Unit 13 and Unit 14
SSS Corporation's total assets amount to $780,000, of which $260,000 represents current assets. Total liabilities equal $370,000, of which $200,000 is considered long-term or other liabilities. What is the equity of SSS Corporation's shareholders? A)$170,000 B)$980,000 C)$410,000 D)$1,150,000
C)$410,000 Total assets minus total liabilities equals shareholders' equity ($780,000 - $370,000 = $410,000).
If a corporation has a dividend payout ratio of 70%, the undistributed earnings will A)decrease book value. B)increase earnings per share. C)increase capital surplus. D)increase retained earnings.
D)increase retained earnings. Retained earnings represent income that has not been paid out to shareholders.
Under the 5% markup policy, which of the following determines the amount of markup in a principal transaction? A)Lowest ask B)Highest ask C)Lowest bid D)Highest bid
A)Lowest ask Markups are always based on the inside offer, which is the lowest ask price in a particular security. Markdowns are based on the inside bid, which is the highest bid price for a particular security.
Which of the following statements regarding the Bond Buyer 20 bond index are true? I. It includes only GO bonds. II. It includes both GO bonds and revenue bonds. III. It is computed weekly. IV. It is computed monthly. A)II and IV B)II and III C)I and IV D)I and III
D)I and III The Bond Buyer 20 bond index measures secondary market yields of GO bonds. It consists of 20 GO bonds, A-rated or better, and each with approximately 20 years to maturity. The index is updated each week.
When comparing the performance of several portfolios, which would you be most likely to recommend to your clients? A)The one with the lowest alpha B)The one with the highest beta C)The one with the lowest beta D)The one with the highest alpha
D)The one with the highest alpha Alpha is a performance measure, while beta is a measure of a stock's volatility relative to the overall market. When a portfolio has a positive alpha, the manager has created excess returns. That is, the performance was better than would have been expected for the risk taken.
Asset allocation refers to the spreading of portfolio funds among different asset classes with different risk and return characteristics. When allocating among asset classes, you would not include A)ETFs. B)bonds. C)stock. D)cash and cash equivalents.
A)ETFs. ETFs are a way of investing in equity (stock) or debt (bonds) securities and are not a separate asset class.
The Bond Buyer compiles several indexes of municipal bonds. Which of the following is limited to bonds with the highest ratings? A)The 11 Bond Index B)The 20 Bond Index C)The Revdex 25 D)The 40 Bond Index
A)The 11 Bond Index This index takes the highest rated (AA or better) bonds from the 20 Bond Index of bonds with A ratings or better.
An investor purchases 100 shares of CDE on December 20, 2019, for $2,000. On the same day, he purchases 100 shares of QRS for $2,000. On January 3, 2020, he sells the CDE stock for $1,700 and the QRS stock for $2,200. On January 24, 2020, he purchases 200 shares of CDE for $3,000. What capital gains or losses did he realize from these transactions? A)$300 loss in CDE B)$300 loss in QRS and $200 gain in CDE C)$200 gain in QRS D)$300 loss in CDE and $200 gain in QRS
C)$200 gain in QRS The investor in this question has a $200 capital gain to report on the purchase of QRS stock for $2,000 and its subsequent sale for $2,200. Because the investor repurchased the CDE stock (January 24) within 30 days of selling it (January 3), the $300 loss incurred ($2,000 - $1,700 = $300) when sold is disallowed under the wash sale rule.
ABC Corporation raised capital through an offering of equity securities. Which component of the balance sheet has changed as a result? A)Fixed assets B)Long-term liabilities C)Current assets D)Current liabilities
C)Current assets When equity securities are issued, cash (a current asset) and net worth increase. Fixed assets and liabilities remain unchanged as a result of the offering.
The risk of a bond decreasing in value during periods of inflation is known as A)marketability risk. B)reinvestment risk. C)interest rate risk. D)credit risk.
C)interest rate risk. Interest rate risk is the possibility that interest rates might rise, causing bond prices to fall. Periods of inflation are accompanied by rising interest rates.
The bond placement ratio, as shown in The Bond Buyer, is computed by taking A)the number of new issues divided by the 30-day visible supply. B)the number of new issues unsold divided by the number of new issues offered. C)the dollar value of new issues sold divided by the dollar value of the new issues offered. D)the dollar amount of new issues sold divided by the dollar amount of new issues unsold.
C)the dollar value of new issues sold divided by the dollar value of the new issues offered. The bond placement ratio is the percentage of new municipal bonds offered last week that were sold last week. Although not a term you'll see on the exam, think of this as the success ratio. It reports how well the underwriters did in moving the week's new issues. For example, if $1 billion of bonds were offered during the week, and $700 million were placed (sold), that is a 70% placement ratio.
It is not uncommon for one company to attempt to take over another by acquiring a significant percentage of its voting shares. Under SEC rules, if the terms of the offer are changed, the revised offer must remain open for at least A)10 business days from the commencement and 20 business days from the date the terms are changed. B)10 business days from the commencement and 10 business days from the date the terms are changed. C)20 business days from the commencement and 20 business days from the date the terms are changed. D)20 business days from the commencement and 10 business days from the date the terms are changed.
D)20 business days from the commencement and 10 business days from the date the terms are changed. The rule is that the offer must remain open for at least 20 business days from the time the tender offer begins, and if there should be a change to the terms of the offer, if must be held open for 10 business days from the change. This is more a principal level question and unlikely to be on your exam, but we want to be sure you are exposed to the information.
The financial statements of a corporation include the balance sheet and the income statement. The major components of a balance sheet are assets, liabilities, and net worth. Which of the following would be a major component of an income statement? A)Cash on hand B)Work in process C)Bonded indebtedness D)Cost of goods sold
D)Cost of goods sold Cost of goods sold (COGS) is one of the major components of an income statement. In addition to COGS are revenues (or sales), interest expense (if any), and pretax income. Some accountants include depreciation in COGS, while others show it as a separate nonoperating expense. Current assets on a balance sheet include cash on hand and inventory, such as work in process. Bonds are long-term liabilities also appearing on a corporate balance sheet.
ABC Corporation's earnings have increased by 10%, and its shares outstanding have increased 5%. This has what impact on ABC's EPS? A)EPS has increased. B)There is not enough information to answer the question. C)EPS has stayed the same. D)EPS has decreased.
A)EPS has increased. If earnings (net income) have increased faster than the shares outstanding, EPS will increase. For example, if ABC's earnings were $10 million and it had 1 million shares, the earnings per share were $10. Now, with a 10% increase to earnings, those earnings are $1.1 million. If the shares have increased by 5%, there are now 1,050,000 shares. That makes the new EPS $11,000,000 ÷ 1,050,000 shares which equals approximately $10.48 per share. This proves the correct choice that EPS has increased.
Which items would change if a company buys equipment for cash? I. The working capital II. The total assets III. The total liabilities IV. The shareholders' equity A)I only B)I and II C)III and IV D)IV only
A)I only The general balance sheet formula is assets equals liabilities plus shareholders' equity. A purchase of equipment for cash would affect working capital by reducing current assets. However, it would not affect total assets because it is an exchange of one asset (cash) for another asset of equal value (equipment). Because no loan was needed, it affects neither total liabilities nor equity.
Which of the following describes additional paid-in capital? A)The difference between the total dollar amount received from the issuance of common stock and the stock's aggregate par value B)May also be called earned surplus C)Total of all residual claims that stockholders have against the corporation's assets D)Total of all earnings since a corporation was formed, less dividends
A)The difference between the total dollar amount received from the issuance of common stock and the stock's aggregate par value Additional paid-in capital is the difference between the dollar amount received from the sale of stock and the stock's aggregate par value. Earned surplus is another name for retained earnings.
XYZ Corporation owns 18% of the voting common stock of ABCD Enterprises. In the current tax year, XYZ receives $250,000 in dividend income from its investment in ABCD. If XYZ has a marginal tax rate of 21%, what is its tax liability on the dividend income received? A)$0 B)$26,250 C)$9,450 D)$52,500
B)$26,250 Under the intercorporate dividend exclusion rule, if a corporation owns stock in another corporation, 50% of the dividends received is excluded from taxation. Therefore, only 50% of the $250,000 received is subject to tax (50% × $250,000 = $125,000). Applying a tax rate of 21% to $125,000 results in a tax liability of $26,250.
On September 1, an investor sold 100 shares of KLP Corporation common stock for a loss of $1 per share. On September 15, he purchased a KLP convertible bond with a conversion price of $40. How much of the original loss may he now declare for tax purposes? A)None B)$75 C)$40 D)$100
B)$75 Because he purchased the convertible bond less than 30 days after realizing the loss, the sale of the stock falls under the wash sale rule. Investors who sell a security at a loss, and repurchase it, including its equivalent (e.g., convertible bond, warrant, or call option), 30 days before or after the sale will have the loss disallowed by the IRS. With a conversion price of $40, the bond could be converted into 25 shares (1,000 / 40) of KLP common stock. Hence, the investor has "bought back" the equivalent of 25 shares and may only declare a $75 loss, as the remaining $25 loss will be disallowed. Look at this question as if it said, "On September 15, he purchased 25 shares of KLP stock." That washes out $25 of the loss, but the rest is okay.
While reviewing a new customer's investment profile, you determine that the customer is willing to tolerate a high degree of risk and does not anticipate utilizing the invested funds for at least 15 years. What would be a suitable recommendation regarding asset allocation for the customer's portfolio, given the customer's risk tolerance and time horizon criteria? A)25% debt, 25% equities, 25% money market instruments, and 25% real estate B)70% equities, 20% debt, and 10% money market instruments C)45% debt, 45% equities, and 10% money market instruments D)65% debt and 35% equities
B)70% equities, 20% debt, and 10% money market instruments For an investor who has a long-term investment time horizon and is willing to tolerate higher levels of risk, a recommendation having a higher percentage of the portfolio in equities would be suitable. Of the asset mixes presented, only one has a majority percentage in equities. The remaining choices with higher percentages in debt securities are too conservative.
An investor looking for current income while wishing to reduce interest rate risk would most likely find which of the following investments suitable? A)A $100 par preferred stock callable at 102 in three years B)A bond unit investment trust (UIT) with a duration of five years C)U.S. Treasury STRIPS maturing in five years D)A U.S. Treasury note maturing in eight years
B)A bond unit investment trust (UIT) with a duration of five years One of the features of a unit investment trust is that it has a defined end date. The bonds held in the UIT in our question all mature in five years. Regardless of how high current market interest rates rise, bonds pay off at face value when they mature. The longer the investor has to wait for maturity, the greater the interest rate risk. That makes the Treasury notes a less acceptable choice. You can assume that a callable security, preferred or debt, is not going to be called unless interest rates go down. Remember, when interest rates decline, fixed income investment rise in price so the investor would not want the stock called away. The STRIPs will mature in five years but, as zero coupon securities, will pay no income in the interim.
An investor follows a program of buying 100 shares of Mutable Precision Castings Corporation (MPCC) common stock every six months. Over the past two years, the purchase prices have been: February 1, 2020, $50; August 1, 2020, $55; February 1, 2021, $60; August 1, 2021, $48. Needing some cash before the end of the year, the investor desires to sell 200 shares of the MPCC stock in November 2021. The investor is in the 35% income tax bracket and MPCC stock is trading at $53 per share. From a tax minimization standpoint, you would recommend selling the shares bought on A)February 1, 2021 and the shares bought on August 1, 2021. B)August 1, 2020 and the shares bought on August 1, 2021. C)August 1, 2020 and the shares bought on February 1, 2021. D)February 1, 2020 and the shares bought on August 1, 2020.
B)August 1, 2020 and the shares bought on August 1, 2021. Minimizing taxes means selling the shares with the highest cost. The higher the cost, the lower the taxable gain. By default, the IRS would use FIFO (first-in, first out). That would mean using a cost basis of $50 for the first 100 shares and $55 for the next 100 (the two purchases in 2020). That is a cost basis of $52.50 per share (50 + 55 divided by 2, or $5,000 + $5,500 divided by 200 shares). When selling 200 shares at $53 each, there is a long-term capital gain of $100 (a $0.50 profit on 200 shares, or $10,600 minus $10,500). On the other hand, if the investor uses the identified shares method and tells the registered representative to sell the shares bought at $55 per share, and the shares bought at $60 per share, the cost basis is $57.50 per share (55 + 60 divided by 2), and that generates a $900 capital loss ($57.50 - $53 = $4.50 loss per share times 200 shares). Regardless of which shares are sold, the investor still receives $10,600 (200 times $53), but by selecting properly, the investor can have a $900 write off against other gains or, if there are no other gains, against income to the extent permitted by law.
The Bond Buyer's 30-Day visible supply includes I. issues of notes sold on a competitive basis. II. issues of bonds sold on a competitive basis. III. issues of notes sold on a negotiated basis. IV. issues of bonds sold on a negotiated basis. A)III and IV B)II and IV C)I and II D)I and III
B)II and IV The visible supply includes only bonds. Notes are not considered because they do not compete directly with the bonds.
Most taxes in the U.S. fit into one of two categories. They are either progressive or regressive. Which of the following taxes are known as progressive taxes? I. Sales II. Cigarette III. Income IV. Estate A)II and IV B)III and IV C)I and III D)I and II
B)III and IV With a progressive tax, such as income and estate taxes, the percentage amount increases as the taxable amount increases. Sales and cigarette taxes are regressive because everyone pays the same percentage tax regardless of their income.
Which of the following statements regarding the visible supply in The Bond Buyer is true? A)It is the total of the bonds offered in the Blue List. B)It is a daily listing of bonds to be offered in the next 30 days. C)It is a weekly listing of bonds sold in the past 30 days. D)It is a daily listing of available bonds.
B)It is a daily listing of bonds to be offered in the next 30 days. The visible supply implies that the supply of bonds will be available for the visible future.
When referring to the U.S. stock market, which of the following statements regarding its beta is not true? A)It serves as a benchmark for measuring the relative volatility of a stock or portfolio against the movement of the market itself. B)It provides a measurement of a range that the market may move in any given day. C)It shows that if a stock's beta is 1.2, and the market moves by 5%, the stock would move by 6%. D)It is, by definition, equal to 1.
B)It provides a measurement of a range that the market may move in any given day. The beta is a benchmark and does not indicate anything about market movement as a whole. It only measures the movement of a particular security or portfolio, as compared to the movement of the entire market.
At 3:55 pm ET, a registered representative receives a market order from an officer of XYZ to buy 75,000 shares of XYZ for the company's account. The registered representative must A)advise the officer that a safe harbor under SEC Rule 10b-18 no longer exists before refusing the order. B)advise the officer that a safe harbor under SEC Rule 10b-18 no longer exists before placing the order. C)refuse the order. D)place the order without taking any further action.
B)advise the officer that a safe harbor under SEC Rule 10b-18 no longer exists before placing the order. Under SEC 10b-18, an issuer purchasing its own securities cannot affect the opening or closing of the security. A safe harbor is available if the issuer is not involved in the first transaction of the day or in any transaction in the last 30 minutes of trading (10 minutes if the security is actively traded). If the issuer were to purchase its own securities during the last 30 minutes of trading, it may be forced to justify that its purchase did not affect the closing price. If a registered representative receives an order from an issuer at 3:55 pm ET, he must advise the issuer that a safe harbor is not available. The representative may then place the order.
SEC Regulation FD is best described as a rule requiring disclosure by A)securities market professionals that trade on nonpublic information. B)an issuer of securities. C)only those who provide "tips" of select information to securities market professionals. D)only issuers of NMS securities.
B)an issuer of securities. Regulation FD (Fair Disclosure) is an issuer disclosure rule (all issuers) that addresses selective disclosure such as may be given to securities market professionals and others that may trade on the basis of the information. If the disclosure of information is intentional, the issuer must make a simultaneous disclosure to the public. If the disclosure was unintentional, the issuer must make disclosure promptly. Promptly means under the regulation not later than 24 hours or the commencement of the next day's trading on the New York Stock Exchange, whichever is later (which accommodates for weekends and holidays) after a senior official of the issuer learns of the disclosure.
The 30-day visible supply published in The Bond Buyer contains A)revenue bonds only. B)general obligation (GO) and revenue bonds. C)general obligation bonds only. D)short-term anticipation notes only.
B)general obligation (GO) and revenue bonds. The 30-day visible supply consists of new issue GO and revenue municipal bonds expected to be offered in the next 30 days. It does not include short-term anticipation notes.
All of the following will affect the working capital of a corporation except A)a decrease in liabilities. B)payment of a cash dividend. C)an increase in assets. D)declaration of a cash dividend.
B)payment of a cash dividend. Working capital is defined as current assets minus current liabilities. Payment of a cash dividend will reduce current assets (cash) and current liabilities (dividend payable) by the same amount, leaving working capital unchanged.
Which of the following is the most stringent test of liquidity taken from a corporation's balance sheet? A)Current assets / current liabilities B)Current ratio C)(Current assets - inventory) / current liabilities D)Assets / current liabilities
C)(Current assets - inventory) / current liabilities Of the answers given, the quick ratio (or the acid test) is the most stringent because it excludes inventory in the calculation. The current ratio is defined as current assets divided by current liabilities.
Which of the following investments is most suitable for an investor seeking monthly income? A)Mutual fund investing in small-cap issues B)Growth stock C)Money market mutual fund D)Zero-coupon bond
C)Money market mutual fund The money market mutual fund is the most suitable investment for an investor seeking monthly income. The other securities offer higher long-term growth potential, but they are not designed to provide monthly income.
A portfolio manager using index options is trying to reduce which of the following types of risks? A)Financial B)Selection C)Systematic D)Purchasing power
C)Systematic Systematic risk refers to the impact the overall market has on an equity portfolio's value. Index options help insure portfolios against systematic risk. The purchase of index puts to protect a portfolio is called portfolio insurance.
The visible supply may be found in A)the S&P Bond Guide. B)The Wall Street Journal. C)The Bond Buyer. D)the electronic OTC Pink.
C)The Bond Buyer. The Bond Buyer, a daily publication dealing primarily with the new issue municipal market, publishes information on the visible supply—the estimated amount of new municipal bonds to be sold over the coming month.
Consider a fund that randomly selects 30 stocks from the S&P 500 list of companies. The fund creates a portfolio of the 30 stocks, such that the portfolio beta equals 1.0 relative to the S&P 500. Assume there was unexpectedly bad news about two stocks held in the fund such that the fund's return was 8%, whereas the S&P 500 return was 8.5%. Which of the following statements regarding the fund's alpha is correct? A)The fund generated negative beta. B)The fund generated positive beta. C)The fund generated negative alpha. D)The fund generated positive alpha.
C)The fund generated negative alpha. The alpha measures how well a portfolio performed compared to its risk-adjusted benchmark over a specific period. In this question, the fund's strategy is to match the S&P 500. The beta of the fund is constrained to equal 1.0, so we should expect its performance to match that of the S&P 500. The fund's realized return (8%) was less than its required return (8.5%) by 50 basis points. Therefore, the alpha was negative. Beta is not something that is generated by a portfolio. It is a measurement that reflects the expected volatility of a security or portfolio compared to its benchmark.
A corporation has an IPO of its $5 par common stock. The public offering price (POP) is $15 per share. The difference between the par value and the POP represents A)retained earnings. B)capitalized profit. C)paid-in surplus. D)net income.
C)paid-in surplus. When a corporation issues new stock at a price in excess of the par value, the excess is listed on the balance sheet as paid-in or capital surplus.
Acme Pharmaceuticals previously had issued $200 million of common stock in an IPO. A year later, it issued $50 million of debentures at par value. Acme's leverage is what percentage of its total capital? A)400% B)50% C)25% D)20%
D)20% The leverage is the extent to which borrowed funds make up the company's total capital. Total capital is the value of the equity and debt financing combined. Acme has issued $50 million of debentures (debt capital) and $200 million of equity capital (the common stock). That makes the total capitalization of Acme equal to $250 million. The leverage is $50 million divided by $250 million, or 20%. An analyst would consider this conservative leverage.
Which of the following regarding the Bond Buyer Revenue Bond Index (Revdex) are true? I. It includes 30-year bonds. II. It includes 20 bonds. III. It is compiled weekly. IV. It is compiled monthly. A)II and III B)II and IV C)I and IV D)I and III
D)I and III The Bond Buyer Revdex is computed weekly just like The Bond Buyer's general obligation (GO) index. Revdex consists of 25 revenue bonds with 30-year maturities. The GO index includes 20 bonds, each with approximately 20 years to maturity.
If ALFA Securities, a broker-dealer, is a position-trading firm, which of the following statements is true? A)It is violating NYSE rules. B)It is underwriting securities in the primary market. C)It is acting as a broker for customers. D)It is trading for its own account.
D)It is trading for its own account. Position trading is simply trading as principal, or dealer, for a firm's own account. This is the typical case with a market maker. The opposite role is that of a broker, or an agent, purchasing or selling securities in the secondary market for customers.
When determining whether a tax swap of municipal bonds will result in a wash sale, which of the following is not considered? A)Issuer B)Coupon C)Maturity D)Principal amount
D)Principal amount In judging whether bonds purchased are substantially identical to bonds sold for a loss, the tax code considers maturity, issuer, and coupon rate. If at least two of the three are different, a wash sale will generally not result.
A corporation has determined that if it were to go bankrupt, common stockholders would receive $8.47 per share. This calculation is known as A)settlement value per share. B)retained earnings per share. C)net asset value per share. D)book value per share.
D)book value per share. The liquidating value of the company is its book value; the book value per share is what the common stockholders would receive.
An analyst comparing revenues with expenses is most likely analyzing A)capitalization. B)liquidity. C)working capital. D)cash flow.
D)cash flow. The analyst is most likely measuring the income statement for cash flow (money coming in against money going out). Working capital analysis—not the income statement—would involve examining the balance sheet's current assets and current liability entries. Capitalization analysis involves examination of long-term debt and stock issues. Liquidity analysis involves examining current assets and liabilities from the balance sheet.
The cost of the asset is $100,000, and it will be depreciated on a straight-line basis with no salvage value. This means that A)at the end of five years, the company will have $100,000 in reserve to put toward the purchase of a replacement. B)for the next five years, the company will issue a check to the depreciation account for $20,000. C)for the next five years, the company will issue a check to the manufacturer for $20,000. D)for the next five years, the company will have an operating expense deduction of $20,000.
D)for the next five years, the company will have an operating expense deduction of $20,000. Depreciation is not a liability (i.e., a bill to be paid). Depreciation is the annual expense (write-off) representing the loss in value of a fixed asset over a set period. In this question, that period is five years. Straight-line depreciation means equal amounts each year. With a zero salvage value, the entire cost is depreciable. The $100,000 cost divided by five years is $20,000 per year. No "cash" is involved, which is why depreciation is frequently referred to as a noncash expense.
An investor in fixed-income debt securities wishing to eliminate interest rate risk could do so by A)limiting purchases to investment-grade debt. B)increasing the duration. C)purchasing a bond fund rather than individual bonds. D)holding the securities until they mature.
D)holding the securities until they mature. As we know, when interest rates go up, bond prices go down. Therefore, bondholders are at risk to their principal when interest rates change. However, there is no interest rate risk to the principal if the bond is held to maturity. Regardless of the current market interest rates, the bond pays off at par value. The risk is highest as the duration lengthens. Because bond funds do not have a maturity date, they cannot avoid this risk. The rating (quality) is irrelevant; even Treasury bonds are affected by changes in interest rates.
Your customer wants to know what portion of earnings one of the companies held in her portfolio has available to pay interest expense on bonds the company currently has outstanding. You would be able to find this information A)on the firm's most recent balance sheet. B)on a firm's income statement by subtracting preferred dividends from EBIT. C)by contacting the IRS. D)on the firm's income statement indicated as earnings before interest and taxes (EBIT).
D)on the firm's income statement indicated as earnings before interest and taxes (EBIT). EBIT is the amount of money a company has retained before paying taxes and interest on outstanding debt issues. This can be found by looking at the income statement for the company.
All of the following are true of stockholders' equity except A)that it is reflected in the book value of the stock. B)that it consists of stock issued, capital surplus, and retained earnings. C)that it is also called net worth. D)that it is carried as an asset on the balance sheet.
D)that it is carried as an asset on the balance sheet. Stockholders' equity or net worth (total assets less liabilities) is what a stockholder is entitled to should a company liquidate.
The Bond Buyer's 20-Bond Index reflects A)the average yield of 20 high-quality revenue bonds. B)the average maturity of 20 high-quality municipal bonds. C)the average yield of 20 high-quality municipal bonds. D)the average yield of 20 high-quality general obligation bonds.
D)the average yield of 20 high-quality general obligation bonds. The Bond Buyer 20-Bond Index is defined as the average yield of 20 general obligation bonds having a rating of A or better and a maturity of 20 years. Bonds that have a rating of AAA and AA are included in the 11-Bond Index. Revenue bond yields are reported in the Revdex 25. Although all but the Revdex include bonds with a 20-year maturity (Revdex is 30 years), it is the yields that are reported, not the average maturities.
If a customer of your firm receives stock from the estate of her mother, the stock's cost basis in the hands of the customer is A)the original cost of the stock adjusted for any estate taxes paid. B)the original cost of the stock. C)the market value at date of distribution to the customer. D)the market value at date of death.
D)the market value at date of death. When securities are inherited, the heir receives a cost basis calculated as of the deceased party's date of death.
The most stringent test of a corporation's ability to meet its current obligations is A)the debt-to-equity ratio. B)the current ratio. C)the price-to-earnings ratio. D)the quick ratio.
D)the quick ratio. The quick ratio, sometimes called the acid-test ratio, is a more stringent test than the current ratio because it excludes inventory. The debt-to-equity ratio deals with long-term debt rather than current liabilities. The price-to-earnings (P/E) ratio does not deal with assets and liabilities.
