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Question 1 of 10
1. Question
Which of the following statements is true regarding Beta?
I. Beta is a measure of volatility used to judge the return of a given security or portfolio
II. A lower beta indicates a riskier portfolio or security
III. Beta is a metric showing a security’s or portfolio’s correlation to market movement
IV. A beta measurement of 1 indicates a 1-for-1 performance tracked against the security’s or portfolio’s benchmarkCorrect
Beta
Beta is a measure of volatility used to judge the risk of a given security or portfolio. A higher beta indicates a riskier portfolio or security. Beta is a metric showing a security’s or portfolio’s correlation to market movement. A beta measurement of 1 indicates a 1-for-1 performance tracked against the security’s or portfolio’s benchmark. A 50 percent decrease in the value of the benchmark of a portfolio or security would also result in a 50 percent decrease in the value of that portfolio or security.Incorrect
Beta
Beta is a measure of volatility used to judge the risk of a given security or portfolio. A higher beta indicates a riskier portfolio or security. Beta is a metric showing a security’s or portfolio’s correlation to market movement. A beta measurement of 1 indicates a 1-for-1 performance tracked against the security’s or portfolio’s benchmark. A 50 percent decrease in the value of the benchmark of a portfolio or security would also result in a 50 percent decrease in the value of that portfolio or security. -
Question 2 of 10
2. Question
Which of the following statements is true regarding opportunity cost?
I. Opportunity cost is the potential benefits ceded from one opportunity in order to pursue another opportunity
II. While this may seem ambiguous, investors may think of it in concrete terms
III. To investors, opportunity cost may be the return given up on other investments when they choose a specific investment
IV. If their chosen investment returns more than another investment, then they suffered a measurable opportunity cost measured by the differences in the returnsCorrect
Opportunity cost
Opportunity cost is the potential benefits ceded from one opportunity in order to pursue another opportunity. While this may seem ambiguous, investors may think of it in concrete terms. To investors, opportunity cost may be the return given up on other investments when they choose a specific investment. If their chosen investment returns less than another investment, then they suffered a measurable opportunity cost measured by the differences in the returns.Incorrect
Opportunity cost
Opportunity cost is the potential benefits ceded from one opportunity in order to pursue another opportunity. While this may seem ambiguous, investors may think of it in concrete terms. To investors, opportunity cost may be the return given up on other investments when they choose a specific investment. If their chosen investment returns less than another investment, then they suffered a measurable opportunity cost measured by the differences in the returns. -
Question 3 of 10
3. Question
Which of the following statements is true regarding capital structure and order of liquidation priority?
I. Capital structure is the term given to the method by which a company finances its operations
II. It is some combination of long and short-term debt and preferred and common stock issued. Capital structure is often referred to in conjunction with the debt-to-equity ratio
III. Capital structure differs vastly from investors to employees
IV. Companies that are highly leveraged are considered much safer than companies that raise most of their capital through equity issuance and salesCorrect
Capital structure and order of liquidation priority
Capital structure is the term given to the method by which a company finances its operations. It is some combination of long and short-term debt and preferred and common stock issued. Capital structure is often referred to in conjunction with the debt-to-equity ratio. Capital structure differs vastly from company to company. Companies that are highly leveraged, that is, most of their capital comes from borrowing funds through bonds and notes, are considered much riskier than companies that raise most of their capital through equity issuance and sales. This results in an expectation of higher return on investment to compensate for the greater risk taken.Incorrect
Capital structure and order of liquidation priority
Capital structure is the term given to the method by which a company finances its operations. It is some combination of long and short-term debt and preferred and common stock issued. Capital structure is often referred to in conjunction with the debt-to-equity ratio. Capital structure differs vastly from company to company. Companies that are highly leveraged, that is, most of their capital comes from borrowing funds through bonds and notes, are considered much riskier than companies that raise most of their capital through equity issuance and sales. This results in an expectation of higher return on investment to compensate for the greater risk taken. -
Question 4 of 10
4. Question
Which of the following statements is true regarding SEC filings?
I. A company that is publicly traded and listed on any major exchange must be registered with the Securities Exchange Commission and provide regular statements of that company’s condition, or financial statements to the SEC
II. SEC filings provide uniformity (or a certain degree thereof) to multiple companies that make it difficult for the investor to understand
III. Securities Exchange Commission filings are not governed by the SEC
IV. It provides extra incentive for the company to report accurate figures to prevent a loss of trading privileges or civil penalties and finesCorrect
SEC filings
A company that is publicly traded and listed on any major exchange must be registered with the Securities Exchange Commission and provide regular statements of that company’s condition, or financial statements to the SEC. These are known as SEC filings. SEC filings provide uniformity (or a certain degree thereof) to multiple companies that make it easier for the investor to understand than the more complex and company-specific statements that a firm may use for its internal accounting and decision making. Securities Exchange Commission filings are also governed by the SEC, which provides extra incentive for the company to report accurate figures to prevent a loss of trading privileges or civil penalties and fines.Incorrect
SEC filings
A company that is publicly traded and listed on any major exchange must be registered with the Securities Exchange Commission and provide regular statements of that company’s condition, or financial statements to the SEC. These are known as SEC filings. SEC filings provide uniformity (or a certain degree thereof) to multiple companies that make it easier for the investor to understand than the more complex and company-specific statements that a firm may use for its internal accounting and decision making. Securities Exchange Commission filings are also governed by the SEC, which provides extra incentive for the company to report accurate figures to prevent a loss of trading privileges or civil penalties and fines. -
Question 5 of 10
5. Question
Which of the following statements is true regarding insured deposits?
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. For banks, that insuring company is the Federal Deposit Insurance Corporation, or the FDIC
III. The insurance of deposits held at credit unions are insured by the independent federal government agency the National Credit Union Administration
IV. Insured deposits are cheque deposits that may or may not receive interest paymentsCorrect
Insured deposits
Insured deposits are those deposits that are held as cash in a bank or credit union that are insured against loss by another company. For banks, that insuring company is the Federal Deposit Insurance Corporation, or the FDIC. The insurance of deposits held at credit unions are insured by the independent federal government agency the National Credit Union Administration, or the NCUA. Insured deposits are cash deposits that may or may not receive interest payments. The interest rates received are usually very low and not comparable to market returns but are generally considered very safe due to the insurance thereon and inability to lose value due to market fluctuations.Incorrect
Insured deposits
Insured deposits are those deposits that are held as cash in a bank or credit union that are insured against loss by another company. For banks, that insuring company is the Federal Deposit Insurance Corporation, or the FDIC. The insurance of deposits held at credit unions are insured by the independent federal government agency the National Credit Union Administration, or the NCUA. Insured deposits are cash deposits that may or may not receive interest payments. The interest rates received are usually very low and not comparable to market returns but are generally considered very safe due to the insurance thereon and inability to lose value due to market fluctuations. -
Question 6 of 10
6. Question
Which of the following statements is true regarding demand deposits?
Correct
Demand deposits
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. They are useful, however, due to their totally liquid nature.Incorrect
Demand deposits
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. They are useful, however, due to their totally liquid nature. -
Question 7 of 10
7. Question
Which of the following statements is true regarding certificate of deposit?
Correct
Certificate of deposit
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. They are issued in any
denomination, but there is usually a minimum deposit stated at the bank’s discretion.Incorrect
Certificate of deposit
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. They are issued in any
denomination, but there is usually a minimum deposit stated at the bank’s discretion. -
Question 8 of 10
8. Question
Which of the following statements is false regarding money market instruments?
Correct
Money market instruments
Money market instruments belong to the fixed income sector of the market because they are short maturity debts issued by governments, large companies, and financial institutions. Money market instruments differ from bonds in that they are subject to a much shorter duration for the debt, specifically less than a year. Because of their short duration and relative safety, money market instruments are very liquid. These attractive qualities, however, lend to a low rate of return on money market securities. The two most common and most useful types of money market instruments are commercial paper and Treasury bills, or T-bills.Incorrect
Money market instruments
Money market instruments belong to the fixed income sector of the market because they are short maturity debts issued by governments, large companies, and financial institutions. Money market instruments differ from bonds in that they are subject to a much shorter duration for the debt, specifically less than a year. Because of their short duration and relative safety, money market instruments are very liquid. These attractive qualities, however, lend to a low rate of return on money market securities. The two most common and most useful types of money market instruments are commercial paper and Treasury bills, or T-bills. -
Question 9 of 10
9. Question
Which of the following statements is true regarding commercial paper?
Correct
Commercial paper
Commercial paper is a money market instrument characterized by a short duration and an unsecured nature. They are loans that large corporations use to finance accounts receivable and inventory. Commercial paper maturities typically go no longer than nine months, with the average maturity being one to two months. Commercial paper is considered a very safe investment due to the fact that a company’s financial situation is easy to forecast in such a short time period.Incorrect
Commercial paper
Commercial paper is a money market instrument characterized by a short duration and an unsecured nature. They are loans that large corporations use to finance accounts receivable and inventory. Commercial paper maturities typically go no longer than nine months, with the average maturity being one to two months. Commercial paper is considered a very safe investment due to the fact that a company’s financial situation is easy to forecast in such a short time period. -
Question 10 of 10
10. Question
Which of the following statements is true regarding treasury bills?
Correct
Treasury bills
Treasury bills, commonly referred to as T-bills, are short-term debt issued by the United States government. They are most commonly issued with maturities of one month, three months, and six months. T-bills are issued in denominations of $1,000 dollars. The greatest amount of T-bills purchasable at one time is $5 million. Treasury bills are issued at a discount to par and redeemed at par by the U.S. government. This differs from traditional debt securities in that no interest payments are made on the debt instrument. The effective interest rate earned is calculated using the difference in the price paid at issue and the price at which the Treasury bills are redeemed.Incorrect
Treasury bills
Treasury bills, commonly referred to as T-bills, are short-term debt issued by the United States government. They are most commonly issued with maturities of one month, three months, and six months. T-bills are issued in denominations of $1,000 dollars. The greatest amount of T-bills purchasable at one time is $5 million. Treasury bills are issued at a discount to par and redeemed at par by the U.S. government. This differs from traditional debt securities in that no interest payments are made on the debt instrument. The effective interest rate earned is calculated using the difference in the price paid at issue and the price at which the Treasury bills are redeemed.