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) 7%
D) 17.5%

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

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

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

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

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

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

A) 200 shares @50
B) 200 shares @25
C) a greater percentage of the company
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 buyer
B) the transfer agent
C) the registrar
D) the seller

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

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

Which of the following statements is true of callable bonds?

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

Which of the following represent potential money market securities?

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

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

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

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

A) to increase equity
B) to increase debt
C) to lower the share price
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 bond prices are high
C) when the investor requires monthly income
D) when interest rates are rising

All of the following pap interest subject to state taxes except

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

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

A) Aa
B) Baa
C) A
D)  Ba

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

Which of the followin statements is correct?

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

All of the following investments are redeemable except

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

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

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

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

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

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

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

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

Options are defined as

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

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

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

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

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

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

A) shares may be redeemed for the NAV
B) shares may sometimes be purchased at a discount
C) shares may sometimes be sold a a premium
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) 50 shares GGG common stock
C) 20 shares GGG common stock
D) $1,000 per bond

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

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

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

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) callable preferred stock
C) all choices listed
D) cumulative preferred stock