Quiz-summary
0 of 10 questions completed
Questions:
- 1
- 2
- 3
- 4
- 5
- 6
- 7
- 8
- 9
- 10
Information
certdemy free pracrtice questions
You have already completed the quiz before. Hence you can not start it again.
Quiz is loading...
You must sign in or sign up to start the quiz.
You have to finish following quiz, to start this quiz:
Results
0 of 10 questions answered correctly
Your time:
Time has elapsed
You have reached 0 of 0 points, (0)
Categories
- Not categorized 0%
- 1
- 2
- 3
- 4
- 5
- 6
- 7
- 8
- 9
- 10
- Answered
- Review
-
Question 1 of 10
1. Question
What is true in regards of political risk?
I. Political risk can be reduced by investing in countries with stable governments.
II. Political risk is the risk an investment’s returns could suffer as a result of political changes or instability in a country.
III. Political risk is also called sovereign risk.
IV. The impact of political risk is considered to be long-term because the risk rises over time.Correct
Political risk, also called sovereign risk, is the risk that investors will lose money due to the political climate of the country in which their investment is located. Investors most susceptible to this type of risk are those who aggressively seek high returns by investing in developing economies that lack political stability. Investors with a short time horizon should avoid investments with a high degree of political risk. Political risk may largely be reduced by investing in countries with stable governments.
Incorrect
Political risk, also called sovereign risk, is the risk that investors will lose money due to the political climate of the country in which their investment is located. Investors most susceptible to this type of risk are those who aggressively seek high returns by investing in developing economies that lack political stability. Investors with a short time horizon should avoid investments with a high degree of political risk. Political risk may largely be reduced by investing in countries with stable governments.
-
Question 2 of 10
2. Question
Which of the following statement is/are true?
I. Opportunity cost = return of most lucrative option not chosen – return of chosen option.
II. Opportunity cost analysis does not play a crucial role in determining a business’s capital structure.
III. Liquidity risk occurs when an individual investor, business or financial institution cannot meet short-term debt obligations.
IV. Liquidity risk refers to the risk that an investment may be easily converted to cash.Correct
Investors most susceptible to this form of risk are those who invest in the aforementioned securities and investments.Opportunity cost analysis also plays a crucial role in determining a business’s capital structure. While both debt and equity require expense to compensate lenders and shareholders for the risk of investment, each also carries an opportunity cost.
Incorrect
Investors most susceptible to this form of risk are those who invest in the aforementioned securities and investments.Opportunity cost analysis also plays a crucial role in determining a business’s capital structure. While both debt and equity require expense to compensate lenders and shareholders for the risk of investment, each also carries an opportunity cost.
-
Question 3 of 10
3. Question
What holds true for capital structure?
I. A company that is heavily financed by debt has a less aggressive capital structure and therefore poses lesser risk to investors.
II. The capital structure is how a firm finances its overall operations and growth by using different sources of funds.
III. Capital structure can be a mixture of a firm’s long-term debt, short-term debt, common equity and preferred equity.
IV. A company that is heavily financed by debt has a more aggressive capital structure and therefore poses greater risk to investors.Correct
Capital structure refers to the way in which a firm has chosen to finance its operations. This structure is a mix of debt issues and equity issues. Capital structure is often analyzed using the debt-to-equity ratio. The more debt a company uses to finance its operations, the riskier the company is, but this can also lead to higher returns for investors, as the firm may use debt to invest in ventures in which it may not otherwise have had access.
Incorrect
Capital structure refers to the way in which a firm has chosen to finance its operations. This structure is a mix of debt issues and equity issues. Capital structure is often analyzed using the debt-to-equity ratio. The more debt a company uses to finance its operations, the riskier the company is, but this can also lead to higher returns for investors, as the firm may use debt to invest in ventures in which it may not otherwise have had access.
-
Question 4 of 10
4. Question
The current bond yield for a five-year Exxon Mobil (XOM) bond is 1.82%. The corresponding five-year Treasury bond yield stands at 1.73%. So the credit spread for the Exxon Mobil bond would be?
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.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 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.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. -
Question 5 of 10
5. Question
What is true in regards of a pooled investments?
I. The pooled account lets the investors be treated as a single account holder, allowing them to buy more shares.
II. Individual investor has more control over the group’s investment decisions under the pooled investments.
III. Pooled funds are funds from many individual investors that are aggregated for the purposes of investment.
IV. Investors save on transaction costs and further diversify their portfolios under the pooled investment.Correct
Pooled investments, such as unit investment trusts (UITs) and mutual funds are funds to which more than one investor contributes funds for the purpose of holding them as a group. This is done so each of the investors may have access to benefits to which they may not have had access individually. Pooled investments also create economies of scale which in turn lower an individual’s administrative costs (such as trading costs) and allow for greater diversification and benefit from professional money managers.
Incorrect
Pooled investments, such as unit investment trusts (UITs) and mutual funds are funds to which more than one investor contributes funds for the purpose of holding them as a group. This is done so each of the investors may have access to benefits to which they may not have had access individually. Pooled investments also create economies of scale which in turn lower an individual’s administrative costs (such as trading costs) and allow for greater diversification and benefit from professional money managers.
-
Question 6 of 10
6. Question
Which of the following statements stands true in case of an options contract?
I. A covered call can produce risk-free income for a retiree.
II. It is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a later date at an agreed upon price.
III. The two types of contracts are put and call options, which can be purchased to speculate on the direction of stocks.
IV. Options contracts are often used in securities, commodities, and real estate transactions.Correct
Options contracts are contracts between two or more investors based on the right or requirement to buy or sell a certain security that underlies the contract. The most basic types of options are calls and puts. More advanced options contracts are some combination of the two surrounding a strike price. Options are used for many reasons. A covered call can produce risk-free income for a retiree.
Incorrect
Options contracts are contracts between two or more investors based on the right or requirement to buy or sell a certain security that underlies the contract. The most basic types of options are calls and puts. More advanced options contracts are some combination of the two surrounding a strike price. Options are used for many reasons. A covered call can produce risk-free income for a retiree.
-
Question 7 of 10
7. Question
What is the difference between a future contract and a forward contract?
I. Futures contracts can settle over a range of dates.
II. Futures are traded on an exchange whereas forwards are traded over-the-counter.
III.Futures contracts are settled in the future at the future price, where as forward contracts are settled at current prices.
IV. Forward contracts are settled on one date at the end of the contract.Correct
Futures differ from forward contracts in that forward contracts are based on the current price with future delivery. Some futures may be settled in cash, and others are settled when the commodities are delivered. Forward contracts differ from futures in that futures contracts are settled in the future at the future price, where forward contracts are settled at current prices. The fact that the value of the forward contract is derived from the underlying asset makes it a derivative.
Incorrect
Futures differ from forward contracts in that forward contracts are based on the current price with future delivery. Some futures may be settled in cash, and others are settled when the commodities are delivered. Forward contracts differ from futures in that futures contracts are settled in the future at the future price, where forward contracts are settled at current prices. The fact that the value of the forward contract is derived from the underlying asset makes it a derivative.
-
Question 8 of 10
8. Question
What is true in regards of exchange trade notes?
I. ETNs do have periodic coupon payments.
II. ETNs have a maturity date and are backed only by the credit of the issuer.
III.They are traded on an exchange and they have a maturity date.
IV. ETNs are secured debt instruments.Correct
As their name implies, they are traded on an exchange, although they also have a maturity date like bonds. But with ETNs, the repayment of principal at the maturity date is modified according to the day’s market index factor. (Further, the repayment is reduced by investing fees.) The value of an ETN, however, is not simply based on the market index, but also depends on the creditworthiness of the debtor company, since ETNs are unsecured debt instruments. Unlike ordinary bonds, ETNs do not have periodic coupon payments.
Incorrect
As their name implies, they are traded on an exchange, although they also have a maturity date like bonds. But with ETNs, the repayment of principal at the maturity date is modified according to the day’s market index factor. (Further, the repayment is reduced by investing fees.) The value of an ETN, however, is not simply based on the market index, but also depends on the creditworthiness of the debtor company, since ETNs are unsecured debt instruments. Unlike ordinary bonds, ETNs do not have periodic coupon payments.
-
Question 9 of 10
9. Question
What is/are true in regards of leveraged funds?
I. Due to the high-risk, high-cost structure of leveraged ETFs, they are often used as long-term investments.
II. A leveraged exchange-traded fund (ETF) is a fund that uses financial derivatives and debt to amplify the returns of an underlying index.
III. These funds aim to keep a constant amount of leverage during the investment time frame, such as a 2:1 ratio.
IV. The are also called leveraged exchange-traded funds.Correct
Leveraged funds (also called leveraged exchange-traded funds, or leveraged ETFs) use leverage in the form of debt or derivative securities, such as futures or options contracts, to try to intensify the return of a given stock index. Thus a leveraged ETF based on the S&P 500 index might aim to provide a 2-to-1 return on that index.Leveraged ETFs are typically used by traders who wish to speculate on an index, or to take advantage of the index’s short-term momentum. Due to the high-risk, high-cost structure of leveraged ETFs, they are rarely used as long-term investments.
Incorrect
Leveraged funds (also called leveraged exchange-traded funds, or leveraged ETFs) use leverage in the form of debt or derivative securities, such as futures or options contracts, to try to intensify the return of a given stock index. Thus a leveraged ETF based on the S&P 500 index might aim to provide a 2-to-1 return on that index.Leveraged ETFs are typically used by traders who wish to speculate on an index, or to take advantage of the index’s short-term momentum. Due to the high-risk, high-cost structure of leveraged ETFs, they are rarely used as long-term investments.
-
Question 10 of 10
10. Question
Which statements stands true for a viatical settlement?
I. It’s an arrangement in which someone with a terminal disease sells her life insurance policy at a discount from its face value for ready cash.
II. Investing in a viatical settlement means speculating on death.
III. A viatical settlement is not risky.
IV. A viatical settlement is also referred to as a life settlement.Correct
Viatical settlements (also called life settlements) involve the owner of a life insurance contract—usually the same person insured by the contract—selling this contract at a discount in order to receive some of the death benefit in advance. This would probably be done in the event of terminal and costly illness.
Incorrect
Viatical settlements (also called life settlements) involve the owner of a life insurance contract—usually the same person insured by the contract—selling this contract at a discount in order to receive some of the death benefit in advance. This would probably be done in the event of terminal and costly illness.