Financial Markets and Securities Practice Quiz

1. Money Market Instrument Definition

Which one of the following is the best definition of a money market instrument?

• A. Corporate debt that matures in 90 days or less
• B. Bank savings account
• C. Investment issued by a financial institution that matures in 30 days or less
• D. Investment issued by a financial institution that matures in one year or less
• E. Debt issued by the government or a corporation that matures in one year or less

2. Fixed-Income Security Definition

A fixed-income security is defined as:

• A. A debt obligation that pays a fixed rate of return for a one-year period of time.
• B. Common or preferred stock that pays a fixed annual dividend.
• C. A long-term debt obligation that pays scheduled fixed payments.
• D. Long-term debt issued solely by a federal or state government.
• E. Any security originally issued as either debt or equity that pays a fixed, pre-set payment.

3. Calculating Bond Yields

The annual interest payment divided by the current price of a bond is called the:

• A. Coupon rate.
• B. Current yield.
• C. Yield-to-maturity.
• D. Yield-to-market.
• E. Market yield.

4. Primary Assets Explained

A security originally sold by a business or government to raise money is called a(n):

• A. Derivative.
• B. Primary asset.
• C. Primary debt.
• D. Futures contract.
• E. Option contract.

5. Secondary Asset Classification

A financial asset that represents a claim on another financial asset is classified as a _____ asset.

• A. Secondary
• B. Optioned
• C. Contracted
• D. Derivative
• E. Primary

6. Understanding Futures Contracts

A futures contract is an agreement:

• A. That obligates a corporation to issue additional securities at a specified date in the future.
• B. To exchange financial assets on a specified date in the future with the price determined on that date.
• C. To deliver goods today in exchange for an agreed-upon payment to be paid on a specified date in the future.
• D. To exchange a specified quantity of goods on a specified date in the future at the current market price.
• E. To exchange goods on a specified date in the future at a price that is agreed upon today.

7. Defining Option Contracts

An agreement that grants the owner the right, but not the obligation, to buy or sell a specific asset at a specified price during a specified time period is called a(n) _____ contract.

• A. Futures
• B. Obligatory
• C. Quoted
• D. Fixed
• E. Option