Liberty BUSI 321 Test 2 Answers Complete Solutions
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Question 1
A ____ has first claim on specified assets, while a ____ is a debenture that has claims against a firm’s assets that are junior to the claims of mortgage bonds and regular debentures.
Question 2
When firms issue ____, the amount of interest and principal to be paid is based on specified market conditions. The amount of the repayment may be tied to a Treasury bond price index or even to a stock index.
Question 3
Bonds issued by ____ are backed by the federal government.
Question 4
____ bids for Treasury bonds specify a price that the bidder is willing to pay and a dollar amount of securities to be purchased.
Question 16
The actual relationship reflecting the response of a bond’s price to a change in bond yields is
Question 17
Assume a bond with a $1,000 par value and a 7 percent coupon rate, three years remaining to maturity, and a 9 percent yield to maturity. The duration of this bond is ____ years.
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Question 18
The difference between the 30-year mortgage rate and the 30-year Treasury bond rate is primarily attributable to
Question 21
A __________ is a privately negotiated contract that protects investors against the risk of default on particular debt securities such as mortgage-backed securities.
Question 22
Which of the following is not a guarantor of federally insured mortgages?
Question 23
____ mortgages enabled more people with relatively lower income, or high existing debt, or a small down payment to purchase homes.
Question 24
An adjustable-rate mortgage increases interest rate risk for the ____, but reduces interest rate risk for the ____.
Question 36
The ____ index can be used to measure risk-adjusted performance of a stock while controlling for the stock’s beta.
Question 37
According to the capital asset pricing model, the required return by investors on a security is
Question 38
The demand by foreign investors for the stock of a U.S. firm sold on a U.S. exchange may be higher when the dollar is expected to ____, other things being equal. (Assume the firm’s operations are unaffected by the value of the dollar.)
Question 39
A beta of 1.1 means that for a given 1 percent change in the value of the market, the _______ is expected to change by 1.1 percent in the same direction.
Question 40
The ____ is commonly used as a proxy for the risk-free rate in the capital asset pricing model.
Question 41
If the standard deviation of a stock’s returns over the last 12 quarters is 4 percent, and if there is no perceived change in volatility, there is a ____ percent probability that the stock’s returns will be within ____ percentage points of the expected outcome.
Question 47
While an investor’s ability to simultaneously consider multiple markets to accommodate its orders was perceived to allow for more competitive pricing (lower transactions costs), it also led to a form of “_______________” whereby traders with relatively faster access to specific markets can use another trader’s planned orders and move ahead of that order.
Question 50
The risk of a short sale is that the stock price
