option with minimal value is said to be at-the-money.
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Question 10 of 10
10. Question
How is the intrinsic value of the call option calculated?
Correct
The intrinsic value of an option is defined as the minimum price for which it can be bought. The intrinsic value of a call option is calculated as stock price less strike price; the intrinsic value of put options is calculated as strike price less stock price.
Incorrect
The intrinsic value of an option is defined as the minimum price for which it can be bought. The intrinsic value of a call option is calculated as stock price less strike price; the intrinsic value of put options is calculated as strike price less stock price.