Question

9. Which of the following statements is (are) correct?
(x) Insurance companies protect individuals and corporations (policyholders) from financially adverse events.
(y) Securities firms and investment banks underwrite securities and engage in related activities such as
securities brokerage, securities trading, and making markets in which securities trade
(z) Mutual funds pool many individuals’ and companies’ financial resources and invest those resources in
diversified asset portfolios.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (x) only

12. According to the textbook, which of the following statements is (are) correct?
(x) Liquidity is the ease with which a stock can be converted into a bond.
(y) Liquidity risk is the risk that an asset's sale price will be lower than its purchase price.
(z) Price risk is the risk that an asset's sale price will be lower than its purchase price
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (z) only

14. Which of the following statements is (are) correct?
(x) A continual increase in the price level of a basket of goods and services is known as inflation.
(y) A continual decrease in the price level of a basket of goods and services is known as deflation.
(z) A decrease in the rate of inflation from five percent to three percent will, in general, cause investors to require
a higher return on the financial assets that are purchased in the future.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (y) only

20. Which of the following statements is (are) correct?
(x) A special provision on a security such as tax exemption will, in general, cause the interest rate to be lower on
the security relative to another security if all other factors such as term, default risk, and maturity risk are
identical.
(y) The expected or "implied" rate on a short-term security that will originate at some point in the future is known
as the forward rate
(z) Federal funds are short-term funds that are transferred between financial institutions to satisfy the liquidity
needs of those institutions.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (z) only

Answer 1

9)A(x,y,z are correct)

12)E(z is only correct), liquidity is convertibility of assets into cash or cash equivalents,time required to convert should be short

14)A(x,y,z are correct)

20)A(X,y,z are correct)