8. An example of a derivative security is ______.
A) a common share of General Motors
B) a call option on Mobil stock
C) a commodity futures contract
D) B and C
E) A and B
Answer: D Difficulty: Easy
Rationale: The values of B and C are derived from that of an underlying financial asset; the value of A is based on the value of the firm only.
9. _______ was the first to introduce mortgage pass-through securities.
A) Chase Manhattan
B) Citicorp
C) FNMA
D) GNMA
E) None of the above
Answer: D Difficulty: Easy
10. A bond issue is broken up so that some investors will receive only interest payments while others will receive only principal payments, which is an example of ________.
A) bundling
B) credit enhancement
C) unbundling
D) financial engineering
E) C and D
Answer: E Difficulty: Easy
Rationale: Unbundling is one of many examples of financial engineering that offer more alternatives to the investor.