Capital Markets

Trade-off between risk and return applies to the CAPM and the efficient frontier graph can be rearranged to illustrate the trade-off for individual ____________.

• investments
• risks
• assets
• losses

In the broadest terms, embedded options are components built into the structure of a financial security that provides the option of one of the parties to exercise some action under certain conditions.

• True
• False

Jerry borrowed $4,000 for 5 years at 6% simple interest rate. How much interest is that?

• $1, 200
• $1, 500
• $1, 300
• $1, 400

One country’s currency has appreciated when more of it is needed to buy a unit of a foreign currency (is worth less relative to the other currency)

• True
• False

It has an embedded option that combines the steady cash flow of a bond, allowing the owner to call on-demand the conversion of the bonds into shares of company stock at a predetermined price and time in the future.

• Convertible bond
• Putable bond
• Common stock
• Callable bond

If I am compounding daily, I need to divide the interest rate by ____.

• 365 / 365. 25

If you are spending all your income, and never have money to save or invest, you’ll need to look for ways to cut back on your expenses.

• True
• False

Process of changing future value to the present value known as:

• rate
• discount
• percentage
• interest

This refers to the amount of money a person expects to have in the future.

• balance
• income
• future value
• fix value

Options provide the holder with the right (but not the obligation) to buy or sell foreign currencies at an agreed rate within a period of time, in return for a fee paid to the seller of the option.

• True
• False

Using the CAPM to build a portfolio is supposed to help an investor manage their _______________.

• losses
• risk
• profit
• investment

It pays a specified coupon and is subject to similar interest rates and credit risks as bonds. It also has stock-like features.

• Convertible bonds
• Common stock
• Preferred stock
• Callable bonds

The market portfolio that is used to find the market risk premium is only a theoretical value and is not an asset that can be purchased or invested in as an alternative to the stock.

• True
• False

In FOREX Market, there is no central market, key markets are in several cities around the world.

• True
• False

John put 14,000 Euros in an account at a simple interest rate of 1% per year. How much interest will he get after 12 years?

• 1, 700 Euros
• 1,680 Euros
• 2, 880 Euros
• 1, 800 Euros

Yolanda invests Php7,300 at 6% interest compounded annually for four years. What is the future value of this investment?

• Php 9, 216.08
• Php 10, 216.08
• Php 9, 216.11
• Php 9, 316.08

Investors don't expect to be compensated for risk and the time value of money.

• True
• False

If the time is given in months, you must first _____________ by 12.

• multiply
• subtract
• add
• divide

Which of the following is an assumption about Capital Asset Pricing Model?

• Investments are limited to traded financial assets
• Single-period investment horizon
• Individual investors are price takers
• all of the above

Henry can write 5 pages of his novel in 3 hours.

• 23 1/3
• 13 1/3
• 13 2/3
• 15 1/3

The simple interest formula is i = P r t

• time
• Number of years
• Number of hours
• place

How long would it take for an investment of $1650 to double at 4%?

• 12 months
• 20 years
• 25 days
• 18 years

The Capital Asset Pricing Model (CAPM) describes the relationship between systematic risk and expected return for assets, particularly stocks.

• True
• False

Daniel has dinner at a restaurant and the cost of his meal is $28.00. Because of the service, he wants to leave a 20% tip. What is his total bill including tip?

• $35.60
• $33.60
• $36.60
• $43.60

A fast way to estimate how long it will take your savings to double with compound interest is known as:

• Bill of Money
• rule of 72
• rule of 70
• money act

Katie invested Php 6,500 in a savings account earning 12% interest compounded quarterly. What is the future value of this investment after five years? Round your answers to the nearest cent.

• Php 11, 739. 73
• Php 11, 740
• Php 11, 739. 72
• Php 11, 739. 80

All investors have the same set of income needs, risk tolerances, tax rates, liquidity needs, and time horizons.

• True
• False

The simple interest formula is I=Prt. The P represents the principle. The principle is ___________________.

• the amount of money borrowed or deposited
• the amount of money in the bank
• the amount of loan money
• the amount of interest added to the money

It provides more control of the outcome for the bondholder. Owners of these have essentially purchased a put option built into the bond.

• Convertible bonds
• Putable bonds
• Callable bonds
• Preferred stocks

Cross exchange rate between two currencies is calculated from their exchange rates with a third, benchmark currency - frequently the US dollar.

• True
• False

Spot transactions is when there is an agreement to buy or sell a currency at a date in the future, at a rate agreed in advance.

• True
• False

My mom can bake 66 cupcakes in 3 hours. Write this as a unit rate describing cupcakes per hour.

• (22 cupcakes) / (1 hour)
• (22 cupcakes) / (2 hours)
• (25 cupcakes) / (1 hour)
• (32 cupcakes) / (1 hour)

Stock Market is the largest and most liquid market in the world.

• True
• False

The rate is given as a percent (%). Before using it in the simple interest formula, you must first convert it to a______.

• rate
• decimal
• interest

These are tools used by issuers, especially at times of high prevailing interest rates, where such an agreement allows the issuer to buy back or redeem bonds at some time in the future.

• Convertible bond
• Callable bond
• Putable bond
• Preferred stock

You invest $3,000 in a bank account paying 6.5% simple interest annually. How much interest will you receive after 30 months?

• $487.67
• $487.50
• $487.60
• $488

The beta of a potential investment is a measure of how much risk the investment will add to a portfolio that looks like the market.

• True
• False

Write the percent as a decimal.

• .043
• 430
• 4.3
• .43

Maria borrowed $3,000 at a simple interest rate of 4% per year. How much did she have to repay after 4 years?

• $2,480
• $5,480
• $3,480
• $3,580

Your money earns money. When your money goes to work, it may earn a steady paycheck.

• True
• False

Find the total amount of interest if interest is compounded annually (once a year). Principle of $2750 at 8% for 2 years. (round to the nearest cent)

• $457.60
• $357.60
• $857.60
• $557.60

Esteban has a jar of change in his room. He has 600 coins total, and 240 of them are pennies.

• 40%
• 65%
• 20%
• 80%

Earning interest on interest is called compound interest.

• True
• False

Steady rise in the general level of prices is known as:

• interest
• payment
• inflation
• Money Laundering Act

How much tip should you leave if you want to tip 23% at Applebee's on a $27.31 bill?

• $8.28
• $6.28
• $7.28
• $6.38

Elaine has a collection of 300 CDs. Of these, 21% are Rock and Roll CDs.

• 65 CDs
• 63 CDs
• 67 CDs
• 70 CDs

Cash received today is preferred to cash received in the future.

• Disagree
• Agree

Exchange rate is the price of one currency in terms of another.

• True
• False

Mr. Peterson paid $1,020 in interest for a loan, which was given to him at a rate of 5% for 3 years. How much money did he borrow originally?

• $7,800
• $6,800
• $8,800
• $6,900

What does the "I" in the interest formula stand for?

• ion
• interest
• income
• investment

The key to understanding embedded options is that they are built for specific use and are inseparable from their host security, unlike derivatives that track underlying security.

• True
• False

Savings products include savings accounts, checking accounts, and certificates of deposit.

• True
• False

What does r stand for?

• ratio
• rating
• revenue
• interest rate

At the market, 8 apples cost $4.

• $8.50
• $10.50
• $4.50
• $5.50

How long would it take for $1650 to reach $1,000,000 at 3%, compounded quarterly? Use desmos.

• 230 years
• 280 years
• 255 years
• 215 years

But credit cards are free money.

• True
• False

Anna invested $2,500 at an annual rate of 5%. How long will it take until Anna earns $1,125 in interest?

• 9 months
• 9 years
• 9 days
• 9 weeks

Earning interest on interest is called:

• loan interest
• compound interest
• single interest
• fixed interest

You invest Php 475 in an account that pays 3% simple interest annually. How much money do you have after five years?

• Php 546. 26
• Php 547. 25
• Php 556. 25
• Php 546. 25

A coin contains 9 grams of nickel, and 16 grams of copper. Its total weight is 25 grams.

• 66%
• 69%
• 64%
• 65%

Embedded options are found only in bonds.

• True
• False

While embedded options are inseparable from their issue, their value also can't be added or subtracted from the core securities price.

• True
• False

What does the "r" in the interest formula stand for?

• interest
• rate
• discount
• due

Investors are constantly challenged with learning about and keeping current on a number of financial-related issues such as the volatile world of international investing, currency swings, creative accounting, bankruptcies, or the complex world of derivatives.

• True
• False

Currency swaps is the agreement to trade one currency for another now, and to trade currencies back again later, both at prices agreed at the beginning.

• True
• False

Starting money = $350. Interest rate = 2.5% Time = 3 years. How much is the interest?

• $26.25
• $26.27
• $25.25
• $24.25

Today, you deposit Php500 into Bank A saving account that pays 8% interest per year. How much will you have in five years?

• Php 735
• Php 734. 70
• Php 734. 66
• Php 735. 66

Embedded options are found more often in bonds due to the sheer size of the bond market and the unique needs of issuers and investors.

• True
• False

Calculate the Simple Interest: Principle : $350 Interest Rate : 2.5% Time : 3 years

• $24.25
• $26.25
• $25.25
• $22.25

You invest Php 800 in an account that pays 6% interest, compounded annually. How much money do you have after five years? Round your answers to the nearest cent.

• Php 1,070.59
• Php 1,070.60
• Php 1,071
• Php 1,070.58

If I am investing $1650 at 3%, compounded quarterly for 5 years, what is my exponent?

• 20
• 30
• 35
• 25

Calculate the interest. I = PRT, Principal = $10000, Rate = 7%, Time = 20 years

• $15,000
• $14,000
• $14,000. 24
• $15,000.85

Time Value of Money refers to the idea that money to be paid out or received in the future is not equivalent to money paid out or received today.

• True
• False

This comes under the markowitz theory. It states that the investors will act rationally, always making decision aimed at maximizing their return for their acceptable level of risk

• Optimum portfolio
• Minimum portfolio
• Investment portfolio
• none of the above

The amount money a person expects to have in the future is called future value.

• True
• False

Felipe earns 5% commission on his sales at Best Buy. One week his sales totaled $9,650. What was his commission for the week?

• $482.50
• $483
• $482.60
• $483.25

Forward contracts obligate buyer to buy or sell a certain amount of foreign currency at a future date.

• True
• False

Find the balance of $1650 invested at 3% for 5 years, compounded continuously?

• $1917.03
• $1917.1
• $1918
• $1917.04

he rate is given as a percent (%). Before using it in the simple interest formula, you must first convert it to a______.

• decimal
• percentage
• assurance rate
• interest rate

Timothy earns a 15% commission on each household appliance he sells. If he sells 6 toasters at $20 each, how much does he earn in commission?

• $18.24
• $19
• $18
• $19.34

How much simple interest would be earned on a savings account of $4,500 at 5.5% interest per year after 24 months?

• $495
• $487
• $455
• $465

The money you invest in securities, mutual funds, and other similar investments typically is insured by the government.

• True
• False

Write the decimal as a percent. 0.37

• 3.7%
• 40%
• 0.37%
• 37%

Process of changing present value to the future value known as:

• compound
• balance
• single
• associate

Lisa wants to know what the value of her Php 1,000 will be if she invests it for 3 years at a given rate. What is Lisa trying to find?

• interest
• discount
• future value
• compound value

How long would it take for an investment to double at 5.5%?

• 20 days
• 13 years
• 13 days
• 20 years

Calculate the interest. I = PRT, Principal = $1000, Rate = 6%, Time = 2 year

• $125
• $120
• $145
• $130

The CAPM also assumes that the risk-free rate will change over the discounting period.

• True
• False

You lend $240 to your friend. He pays you back $270. What interest rate did you charge your friend?

• 19. 59%
• 12.5%
• 21.55%
• 21%

This is when the money you received today is worth more than the same amount of money received in the future.

• discount
• interest
• time value of money
• time deposit

It is the portfolio that offers the highest excepted return for a given level of risk or one with the lowest level of risk for a excepted return and the line that connect all these efficient portfolios is efficient frontier.

• Portfolio analysis
• Security analysis
• Efficient set of portfolio
• Variance model

Emilio borrows $1200 from a bank with 8% simple interest per year. How much will he have to pay back total in 2 years?

• $11,392
• $1393
• $1392
• $2392

Find the balance $1650 invested at 3%, compounded quarterly for 5 years.

• $1916
• $1915.96
• $1915.97
• $1915.95

The A in SMART Goals stands for:

• attention
• attainable
• attractive
• affection

Corie earns 3% commission. One day her sales totaled $850. What was her commission earned for the day?

• $26.50
• $25.50
• $27.50
• $35.50

Jack deposited $1,400 in his bank account. After 3 years, the account earned $294 in interest. Find the simple interest rate.

• 8%
• 80%
• 70%
• 7%

Beyonce went to the mall and saw a massage chair that she would have to take a loan out for $6500 to purchase. The bank said that she could get a simple interest rate of 8% for 5 years. What is the total amount that Beyonce will pay for the chair?

• $10100
• $9100
• $6100
• $90100

You invest Php700 in an account that pays 8% interest, compounded annually. How much money do you have after six years? Round your answer to the nearest cent.

• Php 2, 110.81
• Php 1, 110.81
• Php 1, 110.90
• Php 1, 110.82

What is the present value of Php10,000 to be received in year 10 at an interest rate of 10%?

• Php 3, 855. 43
• Php 4, 855. 43
• Php 3, 855. 44
• Php 5, 855. 43

Forward transactions are executed nearly immediately.

• True
• False