Canadian Securities Course Exam 1 Questions and Answers
Question 29
What is the normal shape of a yield curve?
Options:
A.
Downward slope
B.
inverted
C.
Upward slops
D.
Humped
Answer:
C
Explanation:
The normal shape of a yield curve is anupward slope, indicating that longer-term bonds offer higher yields than shorter-term bonds. This reflects the additional risk and time value of money associated with longer maturities.
A. Downward slope: This could describe a yield curve during unusual circumstances, such as a period of market uncertainty or deflation.
B. Inverted: An inverted yield curve, where shorter-term yields exceed longer-term yields, is a rare occurrence and often signals economic recession.
D. Humped: A humped curve is rare and occurs when intermediate-term yields exceed both short-term and long-term yields.
[Reference:CSC Volume 1, Chapter 7, "The Yield Curve – Normal Shape" discusses the upward-sloping yield curve as the standard in normal market conditions., ]
Question 30
Which security is issued by a company lo existing shareholders allowing, them to subscribe for additionalshares over a period of severalyears?
Options:
A.
Stock options.
B.
Long-term equity anticipation security.
C.
Rights.
D.
Warrants
Answer:
D
Explanation:
Warrants are securities issued by a company to existing shareholders, giving them the right to purchase additional shares at a predetermined price, often over a longer period (years). Warrants are typically used as an incentive or as part of financing arrangements.
This differs from rights, which are similar but usually have a shorter exercise period, often weeks.
Study Document References:
Volume 1, Chapter 8:Warrants and Rights, discussing their features and purposes.
