FINANCE 3315 EXAM 2 QUESTIONS AND CORRECT
DETAILED ANSWERS (VERIFIED ANSWERS) ALREADY
GRADED A+
One characteristic of bond funds is the Ans✓✓✓fluctuation in value in
response to changing interest rates.
The open interest at the end of the trading day indicates the number of
contracts that are open and have not been settled by delivery or by an
offsetting transaction. Ans✓✓✓True
In a semi strong efficient market, traders with non public information
would have no advantage over those who had only public information
Ans✓✓✓False
Which type of fund is always passively managed? Ans✓✓✓an index
fund
One characteristic of most index funds is that such funds typically
Ans✓✓✓have a very low − cost structure with respect to management
fees and transaction fees.
Madison believes that the leisure industry (resorts, travel, restaurants,
etc.) is about to experience extraordinary growth because baby boomers
are entering their retirement years. She should invest in Ans✓✓✓a
sector fund.
, A bond with 14 years to maturity and a coupon rate of 6.375% has a
yield-to-maturity (YTM) of 4.5%. Assuming the bond's YTM remains
constant, the bond's value as it approaches maturity will most likely:
Ans✓✓✓decrease.
Bonds with one of the top four ratings (Aaa through Baa, or AAA
through BBB) are designated as Ans✓✓✓investment grade bonds.
Which one of the following best describes "semi-strong" market
efficiency? Ans✓✓✓All public information is quickly reflected in
security prices.
The odd lot trading indicator assumes that Ans✓✓✓odd − lot traders are
unsophisticated and time their decisions poorly.
Trading in closed − end investment companies takes place between
investors in the open market. Ans✓✓✓True
Which one of the following statements is correct? Ans✓✓✓Low P/E
stocks tend to outperform high P/E stocks on a risk − adjusted basis
The Jefferson Company issued a 5% coupon bond four years ago at par
value. The market interest rate on comparable bonds today is 6%. The
Jefferson Company bond currently pays ________ a year in interest and
the bond sells at a ________. Ans✓✓✓$50; discount (no one wants a
bond that pays less in interest then the market)
DETAILED ANSWERS (VERIFIED ANSWERS) ALREADY
GRADED A+
One characteristic of bond funds is the Ans✓✓✓fluctuation in value in
response to changing interest rates.
The open interest at the end of the trading day indicates the number of
contracts that are open and have not been settled by delivery or by an
offsetting transaction. Ans✓✓✓True
In a semi strong efficient market, traders with non public information
would have no advantage over those who had only public information
Ans✓✓✓False
Which type of fund is always passively managed? Ans✓✓✓an index
fund
One characteristic of most index funds is that such funds typically
Ans✓✓✓have a very low − cost structure with respect to management
fees and transaction fees.
Madison believes that the leisure industry (resorts, travel, restaurants,
etc.) is about to experience extraordinary growth because baby boomers
are entering their retirement years. She should invest in Ans✓✓✓a
sector fund.
, A bond with 14 years to maturity and a coupon rate of 6.375% has a
yield-to-maturity (YTM) of 4.5%. Assuming the bond's YTM remains
constant, the bond's value as it approaches maturity will most likely:
Ans✓✓✓decrease.
Bonds with one of the top four ratings (Aaa through Baa, or AAA
through BBB) are designated as Ans✓✓✓investment grade bonds.
Which one of the following best describes "semi-strong" market
efficiency? Ans✓✓✓All public information is quickly reflected in
security prices.
The odd lot trading indicator assumes that Ans✓✓✓odd − lot traders are
unsophisticated and time their decisions poorly.
Trading in closed − end investment companies takes place between
investors in the open market. Ans✓✓✓True
Which one of the following statements is correct? Ans✓✓✓Low P/E
stocks tend to outperform high P/E stocks on a risk − adjusted basis
The Jefferson Company issued a 5% coupon bond four years ago at par
value. The market interest rate on comparable bonds today is 6%. The
Jefferson Company bond currently pays ________ a year in interest and
the bond sells at a ________. Ans✓✓✓$50; discount (no one wants a
bond that pays less in interest then the market)
