FINC 325 Final Review - Guha

Primary markets are markets where users of funds raise cash by selling securities. True/False

True

Quantitative easing consists of the Fed buying bonds even when interest rates are low. True/False

True

Restrictive monetary policy in the United States may slow down nominal GDP. True/False

True

Revenue bonds are generally considered more risky than general obligation bonds. True/False

True

Preferred stockholders have a claim junior to common stock but senior to bondholders. True/False

False

Preferred stockholders have the same voting rights as common shareholders. True/False

False

Preferred stocks have more variable prices than common stock. True/False

False

Real investment is encouraged by rising interest rate. True/False

False

TIPS are designed to primarily protect investors from default risk. True/False

False

The Fed's most commonly used tool is reserve requirements. True/False

False

The Federal Reserve was created in 1933 as a result of the Great Depression. True/False

False

Option premiums vary directly with the maturity of the option. True/False

True

Most state and local government bonds are sold to investors in low tax brackets. True/False

False

A negotiable CD is a short-term unsecured promissory note issued by a non-financial corporation. True/False

False

A non-standardized agreement that is negotiated between a buyer and a seller to exchange as asset for cash at some future date, with the price set today is called a futures agreement. True/False

False

A publicly traded company issuing additional shares of common stock does it through an IPO. True/False

False

A significant move by the Fed toward "tight" money policy is likely to enhance exports. True/False

False

An ARM, compared to a FRM, shifts the interest rate risk from the borrower to the lender. True/False

False

An increase in the money supply should ultimately cause security prices to decrease all else equal. True/False

False

Callable bonds are the bonds that can be redeemed at par value at the option of their holders. True/False

False

Capital market securities are more liquid than money market securities. True/False

False

Closed-end investment companies stand ready to redeem their shares at their NAV less a management fee. True/False

False

Common and preferred stock dividends are paid out of pre-tax earnings. True/False

False

Common stockholders enjoy limited liability, which means any losses in stock value are covered by the company. True/False

False

Currency is an asset of the Federal Reserve Banks. True/False

False

Dealers bring buyers and sellers together; brokers make a market. True/False

False

Deposits should expand when reserve requirements increase. True/False

False

Deposits should expand when the Fed sells securities. True/False

False

Easy monetary policy strengthens the dollar. True/False

False

Exports grow when foreign currencies depreciate relative to the dollar. True/False

False

Federal funds are the funds provide by the Federal Government for domestic corporations for long-term growth. True/False

False

Finance companies take small consumer deposits and make large consumer loans. True/False

False

Futures contracts eliminate risk to all participants. True/False

False

Hedge funds have been popular diversification investments for small investors. True/False

False

High stock prices are a goal of monetary policy. True/False

False

If the FOMC wished to slow down economic growth and slow growth in price level, they could issue a policy directive to theFederal Reserve Board Trading desk to purchase U.S. government securities. True/False

False

Increasing interest rates increases wealth and encourages spending. True/False

False

Like corporate and municipal bonds, mortgages are issued in standard denomination. True/False

False

Limited liability of stockholders protects them from losses on their stock portfolio. True/False

False

Most forward market contracts are settled before delivery. True/False

False

The conversion feature of a bond is designed to give the issuer the opportunity to repurchase bonds at a stated price prior to maturity. True/False

False

The most common method of selling stock to the public is through a rights offering. True/False

False

The secondary market for capital market securities is important because it provides funds directly to deficit spending units. True/False

False

A Canadian dollar costs $0.84 in USD and later costs $0.86. The USD has depreciated relative to the Canadian dollar. True/False

True

A U.s. Treasury STRIP is a zero-coupon bond. True/False

True

A hedger who is contracted to buy a commodity in the future may wish to reduce their price risk by buying futures contracts on the commodity. True/False

True

A household is a surplus spending unit when income for a period exceeds spending. True/False

True

A lender with a fixed-rate mortgage bears the risk of future inflation. True/False

True

A major asset of the Federal Reserve is U.S. Treasury securities, and the major liability is the currency outside banks. True/False

True

A state turnpike authority is more likely to issue revenue bonds than a city that issues bonds to finance a school expansion. True/False

True

A subprime mortgage made to a borrower who has a below normal credit rating. True/False

True

A weak U.S. dollar will lead to increased foreign demand for US goods. True/False

True

All money market instruments are short-term liability securities. True/False

True

Bankers' acceptances are used primarily for financing international trade. True/False

True

Capital market interest rates tend to be higher than money market rates for a given issuer. True/False

True

Capital market securities are typically used to finance real capital investments. True/False

True

Closed-end investment companies' securities often sell at a discount to their NAV. True/False

True

Decreasing interest rates tend to increase financial wealth and encourage consumer spending. True/False

True

Fed funds are short-term unsecured loans while repos are short-term secured loans. True/False

True

Futures markets involve more standardized contracts compared to forward markets. True/False

True

Hedge funds are typically organized as limited partnerships with the fund manager as the general partner. True/False

True

Home equity credit lines are a form of second mortgage financing. True/False

True

If a stock's price is $56 per share a call option with a $60 exercise price will cost less than an equivalent maturity put option with the same exercise price. True/False

True

If interest rates are higher in Japan than in the United States, the cost of yen per USD in the spot market will typically be higher than in the forward market. True/False

True

If the option exercise price is greater than the current stock price, a call option is out-of-the-money but the put option is in-the-money. True/False

True

In balance of payments accounting, a deficit in the current account may be offset by a surplus in the financial accounts. True/False

True

In general, writing calls is riskier than buying puts. True/False

True

Investment bankers help deficit spending units (DSUs) bring new primary security issues to market. True/False

True

Margin requirements relate to the amount of cash down payment or equity one must have deposited before participating in a futures trade. True/False

True

Money market instruments are a form of short-term debt. True/False

True

Money market securities are all debt securities, while capital market securities are either debt or equity securities. True/False

True

Mortgages are capital market debt securities. True/False

True

Most hedge funds are not investment companies. True/False

True

Most mortgage loans are amortized over the maturity of the loan with interest computed on the declining principal. True/False

True

Mutual funds offer diversification and professional investment management for the fees charged. True/False

True

On a fixed rate mortgage, the dollars of interest the homeowner pays falls each year the mortgage is outstanding. True/False

True

Open-end mutual funds have largest share of investment company assets. True/False

True

The Dow Jones Industrial Average is a price-weighted index. True/False

True

The Federal Reserve decreases the monetary base whenever it sells government securities. True/False

True

The New York Stock Exchange is an example of a secondary market. True/False

True

The money market is a dealer market, not an exchange, and has no specific location. True/False

True

The seven members of the Board of Governors of the Federal Reserve System serve 14 year nonrenewable terms. Each board member is appointed by the President and confirmed by the Senate. True/False

True

The writer of a call option on stock benefits if the underlying stock price decrease. True/False

True

There are 12 Federal Reserve District banks today. True/False

True

Unexpected high levels of inflation aid debtors at the expense of lenders. True/False

True

When reserve requirements are increased, interest rates should increase. True/False

True

Writing calls can generate potentially unlimited losses. True/False

True

On the second Friday of March, the market closing price of Independence & Co. stock is $100. Its March options are about to expire. One of its puts is worth $10 and one of its calls is worth $5. The exercise price of its put must be ________ and the exercise price of the call must be________. a. 110, 95 b. 105, 95 c. 90, 105 d. 105, 90

a. 110, 95

Which of the following is not a money market security? a. Ba-rated corporate bonds b. Treasury bills c. certificates of deposit d. banker's acceptance e. P2-rated commercial paper

a. Ba-rated corporate bonds

The major regulatory body representing mutual fund investors' interest is the a. Securities and Exchange Commission b. Security Investors Protection Commission c. Federal Reserve System d. Federal Trade Commission

a. Securities and Exchange Commission

A repurchase agreement calls for a. a firm to sell securities with the agreement to buy them back later at a higher price b. a firm to buy securities with the agreement to sell them back later at a higher price c. a firm to sell securities with the agreement to buy them back later at a lower price d. a firm to buy securities with the agreement to sell them back later at a lower price

a. a firm to sell securities with the agreement to buy them back later at a higher price

The Fed Funds Rate is the rate that a. banks charge each other on loans of excess reserves b. banks charge to lend foreign exchange to customers c. The Federal Reserve charges on emergency loans to commercial banks d. banks charge for loans to corporate customers

a. banks charge each other on loans of excess reserves

A customer wishes to sell stock they own and comes to a dealer. Which of the following would a securities dealer engage in? a. buying the securities and adding them to their own inventory b. locating a buyer for their client c. issuing the stock to the public d. loaning money to the client

a. buying the securities and adding them to their own inventory

Which of the following may be a liability of a non-financial business corporation? a. commercial paper b. Federal Funds c. Treasury securities d. agency securities

a. commercial paper

Which of the following terms is NOT associated with common stock? a. contractual cash flows b. residual c. ownership d. limited liability

a. contractual cash flows

Credit unions are ________ institutions; pension funds are ________ institutions a. depository; contractual b. contractual, depository c. federal; money market d. depository; depository

a. depository; contractual

A European option is an option contract that allows the holder to a. exercise the option only on the expiration date b. exercise the option on or before the expiration date c. exercise the option before but not on the expiration date d. exercise the option after the expiration date

a. exercise the option only on the expiration date

Everything else being equal, a bond will sell at a higher yield if it a. has a call provision b. has low default risk c. can be converted to stock d. is listed on an exchange

a. has a call provision

If a Canadian dollar cost $0.84 un USD today and traded for $0.86 last year, the USD a. has appreciated against the Canadian dollar b. has depreciated against the Canadian dollar c. has less buying power in Canada d. has violated purchasing power parity

a. has appreciated against the Canadian dollar

Pension funds tend to invest in a. higher-yielding long-term securities b. money market securities exclusively c. government securities exclusively d. debt securities exclusively

a. higher-yielding long-term securities

In inflation targeting the Fed should _________ interest rates when inflation is _________ the target rate. a. increase, above b. increase, below c. not change, below d. decrease, above

a. increase, above

Which of the following mutual fund types is likely to have the lowest expense ratios? a. index funds b. aggressive growth funds c. growth and income funds d. international and global equity funds

a. index funds

If the Fed decreases interest rates through open market operations then a. investors and consumers are encouraged to invest and spend more b. real GDP growth will fall c. inflation will decline d. all of the above

a. investors and consumers are encouraged to invest and spend more

Issuers of commercial papers tend to be a. large financial and non-financial firms b. firms with high credit risk c. small banks d. wealthy individuals e. both a and b

a. large financial and non-financial firms

Surplus spending units (SSUs) are called a. lenders b. borrowers c. sellers of securities d. balanced budget units

a. lenders

Which of the following would tend to hold the most corporate bonds as a percentage of investments? a. life insurance company b. credit union c. mutual savings bank d. commercial bank

a. life insurance company

12b-1 fees help mutual funds pay for a. marketing expenses b. costs of trading securities c. management salaries d. account maintenance costs

a. marketing expenses

Money market instruments and capital market instruments differ appreciably in a. maturity b. liquidity c. safety of principal d. all of the above

a. maturity

A capital market issue is most likely to finance a. new plant and equipment b. seasonal inventory needs c. a quarterly dividend payment d. the sale of common stock

a. new plant and equipment

Federal Reserve profitability a. was negative from 2006 through 2008 b. increased dramatically after 2009 c. has fallen since the financial crisis d. fell every year after 2009

b. increased dramatically after 2009

Which type of investment company allows shareholders to cash in their shares at their present net asset value? a. open-end investment companies b. closed-end investment companies c. both of these d. none of these

a. open-end investment companies

All but one of the following is associated with investment banking: a. taking deposits b. marketing new issues of securities c. underwriting securities d. completing regulatory paperwork and providing consulting services

a. taking deposits

Total Reserves = $80,000,000; Reserve Requirement = 5%; Total Deposits = $700,000,000 Using the data above, the level of excess reserves is a. $4,000,000 b. $45,000,000 c. $70,000,000 d. not ascertainable

b. $45,000,000

If an item costs 4 Euros in Germany, assuming purchasing power parity with current exchange rate of $1.3135/Euro, what is the price of the item in theUS? a. $0.33 b. $5.25 c. $3.05 d. $4.00 e. 4.00 Euros

b. $5.25

Which of the following bonds is likely to have the highest required rate of return, ceteris paribus? a. AAA rated noncallable corporate bond with a sinking fund b. AA rated callable corporate bond without a sinking fund c. AA rated callable corporate bond with a sinking fund d. AAA rated callable bond with a sinking fund

b. AA rated callable corporate bond without a sinking fund

Which of the following money market instruments would typically be used to finance international trade? a. a Treasury bill b. a banker's acceptance c. commercial paper d. a negotiable CD

b. a banker's acceptance

A sale of an entire security to one investor or a small group of investors is a. a dealer arrangment b. a private placement c. an underwriting d. intermediation financing

b. a private placement

Which of the following mutual fund types is likely to have the highest risk exposure? a. growth and income funds b. aggressive growth funds c. balanced funds d. income-equity funds e. money market funds

b. aggressive growth funds

If a government wanted to promote exports and trade surplus, it might institute all of the following policies except a. establish import trade tariffs and quotas b. buy domestic currency in the foreign exchange markets c. provide low cost financing for exporting industries d. require local content on all imports

b. buy domestic currency in the foreign exchange markets

Daily changes in futures prices means one party (hedger or speculator) has gained while another lost money on the contract. How are the exchanges able to keep the "daily" loser in the contract and prevent default? a. by the threat of bankruptcy b. by daily margin calls if needed c. by loans d. by guarantees by a third party

b. by daily margin calls if needed

Investment funds provide investors all of the following EXCEPT a. diversification b. contractual rate of return c. professional advice d. small minimum investment

b. contractual rate of return

The only "deposit-type" institutions that do not operate for profit are a. thrift institutions b. credit unions c. pension funds d. commercial banks

b. credit unions

What actions would the holder of a maturing call option which cost $300, had a strike price of $50, and the market value of the stock was $52? a. let the option expire unexercised b. exercise the option c. request that he $300 be returned d. exercise the right to extend the option

b. exercise the option

An agreement between a business and a large money center bank to sell 10 million dollars of T-bills in sixty days at a price set today is called a a. call option b. forward contract c. put option d. long futures position

b. forward contract

If the U.S. dollar increases in value the the U.S. a. import and exports will rise b. imports will rise and exports will fall c. exports will rise and imports will fall d. imports and exports will not change

b. imports will rise and exports will fall

A surplus spending unit's a. income and expenditures for a period are equal b. income for a period exceeds expenditures c. expenditures exceed receipts d. spending is entirely financed by credit cards

b. income for a period exceeds expenditures

Security exchanges provide a valuable function in that they a. raise funds for company owners b. increase the marketability of securities c. provide a legal way to gamble d. supply money to deficit spending units

b. increase the marketability of securities

Increases in the Fed's assets a. decrease the monetary base b. increase the monetary base c. have no effect on the monetary base d. none of the above

b. increase the monetary base

The value of a call option ________ and the value of a put option with the same price and expiration date ________ when the spot price of the underlying asset increases. a. increases; increases b. increases; decreases c. does not change; does not change d.falls; increases e. falls; falls

b. increases ; decreases

TIPS have less _______ risk than "regular" Treasury securities of the same maturity. a. default b. inflation c. liquidity d. foreign exchange

b. inflation

Which of the following institutions provides risk protection from events such as automobile accidents? a. finance company b. property and casualty insurance c. pension fund d. mutual fund

b. property and casualty insurance

A contract designed to us the equity in a home for retirement income without making nay required payments is called a(n) a. rollover mortgage b. reverse annuity mortgage c. adjustable-rate mortgage d. home equity loan

b. reverse annuity mortgage

A primary stock offering where existing stockholders are given the chance to purchase the new seasoned offering is called a(n) a. IPO b. rights offering c. best efforts offering d. fully underwritten general cash offer e. private placement

b. rights offering

French importers of U.S. merchandise are most likely to be involved in foreign exchange markets by a. buying Euros in return for USD b. selling Euros in return for USD c. selling dollars in return for Euros d. buying both Euros and dollars

b. selling Euros in return for USD

The purchase of U.S. Treasury bonds for immediate delivery is a ________ market transaction. a. stock b. spot c. futures d. forward e. swap

b. spot

A mutual fund "load" refers to a. the operating expenses charged against the assets b. the sales commissions paid to brokers c. the sum of the commissions paid for buying and selling the assets of the fund d. the fees paid to the investment manager

b. the sales commissions paid to brokers

Excess reserves are equal to a. required reserves - total reserves b. total reserves - required reserves c. non-borrowed reserves - borrowed reserves d. total reserves - discounted reserves

b. total reserves - required reserves

Match the financial institutions with the characteristic that best describes its function. I. Pool funds of small savers and invest in either money or capital markets II. Provide economic protection from adverse events III. Provide consumer loans and real estate loans funded by deposits IV. Underwrite and trade securities and provide brokerage services V. Accumulate and transfer wealth from work period to retirement period 1. Credit unions 2. Insurance companies 3. Pension funds 4. Securities firms and investment banks 5. Mutual funds a. 1, 3, 2, 5, 4 b. 4, 2, 3, 5, 1 c. 5, 2, 1, 4, 3 d. 2, 4, 5, 3, 1 e. 5, 1, 3, 2, 4

c. 5, 2, 1, 4, 3

A standard ARM has a cap such that the rate cannot increase more than 1% per year and 5% over the life of the mortgage. What will the mortgage rate be after 3 years if the initial rate is 5%, and interest rates increase by 2% in each of the first 3 years of the contract? a. 6% b. 7% c. 8% d. 9% e. 10%

c. 8%

The most common money market instrument utilized in the Fed's open market operations is a. Federal Funds b. commercial paper c. Treasury bills d.Agency securities

c. Treasury bills

Bonds issued by foreign entities in theUnited Sates are called: a. foreign bonds b. American depository receipts c. Yankee bonds d. Samurai bonds

c. Yankee bonds

The least used tool of monetary policy by the Fed is a. changing the discount rate b. open market operations c. adjusting reserve requirements d. changing the Federal Funds target rate

c. adjusting reserve requirements

The sale of securities via an investment banker by a corporation raising equity funds from the public for the first time is called a. a seasoned offering b. a secondary offering c. an initial public offering d. a best efforts offering

c. an initial public offering

The majority of securities owned by open-end mutual funds are: a. real, physical assets b. money market securities c. capital market securities d. safe, low-risk government securities

c. capital market securities

M2 includes M1 and in addition, a. currency circulation b. demand deposits c. certain money market accounts d. bonds

c. certain money market accounts

Which of the following is NOT an example of capital market securities? a. common stock b. convertible bonds c. commercial paper d. mortgages

c. commercial paper

Which of the following is NOT a characteristic of common stock? a. residual claim on income and assets b. limited liability c. cumulative dividends d. dual-class stock

c. cumulative dividends

A Mexican importer of computer parts from Canada denominated in Canadian dollars would take which action in the foreign exchange markets? a. supply Canadian dollars b. demand pesos c. demand Canadian dollars d. demand USD

c. demand Canadian dollars

A standardized, exchange-backed contract to deliver assets 3 months from today is a a. forward contract b. securitized asset c. futures contract d. option contract

c. futures contract

Which of the following is best associated with hedge fund investing? a. employees in a 401k pension plan b. commercial banks c. high net worth individuals and institutions d. investors seeking to hedge their business risk

c. high net worth individuals and institutions

A U.S. financial account surplus represents a. imports of goods and services greater than exports b. exports of goods and services greater than imports c. net foreign investment inflows to the US from the foreign sector d. net foreign investment outflows from the US to the foreign sector

c. net foreign investment inflows to the US from the foreign sector

Dual class stock is generally designed to a. provide bigger dividends to majority owners b. help minority owners obtain board representation c. protect the voting rights of managing owners d. improve marketability of the shares

c. protect the voting rights of managing owners

Which one of the following services is NOT provided by closed-end investment companies. a. transaction cost economies b. risk diversification c. redemption of shares on demand d. shared costs of investment management

c. redemption of shares on demand

Which of the following money market securities is backed by specified collateral? a. negotiable CDs b. T-bills c. repurchase agreements d. commercial papers

c. repurchase agreements

During 2008, Bob and Nancy Gutierrez expect a total income of about $225,000 and are budgeting total expenditures of about $180,000. For this budget period, the Gutierrez family is most specifically a(n) a. deficit spending unit (DSU) b. business entity c. surplus spending unit (SSU) d. government entity

c. surplus spending unit (SSU)

A foreign exchange rate is best described as a. the cost of an imported good b. the current interest rates difference of varying countries c. the cost of a unit of one currency in terms of another currency d. the expected change in prices of international goods

c. the cost of a unit of one currency in terms of another currency

Everything else equal, significant trade deficits should have what effect on a countries exchange rate? a. trade levels do not affect exchange rates b. the country's currency should appreciate in value relative to their major trading countries c. the country's currency should depreciate in value relative to their major trading countries d. the country's currency will first appreciate then depreciate over the long-term

c. the country's currency should depreciate in value relative to their major trading countries

If the cost of the yen per dollar changes from 100 to 110 yen per dollar, a. the yen has appreciated against the dollar b. the dollar has depreciated against the yen c. the dollar has appreciated against the yen d. the cost of a yen has increase in terms of dollars

c. the dollar has appreciated against the yen

The price of a mutual fund share is a. the total value of mutual fund shares divided by the number of corporate shares held b. the number of shares issued divided by the number of corporate shares owned c. the value of assets minus expenses all divided by shares issued d. the number of shares of corporate stock held divided into the total value of the stock portfolio

c. the value of assets minus expenses all divided by shares issued

Some countries have adopted a process of dollarization. This means a. they are members of the US Federal Reserve System b. they are signors of the Basel Accord c. they have adopted the USD as their currency d. they have agreed to pay segniorage to the US Federal Reserve

c. they have adopted the USD as their currency

Which of the following is a market participant in the primary equity markets? a. broker b. specilaist c. underwriter d. dealer

c. underwriter

An expansion in the U.S. money Supply a. will increase domestic interest rates b. will cause the exchange value of the dollar to increase c. will cause U.S. exports to increase d. will cause U.S. imports to increase

c. will cause U.S. exports to increase

Which of the following is true about reverse annuity mortgages (RAMs)? I. RAMs allow homeowners to borrow against the equity in their homes II. Typically obtained by older people whose home loans have been paid off that need some additional income in their retirement III. The term could be for the borrower's lifetime IV. The homeowners' equity declines overtime a. I and II only b. I, II, and III only c. II, III, and IV only d. I, II, III, and IV

d. I, II, III, and IV

Which of the following in NOT a derivative security? a. a call option on a stock index b. a futures contract c. an interest rate swap d. a repurchase agreement

d. a repurchase agreement

Money market securities have very little a. default risk b. price risk c, marketability risk d. all of the above

d. all of the above

Ordinarily the money supply will decrease if: a. the Fed makes fewer loans at is discount window b. the Fed sells securities on the open market c. the Fed raises reserve requirements d. all of the above

d. all of the above

Which of the following are "economic units"? a. households b. businesses c. governments d. all of the above

d. all of the above

________ execute buy or sell orders for their clients by matching orders with other investors; ________ "make markets". a. dealers; brokers b. brokers; mutual funds c. dealers; financial institutions d. brokers; dealers

d. brokers; dealers

In the following, who will lose if the price of the underlying asset falls? a. seller of a futures contract b. buyer of a put c. writer of a call d. buyer of a futures contract

d. buyer of a futures contract

The "tools" of monetary policy include all of the following except a. changing the discount rate b. open market operations c. changes in the reserve requirements d. changes in the government budget deficit

d. changes in the government budget deficit

Which of the following does not take deposits/ a. commercial banks b. savings and loan associations c. credit unions d. finance companies

d. finance companies

Which of the following types of mortgages would be most advantageous to have on your house if you expected the annual rate of inflation would be higher than most people thought? a. roll-over mortgage b. interest-only mortgage c. adjustable-rate mortgage d. fixed-rate mortgage

d. fixed-rate mortgage

Which statement about Treasury Bills is NOT true? a. they have maturities less than or equal to one year b. most are sold by "book-entry" method c. they are sold at a discount d. interest on T-Bills is tax-deductible for federal income tax purposes

d. interest on T-Bills is tax-deductible for federal income tax purposes

Private mortgage insurance protects the a. sell of the home b. FHA c. borrower d. lender e. government

d. lender

Which of the following is a contractual institution? a. credit union b. finance company c. thrift institution d. life insurance company

d. life insurance company

Most hedge funds are typically organized as _________ a. investment banks b. hedge funds c. REITs d. limited partnerships

d. limited partnerships

Open-end investment companies are also called ________ and are called "open-end" because a. high risk funds' they are able to assume high levels of risk b. venture capitalists; they invest in the stock of firms c. mutual funds; they can buy an unlimited number of corporate shares d. mutual funds; they can issue an unlimited number of shares to investors

d. mutual funds; they can issue an unlimited number of shares to investors

The equity primary capital market is used to a. borrow long-term b. change ownership of existing shares c. update prices of stock d. obtain funds in exchange for company ownership

d. obtain funds in exchange for company ownership

Federal Funds are typically a. treasury deposits b. Federal Reserve assets c. commercial bank deposits at eh Federal Reserve d. overnight interbank loans settled in immediately available funds

d. overnight interbank loans settled in immediately available funds

What is most likely o happen to an ARM in a decreasing rate environment? a. the borrower's payments will increase b. the maturity of the loan will be extended c. the principal of the loan will increase d. the borrower's payments will decrease

d. the borrower's payments will decrease

Which of the following statements about home equity loans is true? a. the borrower cannot already have a mortgage on the house b. if the borrower already has a mortgage, the home equity loan is a first mortgage c. in the event of a default, the home equity loan would be paid off before any other mortgage on the house d. the interest paid on home equity loans is tax deductible

d. the interest paid on home equity loans is tax deductible

A putable bond gives the bondholder the right a. to sell the bond back to the corporation at the original purchase price b. to sell the bond back to the corporation at a stated premium c. to sell the bond back to the corporation at the current market value d. to sell the bond back to the corporation at par

d. to sell the bond back to the corporation at par

You speculated that the stock price of Cino. Co. will move toward a certain direction and decided to take an option position of this stock to make profit. For that position, if the stock's price drops you will get a level gain no matter how much prices decrease. However, you could go bankrupt if the stock's price rises sufficiently. What is your position? You have _________. a. purchased a call option b. purchased a put option c. written a put option d. written a call option

d. written a call option

You have a right, but not the obligation, to buy a security at a specific price on a specific date if you ________ on this security. a. bought a forward contract b. sold a futures contract c. bought a put option d. sold a call option e. bought a call option

e. bought a call option