FINANCE 325 EXAM 2 QUESTIONS
AND ANSWERS 2026 - 2027
Which one of the following bonds is the least sensitive to interest rate
risk?
A) 7-year; 4% coupon.
B) 3-year; 4% coupon.
C) 7-year; 6% coupon.
D) 5-year; 6% coupon.
E) 3-year; 6% coupon. - ANSWERS-E) 3-year; 6% coupon.
Bonds issued by the U.S. government:
A) Are considered to be free of interest rate risk.
B) Generally have higher coupons than comparable bonds issued by a
corporation.
C) Are called "munis."
D) Are considered to be free of default risk.
E) Pay interest that is exempt from federal income taxes. - ANSWERS-
D) Are considered to be free of default risk.
Municipal bonds:
A) Generally have higher coupon rates than corporate bonds.
B) Are rarely callable.
C) Are totally risk free.
D) Pay interest that is federally tax free.
E) Are free of default risk. - ANSWERS-D) Pay interest that is federally
tax free.
Which one of the following risks would a floating-rate bond tend to have
less of as compared to a fixed rate coupon bond?
A) Liquidity risk.
B) Default risk.
C) Taxability risk.
D) Real rate risk.
, E) Interest rate risk. - ANSWERS-E) Interest rate risk.
Which one of the following types of stock is defined by the fact that it
receives no preferential treatment in respect to either dividends or
bankruptcy proceedings?
A) Non-cumulative.
B) Cumulative.
C) Common.
D) Dual class.
E) Preferred. - ANSWERS-C) Common.
What are the distributions of either cash or stock to shareholders by a
corporation called?
A) Dividends.
B) Diluted profits.
C) Retained earnings.
D) Coupon payments.
E) Capital payments. - ANSWERS-A) Dividends.
An agent who maintains an inventory from which he or she buys and
sells securities is called a:
A) Dealer.
B) Broker.
C) Trader.
D) Capitalist.
E) Principle. - ANSWERS-A) Dealer.
The owner of a trading license for the NYSE is called a:
A) Specialist.
B) Member.
C) Agent.
D) Broker.
E) Dealer. - ANSWERS-B) Member.
A securities market primarily composed of dealers who buy and sell for
their own inventories is referred to which type of market?
A) Insider.
AND ANSWERS 2026 - 2027
Which one of the following bonds is the least sensitive to interest rate
risk?
A) 7-year; 4% coupon.
B) 3-year; 4% coupon.
C) 7-year; 6% coupon.
D) 5-year; 6% coupon.
E) 3-year; 6% coupon. - ANSWERS-E) 3-year; 6% coupon.
Bonds issued by the U.S. government:
A) Are considered to be free of interest rate risk.
B) Generally have higher coupons than comparable bonds issued by a
corporation.
C) Are called "munis."
D) Are considered to be free of default risk.
E) Pay interest that is exempt from federal income taxes. - ANSWERS-
D) Are considered to be free of default risk.
Municipal bonds:
A) Generally have higher coupon rates than corporate bonds.
B) Are rarely callable.
C) Are totally risk free.
D) Pay interest that is federally tax free.
E) Are free of default risk. - ANSWERS-D) Pay interest that is federally
tax free.
Which one of the following risks would a floating-rate bond tend to have
less of as compared to a fixed rate coupon bond?
A) Liquidity risk.
B) Default risk.
C) Taxability risk.
D) Real rate risk.
, E) Interest rate risk. - ANSWERS-E) Interest rate risk.
Which one of the following types of stock is defined by the fact that it
receives no preferential treatment in respect to either dividends or
bankruptcy proceedings?
A) Non-cumulative.
B) Cumulative.
C) Common.
D) Dual class.
E) Preferred. - ANSWERS-C) Common.
What are the distributions of either cash or stock to shareholders by a
corporation called?
A) Dividends.
B) Diluted profits.
C) Retained earnings.
D) Coupon payments.
E) Capital payments. - ANSWERS-A) Dividends.
An agent who maintains an inventory from which he or she buys and
sells securities is called a:
A) Dealer.
B) Broker.
C) Trader.
D) Capitalist.
E) Principle. - ANSWERS-A) Dealer.
The owner of a trading license for the NYSE is called a:
A) Specialist.
B) Member.
C) Agent.
D) Broker.
E) Dealer. - ANSWERS-B) Member.
A securities market primarily composed of dealers who buy and sell for
their own inventories is referred to which type of market?
A) Insider.
