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Question 1 of 10
1. Question
Equity securities are commonly referred to as which of the following?
Correct
Equity securities, most commonly referred to as stocks, are sold as individual shares of a company.
Incorrect
Equity securities, most commonly referred to as stocks, are sold as individual shares of a company.
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Question 2 of 10
2. Question
A share is sold on which of the following market?
Correct
Equity securities, most commonly referred to as stocks, are sold as individual shares of a company. Each share represents a certain percentage of ownership in a company. They are issued by the company and sold at an initial offering and on the secondary market thereafter, wherein investors determine the value of the shares in a bid/ask manner.
Incorrect
Equity securities, most commonly referred to as stocks, are sold as individual shares of a company. Each share represents a certain percentage of ownership in a company. They are issued by the company and sold at an initial offering and on the secondary market thereafter, wherein investors determine the value of the shares in a bid/ask manner.
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Question 3 of 10
3. Question
39. Which of the following bonds depend primarily on revenue generated from the project for repayment?
I. General obligation bond
II. Revenue bond
III. Double-capitalized bond
IV. Double-barreled bondCorrect
Double-barreled bonds are revenue bonds that also have the backing of the taxing authority. They are considered GO bonds, even though they depend primarily on revenue generated from the project for repayment.
Incorrect
Double-barreled bonds are revenue bonds that also have the backing of the taxing authority. They are considered GO bonds, even though they depend primarily on revenue generated from the project for repayment.
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Question 4 of 10
4. Question
Which of the following diminishes the attractiveness of the bond to investors looking to bonds for capital preservation?
Correct
The risk/reward theory states that an investment that bears high risk should return high rewards to be worth accepting the risk associated with the investment. While this results in risky bonds commanding high coupon payments, or fixed interest payments, the inherent risk diminishes the attractiveness of the bond to investors looking to bonds for capital preservation.
Incorrect
The risk/reward theory states that an investment that bears high risk should return high rewards to be worth accepting the risk associated with the investment. While this results in risky bonds commanding high coupon payments, or fixed interest payments, the inherent risk diminishes the attractiveness of the bond to investors looking to bonds for capital preservation.
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Question 5 of 10
5. Question
Discounted cash flow is:
Correct
Discounted cash flow as related to fixed income securities is a function of present value calculations.
Incorrect
Discounted cash flow as related to fixed income securities is a function of present value calculations.
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Question 6 of 10
6. Question
A bond offers a yield to maturity of 4% and makes coupon payments biannually. You are told that a 1% increase in interest rates would lead to a modified duration of exactly 10 years. What is the current duration?
Correct
Modified duration = Macaulay duration
_________________
(1 + yield to maturity ÷
number of coupons per year)
10 years = X ÷ (1 + 0.04/2)
The current duration is 10.2 yearsIncorrect
Modified duration = Macaulay duration
_________________
(1 + yield to maturity ÷
number of coupons per year)
10 years = X ÷ (1 + 0.04/2)
The current duration is 10.2 years -
Question 7 of 10
7. Question
The coupon of a bond is best defines as:
Correct
The coupon of a bond is the fixed rate of interest paid to the investor holding the bond.
Incorrect
The coupon of a bond is the fixed rate of interest paid to the investor holding the bond.
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Question 8 of 10
8. Question
The relationship between the interest rate of a bond and its value can best be described as:
Correct
The relationship exhibited between interest rates, or the coupon, and the value of bonds is an inverse relationship; as one increases, the other declines.
Incorrect
The relationship exhibited between interest rates, or the coupon, and the value of bonds is an inverse relationship; as one increases, the other declines.
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Question 9 of 10
9. Question
When categorized according to the way that the bond repayments can be financed, how many types of municipal bonds are there?
Correct
There are three main types of municipal bonds, categorized according to the way that the bond repayments can be financed.
Incorrect
There are three main types of municipal bonds, categorized according to the way that the bond repayments can be financed.
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Question 10 of 10
10. Question
Which type of municipal bond is issued to pay for improvements that benefit a community, but don’t produce income.
Correct
General obligation (GO) bonds are the first type. These are issued to pay for improvements that benefit a community, but don’t produce income.
Incorrect
General obligation (GO) bonds are the first type. These are issued to pay for improvements that benefit a community, but don’t produce income.