FINC 425 Mock CFP

Which of the following is correct regarding certificates of deposit (CDs)? A. CDs are short-term securities that may be bought or sold in the open market at a market-determined price. B. CDs typically invest in high-quality, short-term investments, such as commercial paper, T-Bills, and money market funds. C. CDs are known as "time deposits". D. The financial institution pays a variable rate of interest for the term of the CD. - Answer- C. CDs are known as "time deposits". All but which of the following are correct regarding Treasury bills? A. Have maturities of one year or less B. Sold in minimum denominations of $500 C. Considered to be default risk free D. Sold at a discount to par - Answer- B. Sold in minimum denominations of $500 Which of the following describes the relationship between total risk, systematic risk, and unsystematic risk? A. Total risk = systematic risk - unsystematic risk B. Total risk - systematic risk = unsystematic risk C. Unsystematic risk - total risk = systematic risk D. Total risk + unsystematic risk = systematic risk - Answer- B. Total risk - systematic risk = unsystematic risk Common stock is referred to as __________ because the owner of the stock is also an owner of the corporation and may participate in its capital and income growth. A. debt B. equity C. cumulative stock D. preferred stock - Answer- B. equity Which of the following are correct regarding a bond's yield to maturity (YTM)? (1) The YTM assumes that coupon payments are reinvested at the YTM rate of return for the life of the bond. (2) When the market rate of interest for the same term and risk is higher than the coupon rate, a discount will be priced into the bond. (3) Bonds that are riskier will have lower yields to maturity. (4) The YTM is the internal rate of return for cash flow associated with a bond, including the purchase price, coupon payments, and maturity value.