CSC Volume 1 (Final Exam - 100 Questions) 2018 PDF

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CSC Volume 1 Final Exam - 100 QUESTIONS 1) What are the characteristics of capital? a) It moves to users offering lowest risk adjusted returns b) It can be increased by government decree c) It is mobile, sensitive, and scare d) It is the product of deficit and is therefore plentiful 2) Which is NOT an example of direct investment? a) A couple investing their savings in a home b) A government investing in a new highway or hospital c) A domestic or foreign company paying start-up costs for a plant to produce a new product d) An individual investing in a mutual fund 3) A liquid market: I. II. III. IV.

Has frequent sales Has narrow price spreads between bid and offering prices Has small price fluctuations from sale to sale Consists of market makers only

a) I, III, IV b) I, II, IV c) I, II, III, and IV d) I, II, and III 4) What are over-the-counter (OTC) markets also called? a) Alternate markets b) Trading markets c) Stock exchanges d) Dealer markets 5) Financial and equity futures and options are traded on the: a) Ice Futures Canada b) Toronto Stock Exchange (TSX) c) The Bourse de Montreal (ME) d) The Vancouver Exchange

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CSC Volume 1 Final Exam - 100 QUESTIONS 6) The underwriting department of a securities firm: a) Will seek an appropriate means for a company or government to find capital b) Assesses the risk of the primary distribution c) Analyzes liquidity of an issue d) All of the above 7) The term “intermediary” is used to describe any organization that facilitates the trading or movement of the financial instruments that transfer capital between suppliers and users? a) True b) False 8) What key fact distinguishes a principal from an agent? a) The principal needs the agent to undertake trading b) The principal owns the securities to be traded c) The principal earns a commission on trades d) The principal runs a lower risk than an agent 9) ABC Securities Inc. has both retail and institutional clients and underwrites a wide range of federal, provincial, and municipal debt, corporate debt and equity issues. Determine the category that investment dealer ABC belongs to. a) Integrated b) Retail. c) Boutique. d) Institutional. 10) Which of the following is NOT true? a) Higher interest rates compensate for a higher risk of default. b) Lower interest rates should increase GDP, because the cost of borrowing for businesses. c) Higher interest rates encourage companies to spend now. d) Higher domestic interest rates attract foreign capital, helping to increase the exchange rate.

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CSC Volume 1 Final Exam - 100 QUESTIONS 11) Which of the following statements is true regarding business cycle indicators? I. II. III. IV.

Employment is a leading indicator, the unemployment rate is a lagging indicator Inflation is a lagging indicator Stock prices are a leading indicator, personal income is a coincident indicator Industrial production, retail sales, and capital spending are leading indicators

a) I, II, and III b) II and IV c) I only d) II only 12) The Gross National Product Index (GNP) is the most widely used indicators of inflation and is considered a measure of the cost of living in Canada. a) True b) False 13) Which of the following is a leading indicator? a) GDP b) Level of inventories c) Personal income d) Housing starts 14) The rate of inflation is commonly measured by changes in the: a) Consumer Price Index b) Gross Domestic Product c) Prime rate d) Gross National Product 15) Which of the following factors influence the exchange rate? I. II. III. IV.

The current account Economic performance of a country Public debts and deficits Political stability

a) I only b) II and III c) II and IV d) All of the above

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CSC Volume 1 Final Exam - 100 QUESTIONS 16) You will find below the phases of the business cycle. Which one(s) is/are not a phase? I. Peak II. Rise III. Trough IV. Contraction a) I and II only b) II and III only c) II only d) IV only 17) The Town of Maple has a population of 3,000. 2,000 are 15 years of age or older. 1,500 of these people are either working or looking for work. 75 of the 1,500 people are looking for work. What is the participation rate? a) 50.00% d) 71.25% c) 75.00% d) 82.75% 18) What is the unemployment rate? a) 2.50% b) 3.75% c) 4.25% d) 5.00% 19) Deflation can lead to: a) Decreasing unemployment b) Slowing of economic growth that can cause a recession c) Higher stock prices d) All of the above 20) All of the following are functions of the Bank of Canada except: a) Making loans to chartered banks b) Acting as the federal government’s fiscal agent c) Smoothing dollar exchange rate fluctuations d) Setting rates of taxation

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CSC Volume 1 Final Exam - 100 QUESTIONS 21) The Bank of Canada reports to: a) A group of major investment dealers b) The Minister of Finance c) The Treasury Board d) The Bank of Canada 22) If the banks tighten their loan policies, it has the following effect: a) Money supply increase b) Fiscal policy c) No change d) Money supply decrease 23) Microeconomics focuses on the performance of the economy as a whole? a) True b) False 24) Which of the following statement best describes the Bank Rate? a) It refers to the transfer of deposits to the Bank from the chartered banks b) It is a transfer of funds from the Bank to the chartered banks c) Is the minimum rate at which the Bank of Canada will lend money on a short-term basis to the chartered banks d) None of the above 25) Fiscal policy is the use of the government’s spending and taxation powers to pursue economic goals as full employment and sustained long-term growth? a) True b) False 26) Keynesian Theory states the following: a) It advocates the use of direct government intervention as a means of achieving economic growth and stability b) It suggests that the economy is inherently stable and, left to its own self-adjusting mechanism, will automatically move to a stable path of growth c) It suggests that firms and workers are rational thinkers and can evaluate all the consequences of a government policy decision, thereby neutralizing the intended impact of the policy d) It maintains that reducing both government spending and taxes provides the stimulus for economic expansion

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CSC Volume 1 Final Exam - 100 QUESTIONS 27) Why would a company issue debt rather than sell stock? a) Finance deficits b) Benefit from operating leverage c) Undertake growth d) All of the above 28) Which of the following is NOT true concerning the difference between bonds and debentures? a) Bonds are secured by assets b) Debentures are secured by assets c) Government of Canada bonds are not secured by assets d) Debentures are based on creditworthiness 29) With a certain bond, the bondholder may select a second later maturity date. To what kind of debt does this refer? a) Extendible debenture b) Retractable bond c) Instalment debenture d) Variable rate bond 30) A Canadian company issued a bond in Germany which paid interest and the face value at maturity in Deutsche marks (German currency). This is an example of a(n): a) Domestic bond b) Eurobond c) Foreign bond d) Euro-Canadian bond 31) Once a straight bond (regular bond) is issued, which component of the bond can change? a) The face value b) The coupon rate c) The term to maturity d) The maturity date 32) The holder of a Strip Bond receives no interest payments, instead, the strip is purchased at a discount and mature at par. a) True b) False

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CSC Volume 1 Final Exam - 100 QUESTIONS 33) Bond issuers often reserve the right, but not the obligation, to pay off the bond before maturity, this privilege is known as: a) Extendible feature b) Callable or redemption feature c) Protective provision d) Marketable bond 34) Which of the following regarding convertible debentures is true? a) The conversion privilege makes the debenture more saleable b) An investor is providing capital for the company even though he or she may not have been interested in buying common shares of the company c) An investor feels that he or she will share in the company’s growth but can avoid substantial risk d) All of the above 35) Which of the following is NOT true with regard to a forced conversion clause? a) It is an advantage to the issuing company rather than to the lender b) The conversion price offered is lower than the level at which the convertible debt is trading c) It is more of an advantage to the lender than to the issuing company d) The conversion would take place due to the rise in the price of the common stock of a company 36) When the issuer sets aside a stipulated amount each year to retire most or all of a debt issue by maturity, this is called a(n): a) Sinking fund b) Conversion fund c) Purchase fund d) Retraction fund 37) The debt security feature that provides for the retiring of the debt by buying the securities in the market prior to maturity, only when it is to the company’s advantage, is called a(n) _________ feature. a) Sinking fund b) Callable c) Purchase fund d) Installment

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CSC Volume 1 Final Exam - 100 QUESTIONS 38) Which of the following statement is FALSE? a) Treasury bills are short-term government obligations b) Canada Savings Bonds can be cashed by the owner at any bank in Canada at any time c) Treasury bills pays annual interest based on current market conditions d) Canada Savings Bonds are available in numerous types, such as; regular interest bonds and Canada premium Bonds 39) What do you call a security that can be changed to another security, usually common shares? a) Reversible b) Convertible c) Changeable d) Open-end 40) The yield of a bond is different from its coupon. Given yield and coupon rate, which of the following relationships is false? a) Bonds trade at a discount when yields are greater than coupon rates b) Bonds trade at par when yields equal coupon rates c) Bonds trade at a premium when yields are less than coupon rates d) A one-year, $1000 BCE bond with a 5% coupon, bought at 95, trades at par 41) The current value of future cash flows is known as its: a) Discount rate b) Compound interest rate c) Present value d) Capital gain or loss 42) The calculation which reflects coupon rate and tern to maturity together is known as: a) Term to maturity b) Duration c) Yield to maturity d) Present value 43) What do you call the graphic presentation showing a relationship between bonds of similar quality but different maturity dates? a) A bid-ask sheet b) A laddered chart c) A yield curve d) A bond curve

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CSC Volume 1 Final Exam - 100 QUESTIONS Use the following information to answer questions 44 and 45 -

A 3-year 12% corporate bond paying interest annually 3-year bonds are currently offering yields of: o Government of Canada: 6% o Province of Ontario: 7.5% o City of Vancouver: 8.75% o ABC Inc.: 10.25%

44) What was the discount rate of this type of bond, when this bond was issued? a) 6% b) 7.5% c) 10.25% d) 12% 45) What has happened to interest rates since this bond was issued? a) They have increased b) They have decreased c) They have stayed the same d) Cannot determine from above information Use the following information to answer question 46 - A 4-year semi-annual 10% bond is trading in the marketplace 46) What is the present value of the principal (assuming a discount rate of 11.5%) a) 10% b) $80.50 c) 11.5% d) $63.94 47) A $100,000, 9.85% corporate bond, maturing January 28, 2014, is bought on Tuesday, January 26, for 108.25. Assuming no holidays during that week, what is the total price the buyer pays for this bond? a) $100,000.00 b) $108,250.00 c) $108,276.99 d) $110,860.00

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CSC Volume 1 Final Exam - 100 QUESTIONS 48) Please calculate the PV (present value) of the first coupon of a 5% four-year bond with a par value of $100, with a 6% discount rate or rate of return a) $1.67 b) $2.00 c) $2.43 d) $4.00 49) A provincial bond with an initial term of 25 years will mature in 2.5 years. The initial coupon rate was 6.5%. Today, another province is issuing a bond with the same maturity date as our 25-year bond and it is paying a coupon rate of 7.20%. What is the market value of the 2nd coupon of this bond? a) $3.03 b) $6.06 c) $6.50 d) $87.02 50) If rates were to decline the value of this bond would: a) Decrease b) Increase c) Stay the same d) Cannot be determined from above information 51) A T-Bill due maturing in 215 days is priced at $97.82. What is it yielding? a) 2.18% b) 3.78% c) 4.00% d) 4.15% 52) Which of the following relationships is NOT correct? a) Bond prices are more volatile when interest rates are high b) Longer term bonds are more volatile in price than shorter term bonds c) Lower coupon bonds are more volatile in price than high coupon bonds d) When interest rates rise, bond yield rise

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CSC Volume 1 Final Exam - 100 QUESTIONS 53) In falling interest rate environment, which of the following bonds would be most affected? a) A bond with a coupon of 12% and a term to maturity of 8 years b) A bond with a coupon of 4% and a term to maturity of 9 years c) A bond with a coupon of 7% and a term to maturity of 5 years d) A bond with a coupon of 9% and a term to maturity of 3 years 54) What best describes a laddered bond portfolio? a) An account where yields reflect periodic interest rate changes in the market b) An account whose rate of return is guaranteed by a strip bond c) An account whose rate of return is linked to an equity benchmark d) An account in which maturities are segmented with one term maturing each year 55) Preferred shares are bought largely by income-oriented investors to take advantage of the dividend tax credit? a) True b) False 56) What type of feature would a preferred share have if the dividend was in arrears? a) Participating b) Redeemable c) Convertible d) Cumulative 57) An investor owns 500 shares of a company and there is a 3 for 2 stock split. They would now own: a) 600 shares b) 1,500 shares c) 750 shares d) 1,000 shares 58) After one year in a dividend re-investment plan, a shareholder’s number of shares will be ____________ when they started the year. a) Higher than b) Lower than c) The same as

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CSC Volume 1 Final Exam - 100 QUESTIONS 59) On Monday, February 23rd, the shareholders of record will receive a dividend from FMD Company. On what date in February will the shares start trading ex-dividend? (No holidays in February) a) Monday February 23rd b) Wednesday February 18th c) Thursday February 19th d) Thursday February 26th 60) Company A has a quarterly dividend of $0.60 and the market price is $40.00. Company B has an annual dividend of $1.40 and the market price is $32.00. Which of the following is NOT true? a) Company A has a higher yield than Company B b) Company B has a higher yield than Company A c) The yield spread between the two companies is 1.62% d) Cannot be determined from information given 61) What type of feature would a preferred share have if the dividend were in arrears? a) Participating b) Redeemable c) Convertible d) Cumulative 62) A company decided to issue new preferred shares instead of a new debt issue. Which of the following situations could be occurring? I. II. III. IV.

The company has a low apparent tax rate The company’s debt/equity ratio is high Investors are looking for new debt issues The company has assets available to pay dividends

a) I, II and III b) I, II and IV c) II, III and IV d) I only 63) In order to sell securities short, a client must sign: a) A short form b) A letter of intent c) A discretionary account form d) Margin agreement

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CSC Volume 1 Final Exam - 100 QUESTIONS 64) Which of the following statements is NOT true regarding margin accounts for long positions? a) Reduced margin eligible securities have a maximum loan value of 70% of the market value b) The stock trading at $1.45 has no loan value c) Members of IIROC firms are allowed to have higher loan values for their better clients d) All of the above are true statements 65) Long margin position is created when an investor sells a security that he or she does NOT own a) True b) False 66) Assume a client buys 1000 shares of listed XYZ Co. on margin @ $2.00/share. The security is Not eligible for reduced margin. What is the maximum margin loan the client is eligible for? a) $1,400 b) $1,000 c) $800 d) $400 67) Assume the shares of the above XYZ co. declines from $2.00/share to $1.50/share. What is the revised maximum margin loan the client is eligible for? a) $300 b) $600 c) $750 d) $1,050 68) Which of the following statements is NOT true regarding short selling? a) For a stock selling at $1.75, the minimum margin required is $3.00 per share b) There is no loan value available for stock trading at $0.20 c) There is no time limit on a short sale position as long as the shorted security can be borrowed and adequate margin maintained d) All of the above are true statements of short selling

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CSC Volume 1 Final Exam - 100 QUESTIONS 69) Which of the following regarding common shares is NOT true? I. II. III. IV.

Dividends on common shares are a contractual obligation. If the earnings allow it, the directors may pay extra dividends. Immediately after a stock split, the value of a shareholder’s stake will change. A reverse split raises the market price of the common shares.

a) I and III b) I, II and III c) II, III and IV d) III only 70) A stock that is eligible for reduced margin, what is the maximum margin loan? a) 20% b) 70% c) 50% d) Not applicable 71) Which of the following is false? a) A right is a term applied to the privilege granted to a shareholder to acquire additional shares directly from another individual b) A right is a term applied to the privilege granted to a shareholder to acquire additional shares directly from the issuing company c) Rights are usually very short-term in nature, possibly having as little as four to six weeks of life d) By exercising their rights, it provides shareholders with the ability to maintain their level of ownership 72) A client will accept all stock in odd, broken, or board lots up to the full amount of his order. a) Market b) Day c) All or none d) Any part 73) An order to sell which becomes effective as a market order when the price of the stock declines to or below a stated limit price. a) Stop buy b) Day c) Stop loss d) Limit

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CSC Volume 1 Final Exam - 100 QUESTIONS 74) An order that is valid only until closing on the date it is given to the broker. a) At the market b) Limit c) Stop loss d) Day 75) RKM Company has never gone to the market and wants to do some financing that will be done publicly. It will do a(n): a) Offering memorandum b) Initial Public Offering c) Placement memorandum d) Outside memorandum 76) The authorization given by one shareholder to someone else to vote shares on his or her behalf at an annual meeting is known as a: a) Director’s circular b) Solicitation circular c) Voting information solicitation d) Proxy 77) Full, true, and plain disclosure of all material facts is: a) Included in the red herring b) Required in the final prospectus c) Arranged with the issuer by the selling group d) Not required for Prospectus approval 78) Which of the following is true regarding the disadvantages of listing a company? I. II. III. IV.

There could be market indifference Additional costs to the company (e.g., listing fees, subsequent annual sustaining fees) Additional controls on management Cost of keeping market participants informed

a) I, III and IV b) IV nly c) II and III d) I, II, III and IV

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CSC Volume 1 Final Exam - 100 QUESTIONS 79) Once an issue has been approved and can be sold to the public, it is said to be: a) Green sheeted b) Red skied c) Grey approved d) Blue skied 80) The TSX would likely suspend a company’s trading under which of the following conditions? a) Proposed merger talks b) All outstanding shares are redeemed c) Failure to file financial statements on time d) Announcing higher than expected earnings 81) TUV Ltd., a TSX-listed stock, trades at $20 per share. There are 10 million share...