Multiple-Choice Questions and Answers

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Chapter 15

• Multiple-Choice QuestionsandAnswers

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1. Dermot wants to invest 4,000 to get a fixed
return over a short period of time without any
risk. He should consider investing in ________.

• (a) a government bond
• (b) stock mutual funds
• (c) term deposit at the TD bank
• (d) gold
• (e) none of the above

The answer is (c).
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2. Which of the following investments has
positive default risk?

1. Canada saving bonds
2. Treasury bills
3. Guarantee investment certificates
4. Canada government bond
5. None of the above

The answer is (c).
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3. Violetta has the following amounts in a trust
company that is a member of the CDIC 5,000 in
her chequing account, 45,000 in term deposits,
15,000 in a joint account with a friend, 30,000
in the trust companys stock mutual fund. If the
company fails, which of the following will not be
covered by CDIC insurance?

1. 5,000 in her chequing account
2. 15,000 in the joint account with a friend
3. 45,000 in term deposits
4. 30,000 stock mutual fund
5. All of the above are covered.

The answer is (d).
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4. A _________ provision provides the bondholder
with an option to sell the bond back to the
issuing company for a specified price before
maturity.

1. call
2. extendibility
3. convertibility
4. retractability
5. zero coupon

The answer is (d).
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5. Heather plans to invest in a long-term
government bond. If she holds the bond until
maturity, her return on the bond does not depend
on _______.

• (a) the coupon rate
• (b) the term to maturity
• (c) the current price
• (d) the future rate of interest
• (e) none of the above

The answer is (e).