1. Which financial asset is the most illiquid, i.e., the least liquid?

a. shares of Motorola stock

b. U.S. government bonds

c. U.S. Treasury bills

d. a passbook savings account

2. Which type of marketable U.S. government security has the largest amount outstanding?

a. Treasury bills

b. Treasury notes

c. Treasury bonds

d. Government account series

3. If U.S. government 6s of 2008 are selling at $960 (face value = $1,000) which of the following is necessarily true?

a. the yield to maturity exceeds the current yield

b. the current yield exceeds the yield to maturity

c. a capital loss will accrue at maturity

d. none of the above are necessarily true

4. If 8s of 2004 are quoted at 105, then

a. the current yield is 8%

b. the yield to maturity is less than the current yield

c. a capital gain will accrue at maturity

d. the yield to maturity is 8%

5. You purchase a whole-life life insurance policy from your friendly neighborhood insurance agent. That policy represents a __________ claim, and the purchase was made in the __________ market.

a. primary; direct

b. secondary; intermediation

c. secondary; direct

d. secondary; intermediation

ANSWER KEY - 1a; 2b; 3a; 4b; 5d