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Question 1 of 10
1. Question
One particular kind of CMO is the ‘mortgage pass through strip.’ It has just two classes of securities, known as the:
Correct
One particular kind of CMO is the ‘mortgage pass through strip.’ It has just two classes of securities, known as the Interest- only & principle only. Their yield is higher than that of government securities, and payments are received monthly, instead of every six months.
Incorrect
One particular kind of CMO is the ‘mortgage pass through strip.’ It has just two classes of securities, known as the Interest- only & principle only. Their yield is higher than that of government securities, and payments are received monthly, instead of every six months.
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Question 2 of 10
2. Question
When the market interest rate is lower than the bond rate, then the interest rate on refinancing will be:
Correct
Bond issuers will call bonds if the market interest rate is lower than the bond rate, so that they can refinance their bonds to pay less interest.
Incorrect
Bond issuers will call bonds if the market interest rate is lower than the bond rate, so that they can refinance their bonds to pay less interest.
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Question 3 of 10
3. Question
Bonds are backed by some collateral, such that if the issuer defaults, the bond investor has claims on the collateralized asset are known as:
Correct
Secured bonds are bonds backed by some collateral, such that if the issuer defaults, the bond investor has claims on the collateralized asset.
Incorrect
Secured bonds are bonds backed by some collateral, such that if the issuer defaults, the bond investor has claims on the collateralized asset.
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Question 4 of 10
4. Question
Which of the following is true for calculating the conversion ratio:
Correct
The conversion ratio gives the number of shares a convertible bond may be converted into. It is calculated by the following formula:
Conversion ratio = (par value of bond) / (conversion price of stock)Incorrect
The conversion ratio gives the number of shares a convertible bond may be converted into. It is calculated by the following formula:
Conversion ratio = (par value of bond) / (conversion price of stock) -
Question 5 of 10
5. Question
Which of the following municipal bonds are related to where the bondholders are repaid through a particular tax levied specifically for their repayment:
Correct
Special tax bonds are municipal bonds where bondholders are repaid through a particular tax levied specifically for their repayment. Generally, this tax will be related to the project which the bonds have funded.
Incorrect
Special tax bonds are municipal bonds where bondholders are repaid through a particular tax levied specifically for their repayment. Generally, this tax will be related to the project which the bonds have funded.
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Question 6 of 10
6. Question
Which of the following formula is used to calculate the tax equivalent yield:
Correct
The tax-equivalent yield is the yield that a taxable bond needs to have before taxes in order to
achieve the same return as a nontaxable bond.
Tax-equivalent yield = (desired yield) / (1 – tax rate)Incorrect
The tax-equivalent yield is the yield that a taxable bond needs to have before taxes in order to
achieve the same return as a nontaxable bond.
Tax-equivalent yield = (desired yield) / (1 – tax rate) -
Question 7 of 10
7. Question
As per which of the act, banks can’t deduct the carrying cost of holding municipal bonds in inventory; that is, they can’t deduct the interest expenses which are incurred to purchase or carry those bonds:
Correct
Under the Tax Reform Act of 1986, banks can’t deduct the carrying cost of holding municipal bonds in inventory; that is, they can’t deduct the interest expenses which are incurred to purchase or carry those bonds.
Incorrect
Under the Tax Reform Act of 1986, banks can’t deduct the carrying cost of holding municipal bonds in inventory; that is, they can’t deduct the interest expenses which are incurred to purchase or carry those bonds.
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Question 8 of 10
8. Question
Investment dollars by an experienced investment adviser are automatically diversified, giving them the benefit in which of the following areas.
I. Reduced risk
II. Opportunities for gains
III. Market exploitation
IV. Market riskCorrect
A professional experienced investment adviser uses his knowledge and skill for the investors’ benefit. Their investment dollars are automatically diversified, giving them the benefit of reduced risk and opportunities for gains in several areas.
Incorrect
A professional experienced investment adviser uses his knowledge and skill for the investors’ benefit. Their investment dollars are automatically diversified, giving them the benefit of reduced risk and opportunities for gains in several areas.
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Question 9 of 10
9. Question
Growth funds are only suitable for aggressive investors who are comfortable with which of the following:
Correct
Growth funds are only suitable for aggressive investors who are comfortable with a high degree of risk. Because growth funds invest in younger, less established companies that are growing fast, the risk with this type of fund is greater than that of investing in an index fund of established companies across the spectrum of the American economy.
Incorrect
Growth funds are only suitable for aggressive investors who are comfortable with a high degree of risk. Because growth funds invest in younger, less established companies that are growing fast, the risk with this type of fund is greater than that of investing in an index fund of established companies across the spectrum of the American economy.
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Question 10 of 10
10. Question
Which of the following funds aim to hold stocks that have an undervalued price and tend to pay out dividends:
Correct
Value funds are mutual funds which aim to hold stocks that have an undervalued price and tend to pay out dividends. Since the share prices are undervalued, they are expected to rise in time and give the fund investors capital gains.
Incorrect
Value funds are mutual funds which aim to hold stocks that have an undervalued price and tend to pay out dividends. Since the share prices are undervalued, they are expected to rise in time and give the fund investors capital gains.