金融市场和金融机构选择、是非题网络练习汇总.doc

金融市场和金融机构选择、是非题网络练习汇总.doc (按 书 关于书的成语关于读书的排比句社区图书漂流公约怎么写关于读书的小报汉书pdf 上顺序排列)1(P1-P4) 2(P4-P8) 3(P8-P12) 6(P12-P16) 7(P16-P20) 8(P20-P23) 9(P23-P27) 10(P27-P31) 11(P31-P35) 12(P35-P38) CHAPTER 1.Role of Financial Markets and Institutions 1 Financial markets help transfer funds from ________ units to ________ units. a. deficit; surplus b. surplus; deficit c. both a and b d. none of the answers are correct -------------------------------------------------------------------------------- 2 ________ markets facilitate the flow of short-term funds while ________ markets facilitate the flow of long-term funds. a. Money; capital b. Capital; money c. Primary; secondary d. Bond; stock -------------------------------------------------------------------------------- 3 Which of the following does NOT characterize the primary market? a. Funds provided directly to the issuing company. b. New securities are issued. c. Federal Government is involved. d. All of the above are characteristics of the primary market. -------------------------------------------------------------------------------- 4 Which of the following does NOT characterize the money market? a. high liquidity b. securities are debt c. short maturity d. high expected returns -------------------------------------------------------------------------------- 5 Which is NOT a capital market security? a. stock b. bond c. mortgage d. Treasury Bills -------------------------------------------------------------------------------- 6 ________ represent partial ownership of a corporation. a. Mortgages b. Stocks c. Debts d. Certificates of deposit -------------------------------------------------------------------------------- 7 When securities prices reflect all available information, the markets are: a. efficient. b. transparent. c. liquid. 1 d. none of the answers are correct. -------------------------------------------------------------------------------- 8 Asymmetric information says that ________ has (have) information about a company's financial condition that is not available to ________. a. investors; the company's managers b. the government; investors c. the company's managers; investors d. the IRS; the company's managers -------------------------------------------------------------------------------- 9 The ________ established the Securities and Exchange Commission to oversee securities markets. a. Securities Act of 1933 b. Securities Exchange Act of 1934 c. Glass-Steagall Act d. Financial Services Modernization Act -------------------------------------------------------------------------------- 10 If all financial markets were ________, all information about securities would be freely available to investors and there would be no transactions costs. a. deregulated b. insured c. perfect d. balanced -------------------------------------------------------------------------------- 11 Which of the following is a characteristic of depository institutions? a. They repackage funds to match the sizes of borrowers and lenders. b. They provide expertise on analyzing credit quality of borrowers. c. They offer many loans to diversify the risk of loan defaults. d. All of the above are characteristics of depository institutions. -------------------------------------------------------------------------------- 12 Savings and loans have concentrated on ________ loans while commercial banks have concentrated on ________ loans. a. residential mortgage; business-related b. business-related; government c. government; individual d. business-related; personal -------------------------------------------------------------------------------- 13 The dominant depository institution is _______, while the dominant non-depository institution is ________. a. savings banks; insurance companies b. credit unions; pension funds c. commercial banks; mutual funds d. thrifts; finance companies -------------------------------------------------------------------------------- 14 A ________ makes a market in specific securities by building and trading inventory. 2 a. broker b. dealer c. mutual fund d. finance company -------------------------------------------------------------------------------- 15 Which of the following is commonly used to alter the risk of investments? a. debt b. equity c. derivatives d. all of the answers are correct -------------------------------------------------------------------------------- 16 Governments are the main supplier of surplus funds. True False -------------------------------------------------------------------------------- 17 The primary market is where new issues of stock are sold. True False -------------------------------------------------------------------------------- 18 Liquidity is the ability to sell a security quickly at close to the true market value. True False -------------------------------------------------------------------------------- 19 The New York Stock Exchange is a primary market. True False -------------------------------------------------------------------------------- 20 The value of derivative securities is dependent on the value of other securities. True False -------------------------------------------------------------------------------- 21 Derivative securities have a high degree of leverage, which results in magnified returns for investors. True False -------------------------------------------------------------------------------- 22 The value of securities is the present value of expected cash flows, discounted at the risk free rate. True False -------------------------------------------------------------------------------- 23 A security is said to be in equilibrium if the demand for the security is equal to the supply available for sale. True 3 False -------------------------------------------------------------------------------- 24 Privatization is the process of selling government-owned firms to individuals. True False -------------------------------------------------------------------------------- 25 Savings institutions are also called thrifts. True False -------------------------------------------------------------------------------- 26 Credit unions are usually much larger than commercial banks. True False -------------------------------------------------------------------------------- 27 A broker assists in executing trades between two parties. True False -------------------------------------------------------------------------------- 28 The Securities Act of 1933 required specific disclosures by a company prior to offering securities to the public. True False -------------------------------------------------------------------------------- 29 An insurance company is a non-depository institution. True False -------------------------------------------------------------------------------- 30 Recent activity in the U.S. shows that insurance and banking services are becoming significantly more segregated from each other. True False CHAPTER 2.Determination of Interest Rates 1 Which of the following borrowers' demand for funds is least sensitive to interest rates? a. households b. business c. government d. foreign corporations -------------------------------------------------------------------------------- 2 Which of the following would not result in an outward shift in the demand for loan able funds? a. Decrease in taxes. b. Increase in federal budget deficit. c. Economic expansion. d. Increase in personal income. 4 -------------------------------------------------------------------------------- 3 Which of the following is the largest provider of loan able funds? a. households b. businesses c. Federal Government d. Federal Reserve -------------------------------------------------------------------------------- 4 Which of the following is most likely to result in lower interest rates? a. Economic recession. b. Increase in inflation. c. Increases in the federal budget deficit. d. All of the answers are correct. -------------------------------------------------------------------------------- 5 Nominal interest rates are 8% and inflation is expected to be 5%. What is the real rate of interest? a. 0.4% b. 3% c. 8% d. 13% -------------------------------------------------------------------------------- 6 Which of the following describes the effects of "crowding-out"? a. Business demand for funds limits household access due to higher credit. b. Government demand for funds forces interest rates higher limiting access to businesses. c. Household supply of funds limits government access during recessions. d. Foreign investors accept lower returns than households. -------------------------------------------------------------------------------- 7 Nominal interest rates compensate suppliers of funds for: a. delaying consumption. b. expected inflation. c. taxes due. d. both a and b. -------------------------------------------------------------------------------- 8 What are the likely effects of an economic expansion? a. increases in funds demanded b. decreases in funds demanded c. decreases in supplied funds d. lower interest rates -------------------------------------------------------------------------------- 9 Which of the following did NOT lead to lower interest rates following September 11, 2001? a. Decreased business demand for funds. b. Reduced spending by households. c. Increased federal spending on the military. d. Increase in money supply by the Federal Reserve. -------------------------------------------------------------------------------- 5 10 What is the most likely effect of an increase in personal taxes? a. Decreased supply of loanable funds. b. Decrease in interest rates. c. Increase in business demand. d. All of the above are likely effects of an increase in personal taxes. -------------------------------------------------------------------------------- 11 Inflation causes the supply curve of loanable funds to shift to the ________ and the demand curve to shift to the ________. a. left; right b. left; left c. right; right d. right; left -------------------------------------------------------------------------------- 12 An investor wants to buy 3% more goods and services next year. Prices are expected to rise by 2%. Which of the following is true? a. The investor requires a 1% real rate of interest. b. The investor requires a 2% nominal interest rate. c. The investor requires a 5% nominal interest rate. d. The investor requires a 5% real rate of interest. -------------------------------------------------------------------------------- 13 Which of the following is true? I. When the supply of loan able funds exceeds the demand, interest rates fall. II. When the demand of loan able funds exceeds supply, interest rates fall. a. I only b. II only c. I and II d. neither I or II -------------------------------------------------------------------------------- 14 Which of the following borrowers is LEAST sensitive to interest rates? a. foreign borrowers b. Federal Government c. households d. businesses -------------------------------------------------------------------------------- 15 The ________ is the net return to a lender that is earned after adjusting for the effects of inflation. a. adjusted interest rate b. raw rate c. fisher rate d. real interest rate -------------------------------------------------------------------------------- 16 The demand for loan able funds increases as interest rates decline. True False 6 -------------------------------------------------------------------------------- 17 The supply of loan able funds increases as interest rates decline. True False -------------------------------------------------------------------------------- 18 The federal government demand for funds is interest inelastic. True False -------------------------------------------------------------------------------- 19 Households are net suppliers of loan able funds, while governments are net demanders of funds. True False -------------------------------------------------------------------------------- 20 The quantity of loan able funds supplied is more sensitive to interest rates than the quantity of demanded funds. True False -------------------------------------------------------------------------------- 21 When supplied funds exceed the amount of funds demanded, interest rates increase. True False -------------------------------------------------------------------------------- 22 The real interest rate is the increase in purchasing power earned when delaying current consumption. True False -------------------------------------------------------------------------------- 23 The crowding-out effect was a significant issue in lowering interest rates during the late 1990's. True False -------------------------------------------------------------------------------- 24 Expected declines in the value of the dollar reduce the supply of funds provided by foreign investors. True False -------------------------------------------------------------------------------- 25 When businesses demand more loan able funds than they supply, interest rates increase. True False -------------------------------------------------------------------------------- 26 High levels of inflation in the late 1970s led to higher interest rates. True 7 False -------------------------------------------------------------------------------- 27 For businesses, the NPV of projects increases when interest rates decline. True False -------------------------------------------------------------------------------- 28 Foreign demand for funds will increase as U.S. interest rates increase. True False -------------------------------------------------------------------------------- 29 The equilibrium interest rate is where the supply of loan able funds equals the demand for loan able funds. True False -------------------------------------------------------------------------------- 30 After the attack on the U.S. on September 11, 2001, interest rates increased dramatically. True False CHAPTER 3.Structure of Interest Rates 1 Investment grade bonds have a rating of ________ or better. a. A b. BBB c. BB d. CCC -------------------------------------------------------------------------------- 2 Which of the following assets have the least liquidity? a. house b. IBM stock c. T-Bill d. cash -------------------------------------------------------------------------------- 3 An investor is indifferent between a tax-free yield of 5% and a taxable yield of 8%. What is the investor's marginal tax rate? a. 25% b. 37.5% c. 40% d. 62.5% -------------------------------------------------------------------------------- 4 An investor has a marginal tax rate of 32%. An investor can earn a tax-free yield of 10%. What is the equivalent pretax yield on a taxable security? a. 3.2% b. 6.8% c. 13.2% 8 d. 14.7% -------------------------------------------------------------------------------- 5 Nominal interest rates are 8% and inflation is expected to be 5%. What is the real rate of interest? a. 4% b. 3% c. 8% d. 13% -------------------------------------------------------------------------------- 6 Which of the following bonds would have the highest yield? a. 20-year callable bond b. 20-year noncallable bond c. 5-year convertible bond d. 5-year nonconvertible bond -------------------------------------------------------------------------------- 7 The term structure of interest rates shows the relationship between yields and: a. credit quality. b. liquidity. c. maturity. d. bond rating. -------------------------------------------------------------------------------- 8 Using pure expectations, when interest rates are expected to increase, which of the following occur? a. Borrowers demand more long-term funds. b. Borrowers demand more short-term funds. c. Lenders supply more long-term funds. d. None of the answers are correct. -------------------------------------------------------------------------------- 9 What would the pure expectations theory predict about the shape of the yield if interest rates are expected to fall? a. upward sloping b. downward sloping c. flat d. U-shaped -------------------------------------------------------------------------------- 10 The one-year interest rate is 5%, the two-year rate is 6%. Using the pure expectations theory, what is the implied forward rate from year 1 to year 2? a. 3% b. 5% c. 7% d. 9% -------------------------------------------------------------------------------- 11 If the one-year interest rate is 10% and next year's one-year rate is expected to be 13%, what is the today's two-year interest rate under the pure expectations theory? 9 a. 8.5% b. 10.0% c. 11.5% d. 13.0% -------------------------------------------------------------------------------- 12 Use the following term structure and the pure expectations theory to determine the implied two-year interest rate that begins three years from today. Time Rate 1 year 4.5% 2 years 5.0% 3 years 5.5% 4 years 6.0% 5 years 7.0% a. 5.9% b. 7.8% c. 8.5% d. 9.3% -------------------------------------------------------------------------------- 13 Suppose the one-year interest rate is 6%, the two-year rate is 7%, and the liquidity premium on a two-year security is 25 basis points. What is the one-year forward rate beginning in one year? a. 7.52% b. 7.77% c. 8.02% d. 8.27% -------------------------------------------------------------------------------- 14 What is the effect of the Treasury's decision to stop issuing 30-year bonds? a. Short-term rates decrease. b. All interest rates decrease. c. Yield curve becomes severely upwardly sloped. d. Long-term rates decrease. -------------------------------------------------------------------------------- 15 A corporation is planning to issue 90-day commercial paper to investors at a yield at 6%. If the T-bill rate is 4%, the default risk premium is 90 basis points, and there is a 40 basis point tax adjustment, what is the liquidity premium? a. 50 b.p. b. 60 b.p. c. 70 b.p. d. 80 b.p. -------------------------------------------------------------------------------- 16 U.S. Treasury bonds are rated AAA by Standard and Poor's and Aa by Moody's. True False -------------------------------------------------------------------------------- 10 17 A B-rated bond pays twice the interest rate of an A-rated bond. True False -------------------------------------------------------------------------------- 18 Credit risk premiums generally increase during times of uncertainty. True False -------------------------------------------------------------------------------- 19 Callable bonds offer higher yields than noncallable bonds. True False -------------------------------------------------------------------------------- 20 Investors benefit from investing in callable bonds when interest rates decline. True False -------------------------------------------------------------------------------- 21 If interest rates increase 50 basis points from their current level of 7%, the new interest rate is 7.05%. True False -------------------------------------------------------------------------------- 22 The yield for convertible bonds is generally lower than the yield for callable bonds, everything else the same. True False -------------------------------------------------------------------------------- 23 The liquidity premium presents an explanation for the prevalence of an upward sloping yield curve. True False -------------------------------------------------------------------------------- 24 Savings institutions have historically focused on attracting short-term funds and lending funds for long-term periods. True False -------------------------------------------------------------------------------- 25 An upward sloping yield curve is an indication of possible near-term recession. True False -------------------------------------------------------------------------------- 26 Interest rates were higher in the early 1980s compared to the late 1990s. True False -------------------------------------------------------------------------------- 11 27 AA-rated bonds have higher credit quality than A-rated bonds. True False -------------------------------------------------------------------------------- 28 As the liquidity of bonds declines, so does the offered yield. True False -------------------------------------------------------------------------------- 29 The term structure of interest rates shows the relationship between credit quality and the yield on bonds. True False -------------------------------------------------------------------------------- 30 Convertible bonds can be exchanged for common stock at the discretion of the bond issuer. True False CHAPTER 10.Stock Offerings and Investor Monitoring 1 Existing shareholders can sell a stock: a. in the primary market. b. in the secondary market. c. back to the issuing company. d. none of the answers are correct. -------------------------------------------------------------------------------- 2 When a company decides to issue stock to investors for the first time, it is called: a. primary issue. b. initial public offering. c. initial sale. d. leading underwritten stock. -------------------------------------------------------------------------------- 3 The ________ is the term used for the many presentations given to institutional investors in an attempt to market an IPO. a. marketing blitz b. street hype c. IPO extravaganza d. road show -------------------------------------------------------------------------------- 4 ________ is the process of gathering the total amount of stock desired at various offer prices. a. Bookbuilding b. Cataloging c. Registration d. Green listing -------------------------------------------------------------------------------- 5 Preferred stockholders' claims are paid ________ bondholders and ________ common 12 stockholders. a. before; before b. before; after c. after; before d. after; after -------------------------------------------------------------------------------- 6 How was the price of Google's IPO set? a. By the underwriter (investment banker). b. By individual investors through an auction. c. By the securities and exchange commission. d. By Google management. -------------------------------------------------------------------------------- 7 Research shows that for IPOs, there is short-term (first day) ________ and long-term ________. a. underpricing; overpricing b. underpricing; underpricing c. overpricing; overpricing d. overpricing; underpricing -------------------------------------------------------------------------------- 8 ________ give current shareholders the first opportunity to buy additional stock from the company. a. Primary demands b. Exemption purchases c. Secondary offerings d. Preemptive rights -------------------------------------------------------------------------------- 9 Which of the following is not a physical organized exchange? a. New York Stock Exchange b. American Stock Exchange c. Nasdaq Stock Exchange d. Pacific Stock Exchange -------------------------------------------------------------------------------- 10 You are given the following stock quote from The Wall Street Journal. YTD% Hi Lo Div Yld% P/E Vol (100s) Last Chg +5.2% 96.20 52.99 ?? 1.62 15.2 58104 65.00 –0.32 What is the company's annual dividend? a. 1.62 b. 1.05 c. 1.52 d. 0.32 -------------------------------------------------------------------------------- 11 You are given the following stock quote from The Wall Street Journal. YTD% Hi Lo Div Yld% P/E Vol (100s) Last Chg +5.2% 96.20 52.99 ?? 1.62 15.2 58104 65.00 –0.32 What is the company's earnings per share? 13 a. 4.28 b. 15.20 c. 0.23 d. none of the answers are correct -------------------------------------------------------------------------------- 12 How many stocks are included in the Dow Jones Industrial Average? a. 10 b. 30 c. 500 d. 5,000 -------------------------------------------------------------------------------- 13 The market value of Zipper Industries is $200 million. The company has 10 million shares of stock outstanding. What is the stock price? a. 200 b. 20 c. 50 d. 0.05 -------------------------------------------------------------------------------- 14 Which of the following restrict the ability of corporate raiders to buy a company? a. Antitakeover amendments to the corporate charter. b. Poison pills. c. Golden parachutes. d. All of the answers are correct. -------------------------------------------------------------------------------- 15 ________ allow(s) companies to issue new securities up to two years after filing with the Securities and Exchange Commission. a. Laddering b. Shelf registration c. Pink sheet filing d. Golden parachutes -------------------------------------------------------------------------------- 16 Owners of stock are partial owners of a company. True False -------------------------------------------------------------------------------- 17 The secondary market is where the firm issues new shares of stock to investors. True False -------------------------------------------------------------------------------- 18 Shareholders can participate in the election of the board of directors of the company. True False -------------------------------------------------------------------------------- 19 Dividends on preferred stock are a tax-deductible expense to the firm. 14 True False -------------------------------------------------------------------------------- 20 When IBM decides to sell additional shares of its stock to the public, it is called a secondary offering. True False -------------------------------------------------------------------------------- 21 A lockup provision restricts initial investors in an IPO from selling the new issue for some time after the offer. True False -------------------------------------------------------------------------------- 22 The number of IPOs tends to increase during bear markets and decline during bull markets. True False -------------------------------------------------------------------------------- 23 The initial day's returns of IPOs have been quite poor historically. True False -------------------------------------------------------------------------------- 24 The companies that trade on Nasdaq are generally much larger than those on the NYSE. True False -------------------------------------------------------------------------------- 25 At the end of the bull market of the 1990s, NYSE trading volume had fallen dramatically. True False -------------------------------------------------------------------------------- 26 The ask price is the price that brokers will sell a stock to investors. True False -------------------------------------------------------------------------------- 27 The listing requirements of the NYSE are more stringent than the American Stock Exchange. True False -------------------------------------------------------------------------------- 28 The market usually responds negatively to announcements that a firm is repurchasing its stock. True False -------------------------------------------------------------------------------- 29 American Depository Receipts (ADRs) are a means to invest in foreign stocks. True 15 False -------------------------------------------------------------------------------- 30 Flipping refers to an investor that sells a newly issued stock after the favorable stock performance on its first trading day. True False CHAPTER 11.Stock Valuation and Risk 1 John Smith Widgets Co. is expected to pay a dividend of $2.50 next year. It is anticipated that the dividend will increase 5% per year forever. If the required rate of return on the stock is 10%, what is the stock price for John Smith? a. $5 b. $17 c. $25 d. $50 -------------------------------------------------------------------------------- 2 Empire Company is expected to earn $4 per share next year. There are three other stocks in the company's industry whose P/E ratios are 10, 12, and 14. Using the price-earnings methodology, what is the value of Empire? a. $40 b. $48 c. $56 d. $60 -------------------------------------------------------------------------------- 3 A company is expected to pay a dividend of $4 at the end of the next four years and then pay a liquidating dividend of $40 at the end of the fourth year. It ceases operations at the end of the fourth year. What is the value of the company's stock if the required rate of return is 12%? a. $37.57 b. $27.96 c. $35.03 d. $56.00 -------------------------------------------------------------------------------- 4 Kettle Won Company is expected to pay a $12 dividend forever. If the required return on the stock is 14%, what is the stock price? a. $120 b. $168 c. $86 d. $102 -------------------------------------------------------------------------------- 5 Alley Cat Food currently has earnings of $5 per share, which are expected to grow at 8% per year. The P/E ratio of its competitors is 12. What is the expected stock price in three years? a. $68 b. $70 c. $76 16 d. $82 -------------------------------------------------------------------------------- 6 If a stock tends to go up 12% when the market goes up 10%, the beta of the stock is: a. 0.12. b. 0.83. c. 1.20. d. 10.8. -------------------------------------------------------------------------------- 7 What month do small stocks tend to go up the most? a. January b. June c. September d. December -------------------------------------------------------------------------------- 8 Theresa buys a stock for $50. During the next year, the stock pays a dividend of $2 and Theresa sells the stock at the end of the year for $54. What is her return over the year? a. 4% b. 6% c. 8% d. 12% -------------------------------------------------------------------------------- 9 You invest $100,000 each in two stocks. The first stock has a beta of 1.2 and the second stock's beta is 0.6. What is the beta of your two-stock portfolio? a. 0.6 b. 0.8 c. 0.9 d. 1.8 -------------------------------------------------------------------------------- 10 The beta of Curl Up and Dye stock is 1.4, the T-bond yield is 8%, and the market risk premium is 6%. What is the required return on Curl Up and Dye? a. 8.8% b. 14.0% c. 17.2% d. 16.4% -------------------------------------------------------------------------------- 11 SuperMegaWidgets has had an average return of 16%, a beta of 0.75, and a standard deviation of returns of 20%. The average risk-free rate has been 9%. What is the Sharpe index for SuperMegaWidgets stock? a. 0.09 b. 0.30 c. 0.35 d. 0.80 -------------------------------------------------------------------------------- 12 SuperMegaWidgets has had an average return of 16%, a beta of 0.75, and a standard 17 deviation of returns of 20%. The average risk-free rate has been 9%. What is the Treynor index for SuperMegaWidgets stock? a. 0.09 b. 0.30 c. 0.35 d. 0.80 -------------------------------------------------------------------------------- 13 Wes is a speechwriter for the CEO of Butterfly Industries and trades in the stock before the CEO makes major announcements of the company. If Wes can earn abnormal profits, this is evidence of what type of market inefficiency? a. weak b. semiweak c. semistrong d. strong -------------------------------------------------------------------------------- 14 Which of the following is used to measure the risk of a stock? a. Beta. b. Volatility (standard deviation of returns). c. Value at risk. d. All of the answers are correct. -------------------------------------------------------------------------------- 15 In 1998, when Russian stock and currency values declined abruptly in response to severe financial problems in Russia, and most stock markets around the world experienced losses on that day, it was known as: a. black Friday. b. bloody Thursday. c. manic Monday. d. bloody Wednesday -------------------------------------------------------------------------------- 16 The dividend discount model is more accurate when companies retain their income instead of paying dividends. True False -------------------------------------------------------------------------------- 17 CAPM ignores the unsystematic risk of a stock when determining the required rate of return. True False -------------------------------------------------------------------------------- 18 The overnight federal funds rate is commonly used as a proxy for the risk-free rate in the CAPM equation. True False -------------------------------------------------------------------------------- 19 Foreign demand for U.S. stocks increases when the dollar is expected to weaken. 18 True False -------------------------------------------------------------------------------- 20 The volatility of a two-stock portfolio increases as the correlation between the assets decreases. True False -------------------------------------------------------------------------------- 21 The reward-to-variability index is also called the Sharpe index. True False -------------------------------------------------------------------------------- 22 If the market is semi strong-form efficient, it is also weak-form efficient. True False -------------------------------------------------------------------------------- 23 All else the same, riskier stocks have higher value. True False -------------------------------------------------------------------------------- 24 The beta of a stock can be estimated by using a regression. True False -------------------------------------------------------------------------------- 25 While interest rates affect the value of bonds, they do not affect the value of stocks. True False -------------------------------------------------------------------------------- 26 If the market is weak-form efficient, then prices fully reflect historical information. True False -------------------------------------------------------------------------------- 27 To calculate the beta of a portfolio, you need to account for correlation among the individual securities. True False -------------------------------------------------------------------------------- 28 To use the dividend discount model, the dividends must be constant forever. True False -------------------------------------------------------------------------------- 29 The market risk premium is the excess return of the market over the risk-free rate. True False 19 -------------------------------------------------------------------------------- 30 Compared to the arbitrage pricing theory, the capital asset pricing model is a more specific method of determining the return on an asset. True False CHAPTER 12.Market Microstructure and Strategies 1 A ________ order is when the broker transacts immediately at the best possible price. a. stop-buy b. limit c. quick d. market -------------------------------------------------------------------------------- 2 A ________ order attempts to protect investors who own stock and want to limit losses in the event that the stock price falls. a. market b. limit c. stop-loss d. none of the answers are correct -------------------------------------------------------------------------------- 3 Who establishes margin requirements? a. Securities and Exchange Commission b. New York Stock Exchange c. Federal Reserve d. Secretary of the Treasury -------------------------------------------------------------------------------- 4 Josh buys a stock for $50, depositing $40 in a margin account and borrowing the remainder from his broker at an interest rate of 10%. During the year, the stock pays a $2 dividend. What is Josh's return if the stock is worth $56 at the end of the year? a. 16.0% b. 17.5% c. 20.0% d. 22.5% -------------------------------------------------------------------------------- 5 Compared to buying the stock outright (no borrowing), margin buying ________ returns when the stock price increases and ________ returns when the stock price falls. a. increases; increases b. increases; decreases c. decreases; increases d. decreases; decreases -------------------------------------------------------------------------------- 6 When buying on margin, if the stock price falls, a request to deposit additional funds in your account is called a: a. margin call. 20 b. maintenance margin. c. deposit request. d. limit order. -------------------------------------------------------------------------------- 7 In a ________, the investor borrows a stock and sells it with the intention of buying it back later at a lower price. a. margin call b. stop-loss c. short sale d. reverse position -------------------------------------------------------------------------------- 8 Investors concerned about adverse price movements following a short sale would be interested in a ________ order. a. market b. limit c. stop-loss d. stop-buy -------------------------------------------------------------------------------- 9 Which of the following does NOT explain an increase in the bid-ask spread? a. costs of processing increase b. interest rates increase c. competition increases d. trading volume decreases -------------------------------------------------------------------------------- 10 ________ are designed to mimic the S and P 500. a. Cubes b. Spiders c. Diamonds d. Vipers -------------------------------------------------------------------------------- 11 ________ is the simultaneous buying and/or selling of at least 15 different stocks that have aggregate value of more than $1 million. a. Block trading b. Combination trading c. Packaging d. Program trading -------------------------------------------------------------------------------- 12 All of the following are similarities between ETFs and index mutual funds EXCEPT: a. prices adjust to the level of the index. b. lower management fees than actively managed investments. c. each can be sold short. d. each pays dividends. -------------------------------------------------------------------------------- 13 The price that a specialist pays to buy a stock is called the: 21 a. bid. b. ask. c. spread. d. offer. -------------------------------------------------------------------------------- 14 A ________ is Web-based trading platform that communicates with ECNs to allow investors to trade stocks without using a broker. a. specialist b. program trade c. direct access broker d. none of the answers are correct -------------------------------------------------------------------------------- 15 The "odd-eighths" collusion controversy affected which of the following markets? a. New York Stock Exchange. . ECNs. b c. Nasdaq. d. All of the answers are correct. -------------------------------------------------------------------------------- 16 Full-service brokers offer investment advice, while discount brokers only execute trades for their customers. True False -------------------------------------------------------------------------------- 17 Market orders are executed if the price is better than the price specified by the investor. True False -------------------------------------------------------------------------------- 18 Buying on margin means borrowing some of the funds to pay for a stock. True False -------------------------------------------------------------------------------- 19 The current minimum margin requirement is 50%. True False -------------------------------------------------------------------------------- 20 Buying on margin magnifies the return earned on the underlying stock. True False -------------------------------------------------------------------------------- 21 The maintenance margin is the minimum amount of equity that must remain in a margin account at all times. True False -------------------------------------------------------------------------------- 22 22 The risk of short selling is that stock prices will fall. True False -------------------------------------------------------------------------------- 23 Cubes (symbol QQQ) are ETFs that mimic the Dow Jones Industrial Average index. True False -------------------------------------------------------------------------------- 24 Specialists monitor trading on Nasdaq. True False -------------------------------------------------------------------------------- 25 Restrictions on program trading when the Dow moves by more than 2% are called collars. True False -------------------------------------------------------------------------------- 26 The short interest ratio is the number of shares sold short divided by trading volume. True False -------------------------------------------------------------------------------- 27 Circuit breakers temporarily halt trading if the stock market fluctuates a lot in one day. True False -------------------------------------------------------------------------------- 28 The commissioners of the Securities and Exchange Commission are appointed by the chairman of the New York Stock Exchange. True False -------------------------------------------------------------------------------- 29 When investors borrow stock for short sales, they must make up any dividends that would have been earned by the original owner. True False -------------------------------------------------------------------------------- 30 Specialists offset all incoming orders by taking the opposite side of every transaction. True False CHAPTER 6.Money Markets 1 Which of the following is NOT a characteristic of Treasury bills? a. Sold at a discount. b. Have no default risk. c. Make semiannual interest payments. d. Have an active secondary market. 23 -------------------------------------------------------------------------------- 2 Treasury bill has six months to maturity and investors require an 8% annualized return on the bill. What is the price if the par value is $100,000? a. $92,593 b. $96,154 c. $92,000 d. $96,000 -------------------------------------------------------------------------------- 3 An investor buys a 3-month (91-day), $100,000 par value Treasury bill for $98,500. What is the annualized yield for this investor? a. 1.50% b. 6.00% c. 6.11% d. 5.93% -------------------------------------------------------------------------------- 4 Suppose the investor in question #3 plans to sell the bill in one month (30 days) at a price of $99,250. What is the expected annual yield for this investor? a. 0.75% b. 3.05% c. 4.56% d. 9.26% -------------------------------------------------------------------------------- 5 What is the quoted discount for the T-bill in question #3? a. 1.50% b. 6.00% c. 6.11% d. 5.93% -------------------------------------------------------------------------------- 6 What is the minimum T-bill denomination? a. $1,000 b. $10,000 c. $100,000 d. $1 million -------------------------------------------------------------------------------- 7 What is the name of a short-term, unsecured debt instrument issued by corporations? a. repurchase agreements b. negotiable certificates of deposit c. banker's acceptances d. commercial paper -------------------------------------------------------------------------------- 8 A 60-day, $1 million CD has an 8% annual rate quote. If CD rates fall to 7% after 10 days, what would your profit be if you then sold the CD? a. $10,000 b. $3,529 24 c. $1,626 d. $1,389 -------------------------------------------------------------------------------- 9 What is the rate at which depository institutions borrow and lend short-term funds to each other? a. commercial paper yield b. repo rate c. federal funds rate d. banker's discount rate -------------------------------------------------------------------------------- 10 Which of the following money market instruments is used to facilitate international trade? a. banker's acceptances b. negotiable certificates of deposit c. federal funds d. foreign fund certificates -------------------------------------------------------------------------------- 11 Which of the following money market securities is most liquid? a. banker's acceptances b. commercial paper c. negotiable certificates of deposit d. treasury bills -------------------------------------------------------------------------------- 12 Which of the following is NOT a characteristic of money market securities? a. Short maturity (less than one year). b. Low interest rate risk. c. High liquidity. d. High participation of individual investors. -------------------------------------------------------------------------------- 13 What effects does a "flight to quality" have on money market yields? a. The spread between T-bills and other securities increases. b. The yields on all money market securities decline. c. The yields on all money market securities increase. d. Longer-term securities increase in value. -------------------------------------------------------------------------------- 14 What is the name of dollar deposits in banks outside the U.S.? a. Foreign dollar investments (FDIs). b. Eurodollar CDs. c. American depository receipts (ADRs). d. None of the answers are correct. -------------------------------------------------------------------------------- 15 Which of the following best describes LIBOR? a. The rate charged for interbank loans internationally. b. The overnight repo rate. c. Long-term rates on Treasury bills. 25 d. The rate earned on Euro-commercial paper. -------------------------------------------------------------------------------- 16 In auctions for Treasury bills, all competitive bids are allocated a portion of the offered bill. True False -------------------------------------------------------------------------------- 17 Regardless of the price entered, all accepted competitive bids pay the same price for Treasury bills. True False -------------------------------------------------------------------------------- 18 In a repurchase agreement, the party who repurchases the underlying securities is acting as a lender. True False -------------------------------------------------------------------------------- 19 Commercial paper does not need to be registered with the Securities and Exchange Commission if it doesn't exceed 45 days to maturity. True False -------------------------------------------------------------------------------- 20 Commercial paper yields are greater than yields on Treasury bills because of the risk of default. True False -------------------------------------------------------------------------------- 21 Repos and reverse repos are the same transaction, but viewed from different perspectives. True False -------------------------------------------------------------------------------- 22 As interest rates decline, the value of money market securities increases. True False -------------------------------------------------------------------------------- 23 Eurodollar CDs are subject to the same reserve requirements imposed by the Federal Reserve. True False -------------------------------------------------------------------------------- 24 Treasury bills are quoted as a percent discount of the par value. True False -------------------------------------------------------------------------------- 25 To assist investors in assessing default risk, commercial paper is often rated by ratings agencies. 26 True False -------------------------------------------------------------------------------- 26 Historically, the commercial paper market has experienced high levels of issuer defaults. True False -------------------------------------------------------------------------------- 27 A banker's acceptance is a letter of credit used in international trade. True False -------------------------------------------------------------------------------- 28 During uncertain times, investors prefer low default risk securities. True False -------------------------------------------------------------------------------- 29 Corporations tend to be the largest participants in the federal funds market. True False -------------------------------------------------------------------------------- 30 Treasury bills are free from default risk. True False CHAPTER 7.Bond Markets 1 How often do Treasury bonds make coupon payments? a. monthly b. quarterly c. semiannually d. annually -------------------------------------------------------------------------------- 2 Why was Salomon Brothers fined for its involvement in a 1990 Treasury bond auction? a. It failed to submit its required bid in the auction. b. It inadvertently submitted its bid as a noncompetitive bid. c. It purchased too large of a portion of the bonds issued. d. It was accused of insider information. -------------------------------------------------------------------------------- 3 Suppose the bid price on a $100,000 T-bond is 109:16 and the ask price is 109:24. How much will you receive if you want to sell the bond? a. $109,160 b. $109,500 c. $109,750 d. $109,240 -------------------------------------------------------------------------------- 4 How do inflation-indexed Treasury bonds protect against inflation? 27 a. The principal of the bond changes with inflation. b. The coupon rate on the bond is indexed with inflation. c. The bond is reissued if inflation increases. d. The maturity of the bond changes with inflation. -------------------------------------------------------------------------------- 5 How do federal agencies use the proceeds from their bonds? a. Buy defense and military equipment. b. Pay Social Security benefits (including Medicare). c. Purchase mortgages. d. Provide states with additional funds. -------------------------------------------------------------------------------- 6 A securities firm separates the interest and principal of Treasury bonds and sells them as distinct investments. What are these new securities called? a. revenue bonds b. general obligation bonds c. STRIPs d. bond separates -------------------------------------------------------------------------------- 7 Interest income from Treasury securities is exempt from ________, while interest income of municipal securities is exempt from ________. a. federal taxation; federal taxation b. federal taxation; state taxation c. state taxation; federal taxation d. state taxation; state taxation -------------------------------------------------------------------------------- 8 Revenue bonds are backed by: a. the federal government. b. the taxing authority of the municipality. c. the cash flows of an underlying project. d. none of the answers are correct. -------------------------------------------------------------------------------- 9 What is the name of the legal document underlying a bond issue? a. indenture b. debenture c. covenant d. signatory -------------------------------------------------------------------------------- 10 Which of the following reduces the stress of meeting all debt obligations on the maturity date of the bond? a. protective covenant b. sinking fund provision c. call provision d. variable rate coupon -------------------------------------------------------------------------------- 28 11 Why would an issuer be interested in exercising its right to call a bond prior to its maturity? a. The call price is lower than the par value of the bond. b. The market value of the bond is too low. c. It can refinance the debt and reduce interest expense. d. It expects to have difficulty paying off the debt. -------------------------------------------------------------------------------- 12 Which of the following bonds of the same issuer would offer the highest yield? a. mortgage bonds b. subordinated debentures c. debentures d. convertible bonds -------------------------------------------------------------------------------- 13 ________ are restrictions on the bond issuer that are designed to protect the bondholders from excessive risk. a. Sinking fund provisions b. Exclusive rights c. Protective covenants d. None of the answers are correct -------------------------------------------------------------------------------- 14 A 10-year bond sells for $926.40. It has an annual coupon rate of 5% and a par value of $1,000. What is the yield to maturity on the bond? a. 4% b. 5% c. 6% d. 7% -------------------------------------------------------------------------------- 15 Which of the following issues federal agency bonds? a. Ginnie Mae. b. Fannie Mae. c. Freddie Mac. d. All of the answers are correct. -------------------------------------------------------------------------------- 16 Every payment from a typical bond contains components of both principal and interest. True False -------------------------------------------------------------------------------- 17 The underlying principal of a bond is called the par value. True False -------------------------------------------------------------------------------- 18 The key distinction between Treasury notes and Treasury bonds is the available denominations. True False 29 -------------------------------------------------------------------------------- 19 The trading of Treasury bonds and notes occurs on the New York Stock Exchange. True False -------------------------------------------------------------------------------- 20 Individual investors wanting to buy a Treasury bond pay the bid price. True False -------------------------------------------------------------------------------- 21 Municipal bonds are free from default risk. True False -------------------------------------------------------------------------------- 22 Municipal bonds often have lower yields then Treasury bonds. True False -------------------------------------------------------------------------------- 23 Callable bonds offer lower interest rates than noncallable bonds of the same issuer. True False -------------------------------------------------------------------------------- 24 Zero coupon bonds always sell at a premium to par value. True False -------------------------------------------------------------------------------- 25 The yields on convertible bonds are lower than straight bonds. True False -------------------------------------------------------------------------------- 26 Bonds that have no underlying collateral are called junk bonds. True False -------------------------------------------------------------------------------- 27 The cost of financing with bonds is indicated by the yield to maturity. True False -------------------------------------------------------------------------------- 28 The discount rate that equates the present value of the cash flows of a bond with its par value is called the yield to maturity. True False -------------------------------------------------------------------------------- 29 Investors who buy a bond and hold it to maturity will earn the yield on the bond. True 30 False -------------------------------------------------------------------------------- 30 Treasury bonds are quoted as thirty-seconds of a dollar. True False CHAPTER 8.Bond Valuation and Risk 1 What is the price of a $1,000 par value bond that has a 10% coupon, 5 years to maturity, and a yield of 8%? Assume the bond makes annual coupon payments. a. $1,081.11 b. $1,079.85 c. $924.18 d. $1,031.94 -------------------------------------------------------------------------------- 2 What is the price of a $1,000 par value bond that has a 12% coupon, 8 years to maturity, and a yield of 14%? Assume the bond makes semiannual coupon payments. a. $907.22 b. $905.53 c. $1,101.06 d. $1,099.35 -------------------------------------------------------------------------------- 3 What is the present value of $1 million to be received in five years, if the required annual interest rate is 7.5%? a. $696,559 b. $930,233 c. $1,435,629 d. $759,99 -------------------------------------------------------------------------------- 4 If the coupon on a bond is equal to the required rate of return demanded by investors, the bond sells at: a. par value. b. a discount. c. a premium. d. more information is needed. -------------------------------------------------------------------------------- 5 Rank the following bonds by price, from lowest to highest. NOTE: You should not have to calculate the price of all of the bonds to answer the question. I. Five-year bond, 10% coupon, required interest rate = 12% II. Five-year bond, 10% coupon, required interest rate = 8% III. Ten-year bond, 10% coupon, required interest rate = 12% IV. Ten-year bond, 10% coupon, required interest rate = 8% a. I, II, III, IV b. II, III, IV, I c. III, I, II, IV 31 d. IV, I, II, III -------------------------------------------------------------------------------- 6 Which of the following would tend to increase interest rates? a. Slower economic growth. b. Lower inflation. c. Improved credit quality. d. Increases in the federal budget deficit. -------------------------------------------------------------------------------- 7 Which of the following announcements would tend to drive bond prices up? a. Increasing unemployment. b. Decreasing oil prices. c. Declining expectations of the value of the dollar. d. None of the answers are correct. -------------------------------------------------------------------------------- 8 When interest rates decline by 1%, the change in a bond's price is ________ the change in the bonds price if interest rates increase by 1%. a. greater than b. less than c. equal to d. more information is needed -------------------------------------------------------------------------------- 9 If financial institutions expect increasing interest rates, which of the following strategies should they employ? a. Selling bonds and investing in short-term securities. b. Increasing the proportion invested in low coupon bonds. c. Increasing the maturity of their bonds. d. None of the answers are correct. -------------------------------------------------------------------------------- 10 What is the duration of a four-year, 8% annual coupon bond if the required rate of return is 9%? a. 3.22 b. 3.57 c. 3.86 d. 4.00 -------------------------------------------------------------------------------- 11 A financial institution has the following bond investments. Determine the duration of the portfolio. Maturity Duration Coupon Rate (Annual) Amount Invested 2 years 1.8 10% $1 million 3 years ?? 0% 2 million 5 years 4.5 12% 3 million 10 years 8.0 8% 4 million a. 3.65 b. 4.82 32 c. 5.33 d. more information is needed -------------------------------------------------------------------------------- 12 Determine the price of elasticity of a three-year, 5% annual coupon bond if the required rate of return goes from 5% to 6%. Assume the par value of the bond is $1,000.(正确答案-0.15) a. -0.137 b. -0.267 c. -0.534 d. -2.673 -------------------------------------------------------------------------------- 13 A bond has a duration of 6, a required return of 8%, and a price of $900. What is the predicted price of the bond if the required return goes to 8.5%? a. $650 b. $875 c. $897.50 d. $925 -------------------------------------------------------------------------------- 14 Using duration to predict the price of a bond given a change in the required return: a. always understates the actual price. b. always overstates the actual price. c. understates the actual price only when interest rates decline. d. understates the actual price only when interest rates increase. -------------------------------------------------------------------------------- 15 Investing in bonds to generate the necessary cash flows to exactly meet projected expenses is called a(n) ________ strategy. a. barbell b. laddered c. matching d. efficient -------------------------------------------------------------------------------- 16 Bonds that sell below par value are called discount bonds. True False -------------------------------------------------------------------------------- 17 Most bonds pay semiannual coupons. True False -------------------------------------------------------------------------------- 18 When the investor's required rate of return exceeds the bond's coupon, the bond sells at a premium. True False -------------------------------------------------------------------------------- 19 Discount bonds are better investments than premium bonds. 33 True False -------------------------------------------------------------------------------- 20 Bonds that sell at a discount will increase in value as they approach maturity. True False -------------------------------------------------------------------------------- 21 If inflation is expected to increase, bond prices tend to increase. True False -------------------------------------------------------------------------------- 22 Improving economic conditions often lead to increasing interest rates. True False -------------------------------------------------------------------------------- 23 Federal budget deficits place downward pressure on interest rates. True False -------------------------------------------------------------------------------- 24 The price elasticity of bonds is negative, indicating an inverse relationship between interest rates and bond prices. True False -------------------------------------------------------------------------------- 25 The risk premium on long-term bonds is greater than the risk premium on money market securities. True False -------------------------------------------------------------------------------- 26 Low coupon bonds have higher price elasticity than high coupon bonds. True False -------------------------------------------------------------------------------- 27 The modified duration of zero coupon bonds is equal to its maturity. True False -------------------------------------------------------------------------------- 28 When asset duration exceeds liability duration, the net worth of financial institutions declines as interest rates decrease. True False -------------------------------------------------------------------------------- 29 Convexity is more pronounced for long maturity bonds than short maturity bonds. True 34 False -------------------------------------------------------------------------------- 30 Allocating the same proportion of invested funds across several different bond maturities is called a barbell strategy. True False CHAPTER 9.Mortgage Markets 1 Which of the following is NOT a characteristic of a conventional residential mortgage? a. It is debt. b. It is secured by real estate. c. The amount of the loan is equal to the value of the property. d. Each payment includes both principal and interest. -------------------------------------------------------------------------------- 2 How can a financial institution protect itself against the potential default of a mortgage borrower? a. Federal Housing Administration loans. b. Veterans Administration loans. c. Private mortgage insurance. d. All of the answers are correct. -------------------------------------------------------------------------------- 3 Financial institutions holding conventional fixed rate mortgages are most concerned with ________ interest rates. a. increasing b. decreasing c. stable d. none of the answers are correct -------------------------------------------------------------------------------- 4 Which of the following mortgages would be most appropriate for a borrower that anticipates rapid growth in income? a. growing equity mortgage b. adjustable rate mortgage c. conventional fixed rate mortgage d. balloon payment mortgage -------------------------------------------------------------------------------- 5 Which of the following is NOT a characteristic of a second mortgage? a. The interest rate is higher than a primary mortgage. b. Its claim on the underlying property is behind the primary mortgage. c. The maturity is typically longer than the primary mortgage. d. It is often used in conjunction with a primary mortgage. -------------------------------------------------------------------------------- 6 The process of pooling mortgages, repackaging the cash flows, and selling to investors is called: a. collateralization. b. securitization. 35 c. liquidation. d. separatization. -------------------------------------------------------------------------------- 7 Which of the following organizations is NOT instrumental in the secondary market for mortgages? a. Freddie Mac b. Ginnie Mae c. Sallie Mae d. Fannie Mae -------------------------------------------------------------------------------- 8 Which of the following is NOT performed by various financial institutions? a. Originating mortgages. b. Servicing mortgage payments. c. Investing in mortgages. d. All of the above are performed by various financial institutions. -------------------------------------------------------------------------------- 9 Which of the following factors would NOT increase the value of mortgages? a. Decrease in inflation. b. Decrease in the credit quality of borrowers. c. Higher federal budget surpluses. d. Increasing economic growth. -------------------------------------------------------------------------------- 10 What is the mortgage pipeline? a. Mortgages accumulating in a pool waiting to be sold in the secondary market. b. Delinquent mortgages. c. Mortgages that will be held to maturity by the loan originator. d. The communications network used to originate a loan. -------------------------------------------------------------------------------- 11 Investors in mortgages are subject to ________ risk, which is generally not faced by investors in other markets (like bonds). a. prepayment b. default c. interest rate d. liquidity -------------------------------------------------------------------------------- 12 Which of the following does NOT affect the amount of credit risk in mortgages? a. Loan-to-value ratio. b. Borrower's income. c. Borrower's credit history. d. All of the above affect the credit risk of mortgages. -------------------------------------------------------------------------------- 13 What effect does increased prepayments have on the expected life of a mortgage pass-through security? a. Shortens the life. 36 b. Increases the security's life. c. No change. d. None of the answers are correct. -------------------------------------------------------------------------------- 14 Sequential payment of principal based on tranches is a characteristic of what type of security? a. mortgage pass-throughs b. participation certificates c. collateralized mortgage obligations d. Freddie Mac securities -------------------------------------------------------------------------------- 15 Which of the following mortgages generally gets paid off the fastest? a. graduated equity b. graduated payment c. adjustable rate mortgage d. conventional fixed rate mortgage -------------------------------------------------------------------------------- 16 Adjustable rate mortgages (ARMs) provide a way for financial institutions to stabilize their profit margins. True False -------------------------------------------------------------------------------- 17 Although the interest rate on ARMs fluctuates, there is usually a cap (maximum) on the change in the interest rate during any year. True False -------------------------------------------------------------------------------- 18 Graduated payment mortgage payments increase in the early years of the loan while growing equity mortgage payments decrease in early years. True False -------------------------------------------------------------------------------- 19 The interest rate on shared appreciation mortgages declines as the value of the underlying property increases. True False -------------------------------------------------------------------------------- 20 The largest category of mortgages is for residential mortgages. True False -------------------------------------------------------------------------------- 21 The growth of secondary markets for mortgages has had no influence on the accept/reject decision at mortgage origination. True False 37 -------------------------------------------------------------------------------- 22 Borrowers expecting interest rates to increase tend to prefer fixed rate mortgages. True False -------------------------------------------------------------------------------- 23 Prepayments generally increase when interest rates fall. True False -------------------------------------------------------------------------------- 24 Payments to investors of pass-through securities are insured by the issuing institution. True False -------------------------------------------------------------------------------- 25 Fannie Mae securities are backed by FHA and VA mortgages. True False -------------------------------------------------------------------------------- 26 Like bonds, mortgage-backed securities have semiannual payments. True False -------------------------------------------------------------------------------- 27 Investors in principal-only securities (POs) prefer faster prepayments than owners of interest-only securities (IOs). True False -------------------------------------------------------------------------------- 28 Since the interest rate is typically higher, the payments from a 30-year mortgage are higher than a 15-year mortgage. True False -------------------------------------------------------------------------------- 29 Payments from CMOs are not taxed, while payments from pass-through securities are fully taxed. True False -------------------------------------------------------------------------------- 30 ARMs pass interest rate risk from the lender to the borrower. True False 38