Test #2 sample questions Winter 2024

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Humber College *

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MISC

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Finance

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Apr 3, 2024

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1. If the yield of a bond is greater than its coupon rate... a) it is trading at a discount. b) it is trading at a premium. c) the investor is losing money. d) the investor is making money. 2. Canada Savings Bonds should be understood as… a) liquid, negotiable, and marketable. b) marketable and liquid, but not negotiable. c) marketable and negotiable, but not liquid. d) liquid, but neither negotiable nor marketable. 3. The Canada Yield Call feature means... a) that the Government of Canada reserves the right to call in bonds at any time. b) that the Government of Canada reserves the right to call in bonds at any time at par value plus accrued interest. c) that the corporate issuer can call its bond based on a yield spread with an equivalent Government of Canada bond. d) that the corporate issuer can call the bond at any time, as long as Government of Canada bonds with similar maturities are also callable. 4. Which of the following bonds would most likely provide the investor with the highest yield? a) A 10-year straight bond. b) A 10-year callable bond. c) A 10-year retractable bond. d) A 10-year convertible bond.

5. Currently, there is a 5% convertible debenture that is trading at 95. Each $1,000 face value is convertible into 20 common shares. Since the convertible bonds were issued, interest rates have increased sharply. Therefore, it is most likely that the price of the common shares is closest to... a) $45.00 b) $47.50 c) $50.00 d) $55.00 6. All of the following statements are true with respect to treasury bills except… a) they pay interest at maturity. b) the difference between the issue price and par represents the return on investment. c) they are short-term government obligations offered in denominations of $1,000 to $1,000,000. d) they are sold every two weeks at auction by the Minister of Finance through the Bank of Canada. 7. A real return bond issued by the Government of Canada uniquely protects the investor against… a) the risk of default. b) the risk of inflation. c) the risk of deflation. d) the risks of inflation and default. 8. The Province of Ontario issues a provincial bond with a ten-year maturity and a guaranteed bond, also with a ten-year maturity. We would expect that the guaranteed bond has a… a) lower yield. b) higher yield. c) similar yield. d) Provinces do not issue guaranteed bonds.

9. A railway company wants to borrow from the capital markets. You would recommend that it considers issuing… a) warrants. b) collateral trust bonds. c) subordinated debentures. d) equipment trust certificates. 10. A strip bond…. a) is sold at par and matures at par. It makes regular interest payments. b) is sold at a discount and matures at par. It makes regular interest payments. c) is sold at a premium and matures at par. It makes regular interest payments. d) is sold at a discount and matures at par. It does not make regular interest payments. 11. Mr. Singh has bought 500 shares of ABC Company through his investment dealer, TC Securities. The share certificates will be registered in the name of… a) Mr. Singh only. b) TC Securities only. c) Both Mr. Singh and TC Securities. d) Share certificates are registered in bearer form. 12. Which of the following correctly places the dividend chronology in the correct order? a) pay date, record date, ex-dividend date, and cum-dividend date b) ex-dividend date, cum-dividend date, record date, and pay date c) cum-dividend date, ex-dividend date, record date, and pay date d) record date, ex-dividend date, cum-dividend date, and pay date

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13. In Canada, which of the following receive “favourable” tax treatment? i) interest income ii) dividend income iii) capital gains a) i) only b) ii) only c) i) & ii) only d) ii) & iii) only 14. Subordinate voting shares… a) do not carry a right to vote. b) carry a right to vote only under limited circumstances. c) carry a right to vote, but another class of shares carries a greater voting right per share. d) carry a right to vote, subject to a limit or restriction on the number or percentage of shares that can be voted by a person, company, or group. 15. If a company has 30,000,000 million shares outstanding and is priced at $30 then announces a 3 for 1 split, which of the following would be true? a) there would be 30,0000,000 shares at a price of $90. b) there would be 90,000,0000 shares at a price of $30. c) there would be 10,000,000 shares at a price of $90. d) there would be 90,000,000 shares at a price of $10. 16. An investor purchased 500 shares of ABC Company at $12 per share. When the shares were trading at $27 per share, the company executed a 3 for 1 stock split. A month later when the shares were at $8, the investor sold 200 shares. What would be her profit or loss on those 200 shares? a) $200 loss

b) $200 profit c) $400 profit d) $800 profit Please use the following information for Questions #7 & #8. 52 Weeks High Low Stock Div. High Low Close Change Volume $45.00 $18.20 RMD .50 20.05 $18.20 $18.20 –$2.25 250,000 17. What does the “Div .50” mean? a) The regular quarterly dividend is $.50. b) The regular annual dividend is $.50. c) In the past twelve months, RMD has paid $.50 in dividends. d) The dividend is 50% of what it was in the previous year. 18. What does “Volume 250,000” mean? a) 250,000 trades were made the previous day. b) 250,000 shares were traded the previous day. c) 125,000 shares were bought and 125,000 were sold. d) None of the above. 19. Which of the following investment objectives do Canadian preferred shares meet for Canadian retail investors? a) safety and income b) income and liquidity c) income and tax minimization d) liquidity and tax minimization

20. XYZ common shares are currently $10 per share. They do not pay a dividend. XYZ Series I Preferred Shares were issued at, and currently trade for $25 with a 5% dividend yield, and are convertible into 2 common shares. What is the conversion cost premium? a) 5% b) 20% c) 25% d) 40% 21. What are the years to re-pay premium? a) 2.5 years b) 4 years c) 5 years d) 10 years 22. The main gauge for measuring the investment performance of institutional investments in the United States is the… a) S&P 500. b) Dow Jones 30. c) S&P/TSX Composite. d) Dow Jones Industrial Average. 23. An investor wants to have exposure to the French stock market. You would recommend that she invest in the… a) DAX. b) CAC 40. c) FTSE 100. d) Nikkei Stock Average.

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24. Which of the following is true of free credit balances in clients’ accounts? a) They are always segregated. b) They are not payable upon demand. c) By law, the firm cannot pay interest on them. d) They may be used in the conduct of the firm’s business. 25. What is the document that a potential margin client is required to obtain before opening a margin account? a) New Account Application Form b) Margin Account Agreement Form c) Collateralized Margin Account Form d) Noncollateralized Margin Account Form