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Choose the option that best answers the question. There is only ONE correct a. ver for each question. f you have printed out this examination paper, circle the letter in front of the option below. Alternatively, if using your own paper, only write down the question number and then the letter corresponding to the answer option you have chosen, e.g. Q1. A.

Choose the option that best answers the question. There is only ONE correct a. ver for each question. f you have printed out this examination paper, circle the letter in front of the option below. Alternatively, if using your own paper, only write down the question number and then the letter corresponding to the answer option you have chosen, e.g. Q1. A.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question 1 Multiple Choice and True or False Questions Choose the option that best answers the question. There is only ONE correct a.. ver for each question. If you have printed out this examination paper, circle the letter in front of the option below. Alternatively, if using your own paper, only write down the question number and then the letter corresponding to the answer option you have chosen, e.g. Q1. A. 1. Which of the following best describes indirect financing? ( a. Most large financial institutions are confined to obtaining finance through a financial intermediary. b. Financial institutions include commercial banks, insurance companies, superannuation funds, investment funds and angel investors. c. Non-financial corporations act as an intermediary between lenders and borrows. d. Financial institutions have money owed to them and at the same time, they have money owed by them. 2. Which of the following statements is true about bond theorems? ( For a given change in the interest rate, long-term bonds have higher interest rate risk than short-term bonds. а. b. Bond prices are positively related to interest rate movements. If interest rates are expected to decrease, investors should avoid investing in long-term zero-coupon bonds. C. d. For a given change in the int ast rate, lower coupon bonds bear lower interest rate risk than higher coupon bonds. 3. Which of the following statement is true? ( a. In brokered markets, buyers and sellers confront each other directly and bargain over price. b. Primary market is the market for trading outstanding securities. Preference shareholders have a higher priority claim on company's assets than ordinary shareholders in the event of insolvency. С. d. Ordinary shareholders receive fixed dividend payments. 4. Diversifiable risk a. cannot be diversified away b. can be diversified away by holding multiple securities in a portfolio с. measures the total risk of an investment d. can be reduced if securities' prices are positively perfectly correlated 5. If a 10-year bond with a face value of $1,000 and a coupon rate of 8% p.a. is trading at discount, which of the following statement about yield to maturity (YTM) is true" a. The yield to maturity is less than 8% p.a. b. The yield to maturity is more than 8% p.a. c. The yield to maturity is 8% p.a. d. The yield to maturity cannot be determined with the information above.
Transcribed Image Text:Question 1 Multiple Choice and True or False Questions Choose the option that best answers the question. There is only ONE correct a.. ver for each question. If you have printed out this examination paper, circle the letter in front of the option below. Alternatively, if using your own paper, only write down the question number and then the letter corresponding to the answer option you have chosen, e.g. Q1. A. 1. Which of the following best describes indirect financing? ( a. Most large financial institutions are confined to obtaining finance through a financial intermediary. b. Financial institutions include commercial banks, insurance companies, superannuation funds, investment funds and angel investors. c. Non-financial corporations act as an intermediary between lenders and borrows. d. Financial institutions have money owed to them and at the same time, they have money owed by them. 2. Which of the following statements is true about bond theorems? ( For a given change in the interest rate, long-term bonds have higher interest rate risk than short-term bonds. а. b. Bond prices are positively related to interest rate movements. If interest rates are expected to decrease, investors should avoid investing in long-term zero-coupon bonds. C. d. For a given change in the int ast rate, lower coupon bonds bear lower interest rate risk than higher coupon bonds. 3. Which of the following statement is true? ( a. In brokered markets, buyers and sellers confront each other directly and bargain over price. b. Primary market is the market for trading outstanding securities. Preference shareholders have a higher priority claim on company's assets than ordinary shareholders in the event of insolvency. С. d. Ordinary shareholders receive fixed dividend payments. 4. Diversifiable risk a. cannot be diversified away b. can be diversified away by holding multiple securities in a portfolio с. measures the total risk of an investment d. can be reduced if securities' prices are positively perfectly correlated 5. If a 10-year bond with a face value of $1,000 and a coupon rate of 8% p.a. is trading at discount, which of the following statement about yield to maturity (YTM) is true" a. The yield to maturity is less than 8% p.a. b. The yield to maturity is more than 8% p.a. c. The yield to maturity is 8% p.a. d. The yield to maturity cannot be determined with the information above.
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