Question

Q. Which of the following institutional investors most likely must spend a target percentage of the portfolio annually?

1- Endowments

2- Life insurance firms

3- Property and casualty insurance firms

Q. All else being equal, which bonds typically have the widest credit spreads?

1. A-rated corporate bonds

2. AA-rated corporate bonds

3. AAA-rated corporate bonds

Q. In the structure of a typical private equity fund, investors are commonly referred to as:

1. limited partners.

2. general partners.

3. public shareholders.

Q. The buyer of an option contract:

1. receives the premium when the contract is initiated.

2. must trade the underlying asset at the exercise price.

3. has the right to trade the underlying asset at the exercise price.

Q. In primary security markets investors buy securities from:

1. traders.

2. issuers.

3. exchanges.

Answer 1

Q1) Option 1- Endowments is the correct answer.

Explanation:

A specific portion of an endowment's assets is permitted to use every year.

The amount brought out from the endowment could be a mixture of interest and principal.

Q2) Option 1. An A-rated corporate bond is a correct answer.

Explanation:

The credit spread grows with a drop in a bond rating.

A-rated corporate bonds have a low bond rating.

AAA-rated corporate bonds have a high bond rating.

So, A-rated corporate bonds typically have the widest credit spreads.

Q3) Option 1. limited partners is the correct answer.

Explanation:

Q4) Option 3. has the right to trade the underlying asset at the exercise price is the correct answer.

Explanation:

Buying an options contract gives the right, but not the responsibility to buy or sell the underlying asset.

Q5) Option 2. issuers is the correct answer.

Explanation:

The primary market is where firms sell new securities to the people for the initial period.

Initial public offerings are an example of the primary market.

The secondary market is where investors buy and sell securities (on an exchange).

The New York Stock Exchange (NYSE) and the NASDAQ are examples for the secondary market.

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