Question 1

A corporation sells securities to an investment banking firm on January 1st.The next day an international oil crisis causes stock prices to drop dramatically.The corporation is immune from the drop in price of its stock due to which function of the investment banking firm?

Accepted Answer

A)   hedging
B)   distributing
C)   reinsurance
D)   underwritingE) None of the above
F) C) and D)

Question 2

In August 2004,Google first sold its common stock to the public at $85 per share and raised $1.76 billion.This is an example of

Accepted Answer

A)   a primary market transaction.
B)   a secondary market transaction.
C)   a venture capital firm transaction.
D)   a money-market transaction.E) A) and B)
F) B) and C)

Question 3

Which of the following represents the correct ordering of standard deviation of returns over the period 1926 to 2014 (from highest to lowest standard deviation of returns) ?

Accepted Answer

A)   Treasury bills, long-term corporate bonds, long-term government bonds, common stocks
B)   common stocks, long-term government bonds, long-term corporate bonds, Treasury bills
C)   Treasury bills, long-term government bonds, long-term corporate bonds, common stocks
D)   Treasury bills, long-term government bonds, common stocks, long-term corporate bondsE) A) and D)
F) None of the above

Question 4

A "Dutch auction" was used by Google to raise money in 2004.A Dutch auction involves

Accepted Answer

A)   selling bonds in Europe.
B)   allowing investors to submit bids saying how many shares they'd like to buy and at what price.
C)   allowing investment banking firms to submit bids on how many shares they are willing to sell and at what price.
D)   hiring a Dutch firm to sell a company's securities at auction.E) B) and D)
F) B) and C)

Question 5

The stock market with the most stringent listing requirements is the

Accepted Answer

A)   New York Stock Exchange (NYS
E)  .
B)   NASDAQ Stock Market.
C)   American Stock Exchange (AMEX) .
D)   All organized exchanges have the same listing requirements in order to make trading fair for all investors.E) A) and D)
F) A) and C)

Question 6

Transactions in the futures markets involve current payments for goods which will be delivered at some future agreed upon date.

Accepted Answer

A) True 
 B)False

Question 7

Stocks listed on the New York Stock Exchange must be traded exclusively on the NYSE in order to maintain the high standards set by the exchange.

Accepted Answer

A) True 
 B)False

Question 8

Over time,there has been a high correlation between actual rates of return on securities and the securities' standard deviations of returns.

Accepted Answer

A) True 
 B)False

Question 9

The risk premium would be greater for an investment in an oil and gas exploration in unproven fields than an investment in preferred stock because

Accepted Answer

A)   oil and gas exploration investments have a greater variability in possible returns.
B)   the preferred stock is more liquid.
C)   the inflation rate would vary more with oil and gas exploration investments.
D)   both A and BE) None of the above
F) A) and D)

Question 10

Activities of the investment banker include

Accepted Answer

A)   assuming the risk of selling a security issue.
B)   selling new securities to the ultimate investors.
C)   providing advice to firms issuing securities.
D)   all of the aboveE) A) and D)
F) A) and C)

Question 11

General Motors raises money by selling a new issue of common stock.This transaction occurs in

Accepted Answer

A)   the secondary market.
B)   the capital market.
C)   the money market.
D)   the futures market.E) A) and D)
F) B) and C)

Question 12

Which of the following is NOT a valid theory that attempts to explain the shape of the term structure of interest rates?

Accepted Answer

A)   the unbiased expectations theory
B)   the liquidity preference theory
C)   the market segmentation theory
D)   the Fisher Effect theoryE) B) and C)
F) All of the above

Question 13

Financial intermediaries issue their own indirect securities and use the proceeds to purchase the direct securities of other economic units.

Accepted Answer

A) True 
 B)False

Question 14

Organized stock exchanges provide the benefits of a continuous market,fair security pricing,and helping businesses raise new capital.

Accepted Answer

A) True 
 B)False

Question 15

Examine the securities below and identify the security with the highest liquidity premium,the highest default risk premium,and the highest maturity premium.
a.30-year U.S.Government Treasury bond maturing in 2025
b.25-year Bbb-rated corporate bond maturing in 2030,actively traded on the New York Exchange
c.10-year Aaa-rated corporate bond maturing in 2020,thinly traded on a regional exchange
d.3-month U.S.Treasury bill

Accepted Answer

The 10-year Aaa-rated corporate bond has...

Question 16

The negotiated purchase is the most prevalent method of securities distribution in the private sector.

Accepted Answer

A) True 
 B)False

Question 17

The telecommunications system that provides a national information linkup among brokers and dealers operating in the over-the-counter market is called

Accepted Answer

A)   NCIS.
B)   NSQA.
C)   NASDAQ.
D)   NASQ.E) A) and C)
F) A) and D)

Question 18

A basis point is equal to

Accepted Answer

A)   one percent.
B)   one-tenth of one percent.
C)   one-hundredth of one percent.
D)   one-half of one percent.E) A) and D)
F) A) and C)

Question 19

Which of the following relationships is true regarding the costs of issuing the following securities?

Accepted Answer

A)   common stock > bonds > preferred stock
B)   preferred stock > common stock > bonds
C)   bonds > common stock > preferred stock
D)   common stock > preferred stock > bondsE) B) and C)
F) None of the above

Question 20

When a company repurchases its own common stock,it is likely that

Accepted Answer

A)   the stock price will increase because the company views the stock as undervalued.
B)   the stock price will decrease because the company is creating artificial demand for its stock.
C)   the stock price will remain the same as this is simply an internal transaction.
D)   the board of directors will be fired for incompetence.E) B) and D)
F) B) and C)

Exam 2: The Financial Markets and Interest Rates

Activities of the investment banker include

Correct Answer
verified

A basis point is equal to

Correct Answer
verified

Which of the following is NOT a valid theory that attempts to explain the shape of the term structure of interest rates?

Correct Answer
verified

The negotiated purchase is the most prevalent method of securities distribution in the private sector.

Correct Answer
verified

Transactions in the futures markets involve current payments for goods which will be delivered at some future agreed upon date.

Correct Answer
verified

Which of the following represents the correct ordering of standard deviation of returns over the period 1926 to 2014 (from highest to lowest standard deviation of returns) ?

Correct Answer
verified

When a company repurchases its own common stock,it is likely that

Correct Answer
verified

In August 2004,Google first sold its common stock to the public at $85 per share and raised $1.76 billion.This is an example of

Correct Answer
verified

Which of the following relationships is true regarding the costs of issuing the following securities?

Correct Answer
verified

A corporation sells securities to an investment banking firm on January 1st.The next day an international oil crisis causes stock prices to drop dramatically.The corporation is immune from the drop in price of its stock due to which function of the investment banking firm?

Correct Answer
verified

Organized stock exchanges provide the benefits of a continuous market,fair security pricing,and helping businesses raise new capital.

Correct Answer
verified

Correct Answer
verified
The 10-year Aaa-rated corporate bond has...
View Answer

Over time,there has been a high correlation between actual rates of return on securities and the securities' standard deviations of returns.

Correct Answer
verified

A "Dutch auction" was used by Google to raise money in 2004.A Dutch auction involves

Correct Answer
verified

The risk premium would be greater for an investment in an oil and gas exploration in unproven fields than an investment in preferred stock because

Correct Answer
verified

The telecommunications system that provides a national information linkup among brokers and dealers operating in the over-the-counter market is called

Correct Answer
verified

Financial intermediaries issue their own indirect securities and use the proceeds to purchase the direct securities of other economic units.

Correct Answer
verified

The stock market with the most stringent listing requirements is the

Correct Answer
verified

Stocks listed on the New York Stock Exchange must be traded exclusively on the NYSE in order to maintain the high standards set by the exchange.

Correct Answer
verified

General Motors raises money by selling a new issue of common stock.This transaction occurs in

Correct Answer
verified

Exam 2: The Financial Markets and Interest Rates

Activities of the investment banker include

Correct AnswerverifiedShow Answer

A basis point is equal to

Correct AnswerverifiedShow Answer

Which of the following is NOT a valid theory that attempts to explain the shape of the term structure of interest rates?

Correct AnswerverifiedShow Answer

The negotiated purchase is the most prevalent method of securities distribution in the private sector.

Correct AnswerverifiedShow Answer

Transactions in the futures markets involve current payments for goods which will be delivered at some future agreed upon date.

Correct AnswerverifiedShow Answer

Which of the following represents the correct ordering of standard deviation of returns over the period 1926 to 2014 (from highest to lowest standard deviation of returns) ?

Correct AnswerverifiedShow Answer

When a company repurchases its own common stock,it is likely that

Correct AnswerverifiedShow Answer

In August 2004,Google first sold its common stock to the public at $85 per share and raised $1.76 billion.This is an example of

Correct AnswerverifiedShow Answer

Which of the following relationships is true regarding the costs of issuing the following securities?

Correct AnswerverifiedShow Answer

A corporation sells securities to an investment banking firm on January 1st.The next day an international oil crisis causes stock prices to drop dramatically.The corporation is immune from the drop in price of its stock due to which function of the investment banking firm?

Correct AnswerverifiedShow Answer

Organized stock exchanges provide the benefits of a continuous market,fair security pricing,and helping businesses raise new capital.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe 10-year Aaa-rated corporate bond has...View AnswerShow Answer

Over time,there has been a high correlation between actual rates of return on securities and the securities' standard deviations of returns.

Correct AnswerverifiedShow Answer

A "Dutch auction" was used by Google to raise money in 2004.A Dutch auction involves

Correct AnswerverifiedShow Answer

The risk premium would be greater for an investment in an oil and gas exploration in unproven fields than an investment in preferred stock because

Correct AnswerverifiedShow Answer

The telecommunications system that provides a national information linkup among brokers and dealers operating in the over-the-counter market is called

Correct AnswerverifiedShow Answer

Financial intermediaries issue their own indirect securities and use the proceeds to purchase the direct securities of other economic units.

Correct AnswerverifiedShow Answer

The stock market with the most stringent listing requirements is the

Correct AnswerverifiedShow Answer

Stocks listed on the New York Stock Exchange must be traded exclusively on the NYSE in order to maintain the high standards set by the exchange.

Correct AnswerverifiedShow Answer

General Motors raises money by selling a new issue of common stock.This transaction occurs in

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The 10-year Aaa-rated corporate bond has...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified