Investments terms

Which one of the following statements is correct concerning premium bonds?

The yield to maturity is less than the coupon rate.

The overnight repurchase rate is the rate charged on overnight loans which are collateralized by which one of the following securities?

Treasury securities

An order to buy shares of stock at a stated price or less is called a _____ order.

limit

Which of the following are three key advantages of mutual funds?

low initial investments, professional management, diversification

Which one of the following is required for a trader to earn excess profits?

market inefficiency

Which one of the following terms is used to describe a stock price that moves over time creating no discernible pattern?

random walk

Which one of the following risks is associated with investing a coupon payment at a rate that is lower than the bond's yield-to-maturity?

reinvestment rate risk

Which one of the following transactions occurs in the primary market?

sale of newly issued shares by the issuer to a shareholder

In an efficient market, stocks with similar risks will:

have similar rates of return.

The day-of-the-week effect is defined as the tendency for which day of the week to have a negative average rate of return?

Monday

Which of the following will increase the price of a money market instrument computed using a discount yield? I. increase in discount yield II. decrease in discount yield III. increase in days to maturity IV. decrease in days to maturity

II and IV only

Which of the following will increase if the coupon rate increases? I. face value II. market value III. yield-to-maturity IV. current yield

II, III, and IV only

Which one of the following correctly identifies the phenomenon that states that one month has the greatest tendency for small stocks to earn large returns?

January effect

Which one of the following statements is correct concerning mutual funds?

Mutual funds generally pay no taxes.

Assume that a large corporation, such as General Electric, needs money in the short-term. Which one of the following securities is that corporation most likely to issue to meet this need?

commercial paper

An order to sell that involves a preset trigger point is called a _____ order.

short

The market segmentation theory states that interest rates on debt vary dependent upon market segments which are segmented based upon which one of the following?

time to maturity

Efficient markets tend to exist:

when rational arbitrage traders dominate irrational traders.