Chapter 1: Q8B. (page 105)
Balanced funds and asset allocation funds invest in both the stock and bond markets. What is the difference between these types of funds?
Unlike balance fund, the asset allocation fund may vary the proportion allocated and may be of risk.
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What are the advantages and disadvantages of exchange-traded funds versus mutual funds?
A T-bill with face value $10,000 and 87 days to maturity is selling at a bank discount ask yield of 3.4%. What is the price of the bill? What is its bond equivalent yield?
Turn back to Figure 2.3 and look at the Treasury bond maturing in November 2040.
a. How much would you have to pay to purchase one of these bonds?
b. What is its coupon rate?
c. What is the current yield (i.e., coupon income as a fraction of bond price) of the bond?
A market order has:
a. Price uncertainty but not execution uncertainty.
b. Both price uncertainty and execution uncertainty.
c. Execution uncertainty but not price uncertainty.
Consider the following limit order book for a share of stock. The last trade in the stock occurred at a price of $50.
a. If a market buy order for 100 shares comes in, at what price will it be filled?
b. At what price would the next market buy order be filled?
c. If you were a security dealer, would you want to increase or decrease your inventory of this stock?
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