Bellevue University MBA 620 Quiz 7 1)With fixed income investments, (either long or short-term), their price moves                 relative to movements in market interest rates

Bellevue University

MBA 620

Quiz 7

1)With fixed income investments, (either long or short-term), their price moves

                relative to movements in market interest rates.

a.            Inversely

b.            Directly

2.            If an investor paid $97,710 for a 180 day, $100,000 U.S. Treasury bill, what would be the investor's return on investment quote as a money market yield (i.e. on a 360 day basis)?

a.   10.2%

b.   2.34%

c.   2.29%

d.   4.58%

e.   4.69%            

f.             none of the above

3.            When treasury managers evaluate various short-term investment alternatives, municipal bonds (munis) typically offer interest rates that are approximately 30% or so lower than comparable risk instruments. Why would municipal bonds ever be considered as competitive investment alternatives?

a.            because munis provide lower risk than all other alternatives

b.            because munis provide funds to projects in the public’s interest, such as roads, schools, airports, etc.

c.             because munis are generally exempt from Federal & State income taxes

d.            because munis are more liquid than all other alternatives

4.            Which of the following investment strategies involves purchasing securities that mature when funds are required to meet an expected obligation (or obligations)?

a.            maturity matching

b.            replicating an index

c.             overnight sweeps

d.            dividend capture

e.            riding the yield curve

5.            A             depicts the differences in yield of securities that are identical except for their time to maturity.

a. duration curve b.  yield curve

c.             interest rate risk curve

d.            moving average curve

e.            none of the above

6.            What would be the purchase price for a 180 day, $100,000 U.S. Treasury bill sold at a 5.25% discount rate (recall, T-bills use a 360 day convention for the discount)?

a. 5,250

b.   94,750

c.   99,781

d.   97,375

e. insufficient information to compute

7.            The mix of debt and equity financing for a firm is referred to as the firm's

a.            capital budget

b.            structure mix

c.             capital strategy d. capital structure

e.   balance sheet

8.            High yield bonds are frequently also known as

a.            mortgage bonds

b.            income bonds

c.             TANs

d.            Treasury bond e. junk bonds

f.             industrial revenue bonds

9.            In general, if a firm wanted minimum reporting and disclosure when raising capital, then they would prefer

a.            a private market issue

b.            a public market issue

10.          Which of the following models describes a relationship between the relevant risk and the associated required return on an asset?

a.            TAN b. CAPM

c.             WACC

d.            Factor Model

e.            Fisher Model

f.             None of the above