Question

In: Finance

A bond issued for the purpose of building a tunnel between New Jersey and New York...

A bond issued for the purpose of building a tunnel between New Jersey and New York in which tolls are expected to pay the coupon and principal payments to the bondholders is most likely characterized as a(n):

		a. General obligation bond
		b. Treasury bond
		c. Industrial development bond
		d. Revenue bond

The most likely reason an organization would issue commercial paper is to:

		a. Finance a budget deficit
		b. Manage working capital
		c. Invest in long-term projects
		d. Refinance a long-term bond issue

Which of the following is (are) correct regarding average returns?

		a. The geometric mean is equivalent to IRR
		b. The arithmetic mean is the average return for a series of returns and will always be greater than or equal to the geometric mean
		c. Both a and b
		d. Neither a nor b

A mortgage-backed security can be characterized as having:

		a. Prepayment risk
		b. Little price risk
		c. Extremely low default risk levels
		d. Annual coupon payments

Which of the following statements concerning risk is not correct?

a. Country risk, or political risk, is the variability in a security’s returns resulting from the instability of a country’s economy or government

b. Financial risk is associated with the use of equity as part of a company’s capital structure

c. Market risk is the variability in a security’s returns resulting from fluctuations in the overall market

d. Business risk is the risk associated with the industry or environment in which a business operate

A financial institution hopes to form an equity mutual fund that invests solely in blue-chip stocks. The most likely piece of legislation that dictates the law surrounding the fund is the:

a. Dodd Frank Act of 2010

b. Banking Act of 1933

c. Financial Services Modernization Act of 1999

d. Investment Company Act of 1940

The authority function of a self-regulatory organization is most likely characterized by:

		a. Creation and enforcement of its own policies
		b. The effective management of conflicts of interest
		c. Establishment of clear standards of conduct
		d. Quick resolution of disputes

Solutions

Expert Solution

d) Revenue Bond - is the correct answer.

Revenue bonds are paid up by revenue from public projects such as roads, bridges, tolls, etc.

Reason for incorrect answers:
a) is incorrect because general obligation bonds are not for any specified purpose.

b) is incorrect because treasury bonds are again not based on a specific project or obligation.

c) is incorrect because Industrial development bonds serve private businesses which are sued for development.

The most likely reason an organization would issue commercial paper is to:

b) Managing working capital.

Which of the following is (are) correct regarding average returns?

c. both a and b

A mortgage-backed security can be characterized as having:

a) Prepayment risk

Which of the following statements concerning risk is not correct?

Option d is correct

jeff jeffy answered 2 months ago

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