Series 65 Unit 20 Exam Questions

An investment adviser is analyzing 4 bonds of similar quality for a client. Bond A has a coupon of 6%, matures in 12 years, and is currently priced at 50. Bond B has a coupon of 8%, matures in 9 years, and is currently priced at 50. Bond C has a coupon of 4%, matures in 18 years, and is priced at 45. Bond D has a coupon of 12%, matures in 6 years, and is priced at 50. Base on NPV, which of these bonds represents the better value? (20.Q1.12)

Bond C

From the following 4 portfolio, choose the 1 that would generally be considered to be the most diversified. (20.Q1.4)

STU common stock, beta 0.95, correlation to the S&P 500, +0.84, VWX common stock, beta 0.90, correlation to the S&P 500, +0.07; YZA common stock, beta 0.88, correlation to the S&P 500, -0.45

Which of the following attributes of common stock best describes why internal rate of return (IRR) is not generally used to determine the return on common stock? (20.Q1.9)

Uneven cash flows, no maturity date and price

Your client has the following bonds in her portfolio (20.Q1.8) - XYZ 3s of 44 - TUV 6s of 45 - QRS 9s of 43 - NOP 12s of 42

XYZ 3s of 44

A securities analyst reviewing the financial statements of the XYZ Corporation observes that the company's total liabilities are in excess of its total assets. From this information, the analyst could conclude that XYZ has (20.Q1.18)

a negative book value per share

The terms mean, median, and mode are all measures of (20.Q1.14)

central tendency

As a bond's duration changes (20.Q1.6)

its sensitivity to changes in interest rates changes

When analyzing a company's financial statements, gross profit is computed by subtracting from revenues (20.Q1.3)

the cost of goods sold

One of the reasons why the discounted cash flow method of valuation is useful in assessing the value of fixed income instruments is (20.Q1.10)

the predictability of income