'23 FIN-375 CH 14-18

Question 1

If you inherit stock that has changed in value since it was bought, you might have a step-down in basis

Accepted Answer

True

Question 2

A client plans to gift $10k to her son for his wedding next year, and will remodel her kitchen. These would be noted as:

Accepted Answer

a liquidity constraint

Question 3

Derivatives can be used for...

Accepted Answer

(c) both a and b

Question 4

Alternative investments might be added to a portfolio in order to...

Accepted Answer

increase portfolio diversification

Question 5

If the stock price is less than the strike price, a put option is...

Accepted Answer

in the money

Question 6

Sue thinks the stock market will drop in the near future. Which option strategies would be profitable if she is correct?

Accepted Answer

she could sell (write) a call or buy a put

Question 7

Most futures contracts result in actual delivery of the underlying commodity.

Accepted Answer

False

Question 8

If Ralph buys stock on Jan 2 in one year, and sells it on Jan 2 the next year for $1000 more, he will have...

Accepted Answer

$1000 short-term capital gain

Question 9

Swap contracts, futures contracts, and options are examples of:

Accepted Answer

derivative securities

Question 10

Forward contracts are not standardized, but futures contracts are.

Accepted Answer

True

Question 11

Henry, 45 has a high net worth & income, a guaranteed pension & a portfolio all in T-bills. His ability to take risk is:

Accepted Answer

high

Question 12

The cost basis of a stock investment is...

Accepted Answer

the price you paid for the shares

Question 13

Accepted Answer

True

Question 14

If you are bullish on a stock, you might...

Accepted Answer

buy a call option

Question 15

Convertible bonds typically have a coupon rate that is lower than a similar nonconvertible bond.

Accepted Answer

True

Question 16

The process of mark-to-market reduces default risk and is required on futures contracts.

Accepted Answer

True

Questions 16