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Investments, 4th Canadian Edition, 4/e

Zvi Bodie, Boston University School of Management
Alex Kane, University of California, San Diego
Alan Marcus, Boston College
Stylianos Perrakis, Concordia University
Peter Ryan, University of Ottawa

Markets and Instruments

Multiple Choice Quiz

Prepared by William Lim, University of New Brunswick.


1	Which one of the following is not a money market instrument?
		A)	A corporate bond
		B)	A certificate of deposit
		C)	A Eurodollar account
		D)	A Treasury bill
		E)	Commercial paper


2	Which one of the following statements is true?
		A)	At issuance, provincial bond maturities range up to 10 years
		B)	At issuance, Canada bond maturities range up to 40 years
		C)	At issuance, Treasury bill maturities range up to 10 years
		D)	U.S. municipal bonds are exempt from federal income tax for Canadian investors
		E)	Canada bonds are considered money market instruments.


3	Which of the following is NOT true of Toronto Stock Exchange indices?
		A)	TSE indices are market value-weighted.
		B)	TSE indices are price-weighted.
		C)	TSE indices are equally weighted across all firms listed on the TSE.
		D)	A and C
		E)	B and C


4	Assume at these prices the value-weighted index constructed with the three stocks is 490. What would the index be if stock X is split 2 for 1 and stock Y 4 for 1?
		A)	490
		B)	355
		C)	275
		D)	430
		E)	500


5	A T-bill has a face value of $10,000 and is selling for $9,800. If the T-bill matures in 90 days, what is its effective annual yield?
		A)	6.85%
		B)	2.98%
		C)	6.12%
		D)	8.53%
		E)	6.42%


6	If a $1,000 par value 181-day T-bill sells at $975, the bond equivalent yield would be
		A)	5.17%
		B)	7.57%
		C)	10.07%
		D)	2.57%
		E)	None of the above.


7	Which of the following securities is a money market instrument?
		A)	Provincial bond
		B)	Government of Canada bond
		C)	Commercial paper
		D)	Municipal bond
		E)	Mortgage-backed security


8	Which of the following is not a foreign stock market index?
		A)	FTSE
		B)	Nikkei 225
		C)	S&P/TSX
		D)	DAX
		E)	Nikkei 300


9	The most important characteristic/s of common stock are
		A)	its residual claim feature
		B)	its limited liability feature
		C)	its dividend payouts
		D)	A, B and C
		E)	A and B


10	The major difference between a call option and a long futures contract is
		A)	there is no difference between options and futures.
		B)	the call option gives the right, but not the obligation, to purchase the asset.
		C)	the long futures contract gives the right, but not the obligation, to purchase the asset.
		D)	the long futures position costs more to enter into than the purchase of the call option.
		E)	C and D.

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