Series 65: Unit 19 Quiz 1

The common stock of the YXZ Pharmaceutical Corporation, listed on the NYSE, is likely to be subject to 1. business risk 2. credit risk 3. liquidity risk 4. regulatory risk

Business risk and regulatory risk

If interest rates are dropping, an investor with a maturing bond will be most concerned with A. the quality declining with the yield B. the difficulty in finding another investment with a like yield C. a positive yield curve D. a negative yield curve

The difficulty in finding another investment w/ a like yield

Each of the following would be considered a political risk except A. terrorism. B. nationalization of private industries. C. coups. D. adverse weather conditions.

Adverse weather conditions

When deciding on the suitability of a particular investment, that client's need for liquidity is A. an important consideration when determining the suitability of an investment B. only important if the client has no other liquid investments C. only significant if the individual is planning on retirement D. not a significant consideration

An important consideration when determining the suitability of an investment

Which of the following are considered unsystematic risks? 1. Business 2. Liquidity 3. Market 4. Purchasing power

Business and liquidity

An investor's portfolio that consists of all long-term Treasury bonds is most vulnerable to which of the following types of risk? A. Default (credit) risk B. Business risk C. Marketability risk D. Interest rate risk

Interest rate risk

All of the following are examples of non-diversifiable risks except A. interest rate risk B. market risk C. purchasing power risk D. liquidity risk

Liquidity risk

Which of the following are examples of systematic risk? 1. Business risk 2. Market risk 3. Interest rate risk 4. Credit (default) risk

Market risk and interest rate risk

Which of the following statements are true? 1. Systematic risk can be diversified away. 2. Systematic risk cannot be diversified away. 3. Unsystematic risk can be diversified away. 4. Unsystematic risk cannot be diversified away.

Systematic risk cannot be diversified away and unsystematic risk can be diversified away

The risk known as opportunity cost is often measured by A. the tax-equivalent yield. B. comparing the yield to maturity to the nominal yield. C. comparing the investor's actual return to the return on the 91-day Treasury bill. D. whether the investment had positive or negative returns.

Comparing the investor's actual return to the return on the 91-day Treasury bill

A client's portfolio consists of holdings in long-term U.S. Treasury bonds and Treasury notes. Of least concern to this investor would be A. market risk B. credit risk C. interest rate risk D. purchasing power risk

Credit risk

Calvin has the following securities in his portfolio: ABC common stock, XYZ common stock, PQR mutual fund (domestic small cap), DEZ mutual fund (foreign small cap), 30-year Treasury bond, and 5-year Treasury note. Which of the following risks should not concern Calvin? A. Systematic risk B. Reinvestment rate risk C. Business risk D. Default risk

Default risk