Question 1

Which of the following is correct regarding commercial paper?
I.Maximum maturity date 180 days
II.Maximum maturity date 270 days
III.Short-term debt
IV.Unsecured

Accepted Answer

Commercial paper is a short-term, unsecured debt instrument issued by corporations, with a maximum maturity date of 270 days, making options II, III, and IV correct.

Question 2

Which of the following is a passive management approach to investing?

Accepted Answer

A Systematic Withdrawal Plan is a passive management approach as it involves withdrawing a fixed amount from an investment portfolio at regular intervals, without actively managing or trading the investments.

Question 3

Which of the following is a hybrid security?

Accepted Answer

A convertible bond is a hybrid security because it combines features of both bonds and stocks. It is a bond that can be converted into a set number of shares of the issuing company's stock. The other options are not hybrid securities.

Question 4

Which of the following is purchased at par value,and interest is accrued and paid at redemption.Interest stops accruing after 30 years.Interest earnings are subject to federal income tax but are exempt from state and local income tax.

Accepted Answer

Series EE savings bonds are purchased at half their face value, and interest accrues until redemption or until 30 years have passed. While interest on these bonds is subject to federal income tax, it is exempt from state and local income taxes, fitting the description provided.

Question 5

Which of the following are correct regarding Mortgage-backed securities?
I.Interest only passes through to the investor.
II.Invest in a pool of mortgage loans.
III.Principal only passes through to the investor.
IV.Referred to as a pass-through security.

Accepted Answer

Mortgage-backed securities invest in a pool of mortgage loans and are referred to as pass-through securities, meaning that both principal and interest payments are passed through to the investor. Therefore, statements I and III are incorrect. Statement II is correct and statement IV is also correct.

Question 6

A(n)_____ allows for diversification by pooling the capital of many investors in order to purchase more securities and reduce the risk of the investment portfolio

Accepted Answer

A mutual fund pools together the money of multiple investors in order to purchase a diversified portfolio of securities, which helps to reduce overall risk. This makes them a popular choice for those looking to invest in the stock market, but who may not have the expertise or resources to create a diversified portfolio on their own. While exchange traded securities and margin accounts can also help to diversify an investment portfolio, they each come with their own risks and complexities that make them less suitable for many investors. And while myIRA is a personal retirement account, it does not pool together investor capital or provide the same diversification benefits as a mutual fund.

Question 7

The _____ states that an investor needs to be compensated for the time value of capital (money)invested and the additional risk for making the investment.

Accepted Answer

The Capital Asset Pricing Model (CAPM) is based on the concept that investors need to be compensated for both the time value of their money and the additional risk they take on by investing in a particular asset or security. CAPM is used as a tool for calculating the expected return of an asset or security, taking into account the risk-free rate, beta, and the expected return of the market.

Question 8

Which of the following is a tangible investment?

Accepted Answer

A tangible investment is a physical asset that holds value, and can include things like real estate, precious metals, and collectibles. Of the options listed, only an antique automobile is a tangible investment, as it is a physical asset that can be seen and touched, and has the potential to appreciate in value over time. Bonds, REITs, and stocks are all intangible investments, as they represent ownership in a company or entity, but do not have physical value in and of themselves.

Quiz 11: Investment Planning

Which of the following is correct regarding commercial paper? I.Maximum maturity date 180 days II.Maximum maturity date 270 days III.Short-term debt IV.Unsecured

Which of the following is a passive management approach to investing?

Which of the following is a hybrid security?

Which of the following is purchased at par value,and interest is accrued and paid at redemption.Interest stops accruing after 30 years.Interest earnings are subject to federal income tax but are exempt from state and local income tax.

Which of the following are correct regarding Mortgage-backed securities? I.Interest only passes through to the investor. II.Invest in a pool of mortgage loans. III.Principal only passes through to the investor. IV.Referred to as a pass-through security.

A(n) _____ allows for diversification by pooling the capital of many investors in order to purchase more securities and reduce the risk of the investment portfolio

The _____ states that an investor needs to be compensated for the time value of capital (money) invested and the additional risk for making the investment.

Which of the following is a tangible investment?