Duration of The Portfolio of Assets Equal the Duration of The Liability MCQs

Question Description

I’m working on a finance practice test / quiz and need guidance to help me understand better.

1. Primary liabilities (Sources of funds) of depository institutions are ______.

undefined

I. Deposits

undefined

II. Premium from policies

undefined

III. Shares

undefined

IV. Commercial paper

undefined

Group of answer choices

undefined

I and II

undefined

II, III, and IV

undefined

III and IV

undefined

Any bonds rated ______ are considered sub-investment grade debt. Some ______ purchase financial guarantees to lower the debt risk.

undefined

Group of answer choices

undefined

below BBB; debt issuers

undefined

below A; debt holders

undefined

above BB; debt issuers

undefined

BB or below it; debt holders

undefined

Suppose the rate on a corporate bond is 7% and the rate on a municipal bond is 5.5%. If your marginal tax rate is 25%, the equivalent tax-free municipal interest rate is _____ and you should choose ______.

undefined

Group of answer choices

undefined

4.125%; the corporate bond

undefined

5.25%; the corporate bond

undefined

4.125%; the municipal bond

undefined

5.25%; the municipal bond

undefined

The term structure of interest rates is the relationship among interest rates on bonds with _____ maturities and _____ default risk.

undefined

Group of answer choices

undefined

different; similar

undefined

similar; similar

undefined

different; different

undefined

similar; different

undefined

In 1995, JPMorgan created the credit default swap (CDS). CDS provides ______.

undefined

Group of answer choices

undefined

insurance against default in the principle and interest payments of a credit instrument.

undefined

bond investors with a method to swap interest payments for principle payments during a “credit event”.

undefined

the government with a guarantee that certain bond issues will not run into credit problems.

undefined

an alternative method for bond issuers to pay principle and interest payments via a swap.

undefined

James is confident that a certain stock can be sold off for $118 if it is held on to for 2 years. He has a required rate of return of 17%. He is also confident that the company will pay a $9 dividend in the first year and a $14 dividend in the second year. Then, the price of the stock today should be _____.

undefined

Group of answer choices

undefined

$104.1

undefined

$89.7

undefined

$119.2

undefined

$99.6

undefined

______ theory proposes that bonds of different maturities are not substitutes for one another; _____ theory cannot explain the empirical fact that interest rates on bonds of different maturities tend to move together.

undefined

Group of answer choices

undefined

Separable markets; liquidity premium

undefined

Market segmentation; market segmentation

undefined

Liquidity premium; market segmentation

undefined

Expectations; expectations

undefined

______ are regulators of the U.S. financial system.

undefined

I. National Credit Union Administration

undefined

II. Securities and Exchange Commission

undefined

III. Securities and Futures Commission

undefined

IV. Federal Deposit Insurance Corporation

undefined

Group of answer choices

undefined

I, II, and IV

undefined

All of the above

undefined

I and IV

undefined

I and II

undefined

Which of the following statements would be FALSE?

undefined

I. “Short selling” refers to the practice of buying a stock and holding it for only a short time before selling it.

undefined

II. Loss aversion means the unhappiness a person feels when he or she suffers a monetary loss exceeds the happiness the same person experiences from receiving a monetary gain of the same amount.

undefined

III. The efficient market hypothesis does not have to imply that financial markets are efficient.

undefined

IV. Technical analysis is a popular technique used to predict stock prices by studying past stock price data and searching for patterns such as trends and regular cycles.

undefined

Group of answer choices

undefined

II and IV

undefined

None of the above

undefined

III

undefined

The liquidity premium theorys key assumption is that ______.

undefined

Group of answer choices

undefined

bonds of different default risks are substitutes, but are not perfect substitutes

undefined

bonds of different maturities are perfect substitutes

undefined

bonds of different maturities are substitutes, but are not perfect substitutes

undefined

bonds of different default risks are not substitutes

^{"Place your order now for a similar assignment and have exceptional work written by our team of experts, guaranteeing you "A" results."}