NOTRE DAME COLLEGE
25-Mar-21
INVESTMENTS - BU370 - SPRING SEMESTER 2021
Quiz #7-8 - Chapter 7-10 Stock Market Behavior - Intro to Fixed Income
1 On October 19, 1987 - The DJIA
a reached a record high unsurpassed until Donald Trump was elected president
b traded above 10,000 points for the first time in history
c gained 22.6% of its value in one day
d lost 22.6% of its value in one trading session
2 A bank loan product is based on a nominal rate of 12%. If interest is charged and posted monthly
calculate the effective annual rate (EAR)
a 10.36%
b 11.00%
c 12.68%
d 14.24%
3 A bond with a $1,000,000 par value has a 6.5% annual coupon rate. It will mature in 7 years, with
semi-annual coupon payments (paid every six months). It has a call price of $1,050,000 and its first call is
in two years. Currently, yields on bonds with similar risk are yielding 5.75%. Value this bond to first call.
a.
1,078,225.25
b.
1,064,679.93
c.
1,043,210.55
d
1,013,980.89
e none of the above
4
Which one of the following combination of features causes bond prices to be the most volatile?
a. low coupon, short maturity
b. high coupon, short maturity
c. low coupon, long maturity
d high coupon, long maturity
e none of the above
5
A $10,000 face value bond with 8 years to maturity is selling for $9,852.50. It pays semi-annual
coupon payments of $400. Calculate the bonds yield to maturity.
a.
4.13%
b.
6.53%
c.
8.44%
d
8.26%
e none of the above
6
A $10,000 face value bond with 8 years to maturity is selling for $9,875.00. It pays semi-annual
coupon payments of $400. If the bond has a call price of $10,500 and 3 years to first call, Calculate
the bonds yield to call.
a.
8.67%
b.
8.48%
c.
8.57%
d
9.96%
e none of the above
7
Over the last 50 years, bond yields were at their highest
a. in the early seventies
b. in the late seventies and early eighties
c. in the mid nineties
d in the early part of the twenty-first century
e none of the above
8
The random walk hypothesis
a. implies that security analysis is unable to predict future market behavior
b. suggests that random patterns appear but only after long periods of time
c. has been disproved based on recent computer simulations
d support the notion that random price movements are indicative of inefficient markets
9
A person can be accused of insider trading if acting on information that is
a. material and non-public
b. non-material and non-public
c. material and public
d non-material and public
10
The odd-lot theory advocates that small investors
a. are considered "smart money"
b. are unsophisticated investors
c. rarely make emotional mistakes
d tend to buy low and sell high
11
An analyst who claims to predict stock prices based on charts can most likely be described as
a. technical analyst
b. fundamental analyst
c. chartered financial analyst
d corporate analyst
e none of the above
12
According to Mario's lecture, the yield curve
a. does not move in parallel motion, but non-parallel
b. move up and down in a parallel motion
c. the yield curve never "kinks"
d is always a straight line. That is why everyone loves it
e none of the above
13
The possibility that changes in interest rates will result in losses in a bond's value
a. interest rate risk
b. the yield curve
c. yield to maturity
d issue specific risk
e none of the above
14
A Bollinger Band
a. is a moving trend representing two (2) standard deviations from a stocks price
b. was a musical group that composed many songs related to the stock market
c. is an interest rate that replaces the prime rate
d is used to measure bond prices
e none of the above
15
A widely used measure of a bond's sensitivity to changes in bond yields
a. duration
b. beta
c. reinvestment risk
d alpha
e none of the above
16
A straight bond
a. has variable rate coupon payments
b. is effectively simple interest
c. uses compounding to calculate coupon payment
d is also known as a dirty bond
e none of the above
17
Clean bond prices
a. are the same as straight bonds
b. include accrued interest
c. do not include accrued interest
d describe bond certificates that have been sterilized during COVID
e none of the above
18
A bond's current yield
a. is the same as Internal Rate of Return
b. is a bond's annual coupon divided by its market price
c. is also known as yield to maturity
d is the value of the bond without including coupon payment
e none of the above
19
Which of the following theories are used to describe and support yield curve shapes
a. maturity preference theory
b. expectations theory
c. market segmentation theory
d all of the above are theories that describe and support yield curve shapes
20
Since the beginning of the year (2021)
a. Ten Year Treasury Note Yields (T-Note) have increased -65%
b. Ten Year Treasury Note Yields (T-Note) have increased -25%
c. Ten Year Treasury Note Yields (T-Note) have increased 25%
d Ten Year Treasury Note Yields (T-Note) have increased 65%
e none of the above