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Multiple Choice Quiz
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1

Preferred stock is a derivative security.
A)True
B)False
2

The current yield is equal to the annual interest divided by the current bond price.
A)True
B)False
3

A futures contract is an agreement to trade at a later date with the quantity and the price set on the date that the trade actually occurs.
A)True
B)False
4

Which one of the following characteristics applies to money market instruments?
A)issued by large corporations only
B)issued only by the government
C)long-term
D)must be repaid in one year or less
E)always guaranteed to be repaid
5

Bond dealers report trade information through the system known as:
A)SPREAD.
B)BondEX.
C)TRACE.
D)UST.
E)NYSE.
6

Who determines if, when, and how much will be paid as a common stock dividend?
A)chief executive officer of the corporation
B)chief financial officer of the corporation
C)company shareholders
D)company president
E)board of directors
7

A round lot is:
A)one bond.
B)100 bonds.
C)10 shares of stock.
D)100 shares of stock.
E)1,000 shares of stock.
8

You are a jeweler and will need to buy silver three months from now. Today, you enter a futures contract to buy silver at $10.30 an ounce in three months. Assume that silver actually sells for $10.28 an ounce three months from now. Which one of the following is true?
A)You benefited from the futures contract.
B)The futures contract caused you to pay more than you needed to pay.
C)You will be able to adjust the futures contract for the lower market price.
D)You can just ignore the futures contract and buy silver at the lower market price.
E)You can re-sell the futures contract and make a profit.
9

How much profit would you have earned if you had purchased three July soybeans futures contracts at their lowest lifetime price and sold those contracts at their highest lifetime price?

Soybeans: 5,000 bushels, cents per bushel

  Net     PrevLimit
ExpLast ChgOpenHighLowCloseSettleSettleHiLow
06Jul602΄2-2΄4604΄4604΄6601΄4602΄0602΄2604΄6627΄6581΄4
06Sep613΄6-6΄6618΄0619΄2610΄2613΄4613΄6620΄4641΄2588΄6
A)$480.00
B)$487.50
C)$2,312.50
D)$6,930.00
E)$6,937.50
10

You bought a September European-style call option on 100 shares of stock at $14 a share. You have the:
A)right to buy 100 shares at $14 a share at any time prior to the expiration date in September.
B)obligation to buy 100 shares at $14 a share prior to the expiration date in September.
C)right to sell 100 shares at $14 a share at any time prior to the expiration date in September.
D)obligation to sell 100 shares at $14 a share on the expiration date.
E)right to buy 100 shares at $14 a share but only on the expiration date.





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