Section 2 Quiz

XLT Enterprises, Inc. pays a quarterly dividend of 35 cents and trades @ 20 for a yield of:

A) 1.75%
B) 10%
C) 17.5%
D) 7%

RTY Corp has authorized 1 million shares in its corporate charter.  After issuing 700,000, there are 500,000 held in treasury.  The number of outstanding shares is:

A) 300,000
B) 200,000
C) 700,000
D) 1,000,000

All of the following are direct obligation of the U.S. Government except

A) Treasury bills
B) STRIPS
C) Treasury receipts
D) Treasury bonds

A capital structure that tilts heavily towards debt capitalization is a sign that the enterprise is

A) generating cash flow
B) leveraged
C) a shell company
D) a regulated company under IRC Subchapter M

Tim Johnson owns 100 shares of RTZ common stock @50. If RTZ undergoes a 2:1 split, Tim will own:

A) 200 shares @25
B) a greater percentage of the company
C) 200 shares @50
D) fewer shares of RTZ stock

If an investor purchases common stock regular way on the ex-date, who receives the forthcoming dividend?

A) the seller
B) the registrar
C) the buyer
D) the transfer agent

Which of the following bonds would typically offer the highest nominal yield?

A) general obligation of a large city
B) school bond
C) revenue bond financing sewer improvements
D) revenue bond financing a convention center

Which of the following statements is true of callable bonds?

A) bonds trading at a premium are less likely to be called
B) bonds trading at a discount are more likely to be called
C) bonds are typically called when interest rates are rising
D) bonds are typically called when interest rates are falling

Which of the following represent potential money market securities?

A) short-term equity instruments maturing in one year or less
B) ADR's
C) commercial paper
D) shares of a money market mutual fund

How could a corporation benefit by attaching warrants to debenture offerings?

A) it allows them to offer much higher nominal yields
B) it is anti-dilutive
C) it allows them to offer lower nominal yields
D) it indicates a more sophisticated and, therefore, solid capital structure

Why would a corporation want to effect a 3:1 stock split?

A) to lower the share price
B) to increase debt
C) to increase equity
D) to raise the share price

When is the best time to buy preferred stock on the primary market?

A) when interest rates are falling
B) when interest rates are rising
C) when bond prices are high
D) when the investor requires monthly income

All of the following pap interest subject to state taxes except

A) GNMA
B) T-bils
C) FNMA
D) municipal bonds

Which of the following investment-grade bonds would probably fetch the lowest price?

A) Ba
B) Baa
C) Aa
D) A

Which of the following securities is the most interest-rate sensitive?
A) warrants
B) common stock
C) convertible preferred stock
D) preferred stock

Which of the followin statements is correct?

A) corporate bonds offer tax-free interest only at the state level
B) corporate bonds yield less than municipal bonds because they cost more
C) corporate bonds yield more than municipal bonds because they carry more default risk
D) corporate bonds yield less than municipal bonds because they cost less

All of the following investments are redeemable except

A)  open-end funds
B) face-amount certificates
C) UITs
D) closed-end funds

Two and a half percent is equivalent to how many basis points?

A) 25
B) 2.5
C) 250
D) 25

An analyst is adjusting EPS in terms of convertible debentures issued by the same company.  This is called calculation

A) yield to parity
B) non-diluted earnings per share
C) parity
D) diluted earnings per share

There is a liquid secondary market for all of the following except
A) common stock
B) T-bonds
C) repurchase agreements
D) T-bills

Your customer plans to send a child to college in 7 years and wants to lock ion a yield over that time frame.  She does not want to bear re-investment risk and does not require current income. You would recommend

A) STRIPS
B) T-bills 
C) corporate debentures
D) money market mutual funds

Your customer sold short 100 XYZ @55.  With the stock currently @49, you would recommend that he protect his position by

A) buying an XYZ Oct 50 call
B) writing an XYZ Oct 45 put
C) buying and XYZ Oct 50 put
D) writing an XYZ Oct 50 put

Options are defined as

A) money market instruments
B) futures contracts
C) debt securities
D) derivatives

The NAV  of a corporate bond fund has increased dramatically  The most likely reason is

A) bond prices have fallen
B) interest rates have risen
C) investors have bought substantially more shares
D) yields have dropped

Which of the following investments would be expected to have the lowest volatility?

A) medium cap fund
B) money market fund
C) small cap fund
D) government bond fund

All of the following are advantages of closed-end funds over open-end except

A) shares may sometimes be sold a a premium
B) shares may sometimes be purchased at a discount
C) shares may be redeemed for the NAV
D) shares may be sold short

GGG 4s debentures of '11 are rated Aa and are convertible at $50.  Currently, the bonds are trading on the secondary market @105.  Therefore, upon conversion the investor would receive

A) $1,050 per bond
B) $1,000 per bond
C) 50 shares GGG common stock
D) 20 shares GGG common stock

Which of the following municipal securities would be issued for interim financing needs?

A) IDRs
B) moral obligation bonds
C) revenue bonds
D) TANs

The ABC Corporation is concerned that its sagging stock price is dissuading institutional investors from establishing long positions.  All of the following could help increase the share price except

A) ABC purchases 10 5 of outstanding shares for the treasury
B) ABC pays a 20% stock dividend
C) ABC effects a 1:15 reverse stock split
D) ABC reports a 33% surge in EPS

An investment company that makes no provision for future primary offerings and which trades on the secondary market is a(n)

A) closed-end fund
B) UIT
face amount certificate
D) open-end fund

The board of directors must declare the dividend for which of the following equity securities?

A) common stock
B) cumulative preferred stock
C) callable preferred stock
D) all choices listed