financial intermediaries final

In HK, which is the banking regulator? -SFC -MPFA -HKMA -ICAC

HKMA

Which type of insurance premiums has gone up significantly in the US due to corporate fraud? -Health insurance -Life insurance -D&O insurance

-D&O insurance

What was the goal of Obamacare? -Ensuring that all Americans had health insurance -Ensuring that all Americans had life insurance -Ensuring that insurance companies were properly regulated in the US

-Ensuring that all Americans had health insurance

Imagine that HKSAR Government issues a Cat Bond linked to a severe earthquake. What will happen to investors if the earthquake takes place (meeting the criteria of the bonds) -Investors will get the coupons and principal -Investors will get the principal -Investors will lose the principal

-Investors will lose the principal

How do insurance companies make money? -Paying out less in claims then they receive in premiums -Investing the float to generate income -Premiums less claims paid plus investment income less operational expenses -None of the above

-Premiums less claims paid plus investment income less operational expenses

NoGrowth Industries presently pays an annual dividend of $1.20 per share and it is expected that these dividend payments will continue indefinitely. If NoGrowth's equity cost of capital is 10%, then the value of a share of NoGrowth's stock is closest to ________. A) $9.60 B) $14.40 C) $13.20 D) $12.00

12

Suppose Target Corporation plans to pay $0.68 per share in dividends in the coming year. If its equity cost of capital is 10% and dividends are expected to grow by 8.4% per year in the future, estimate the value of Target's stock. Target's stock price (P0 ) is: -42.50 -53.45 -68.59

42.50, 62.5 times dividend

Expected share price (P1): $50. Expected dividend (Div1): $0.50. Expected rate of return (rE): 5%. Calculate P0 The correct answer is: -49.5 -48.10 -55 Calculate the dividend yield: Div1 / P0 Possible answers: -1.05% -1.04% -1.03% Calculate capital gain P1 - P0 Possible answers -1.8 -1.9 -2.1 What is the capital gain return (capital gain/ P0 )? Possible answers: -3.81 -3.96 -4.10 From the answers above, calculate the total return/expected return (dividend yield + capital gain rate) Possible answers: -4.5% -5% -5.5%

48.10 1.04 1.9 3.96 5

Suppose you expect Koch Industries to pay an annual dividend of $2.31 per share in the coming year and to trade at $82.75 per share at the end of the year. If investments with equivalent risk to Koch's stock have an expected return of 8.9%, what is the most you would pay today for Koch's stock? What dividend yield and capital gain rate would you expect at this price? The stock price we are willing to pay is: -69.5 -78.11 -85.9 The dividend yield is: -2.96% -5.94% -8.90% The capital gain rate is: -2.96% -5.94% -8.90%

78.11 2.96 5.94

Under Basel I what amount of capital do the banks have to maintain as a proportion of their risk weighted assets? -5% -3% -8% -12%

8

Under the Employee Choice Arrangement (ECA), employees can: -Change their allocation choices within the employer plan -Transfer their contributions to another MPF plan of their choice -Transfer both their employers and their own contributions to another MPF plan

??? Transfer both their employers and their own contributions to another MPF plan

The increased integration of financial markets across countries and the need to make the playing field equal for banks from different countries led to the Basel agreement (Basel I) to -standardize bank capital requirements internationally. -reduce, across the board, bank capital requirements in all countries. -sever the link between risk and capital requirements. -do all of the above

?standardize bank capital requirements internationally

Your friend, who is in his final year of engineering studies at HKUST, has discovered a way of making tele-transportation work. He is now looking to build a prototype of his machine, and asks for your guidance in seeking funding to start his new business. Which type of financial institution would you recommend he try? -A commercial bank -A hedge fund -A seed (venture capital) fund -A mutual fund

A seed (venture capital) fund

When a HNWI invests in young companies to help them grow we call this -Angel investing -VC fund -PE fund

Angel investing

The Withdrawal Choice Arrangement allows employees to -Take their contributions in cash at any time -At retirement, choose to get a lump sum or an annuity or keep the money in the MPF longer

At retirement, choose to get a lump sum or an annuity or keep the money in the MPF longer

In Hong Kong, the SFC is responsible for -Approving retail investment products -Authorizing offering documents of retail investment products -Assessing whether a product is suitable for individual investors

Authorizing offering documents of retail investment products

Which entity overlooks banking capitalization rules? -FSB -BCBS

BCBS (basel committee on banking supervision)

CAMELS ratings are used in: -Bank licensing -Bank chartering -Bank examinations

Bank licensing

One key issue for investors in collective investment funds is the costs involved. One of the metrics used to compare funds is the TER (Total Expense Ratio). Which of the following costs is not included in the TER? -Annual management fee -Dealing costs -Administration and legal fees -Distribution fees

Dealing costs

The MPF is a -Defined benefits plan -Defined contributions plan

Defined contributions plan

Which US regulator oversees systemic risk? -The Fed -The SFC -The FSOC -The FSB Which is its equivalent in the EU? -ECB -ESMA -ESRB

FSOC (financial stability oversight council) ESRB (european systemic risk board)

Which of the following is NOT a key element of SWFs: -Owned by the general government -Invests solely in domestic assets -Invests to achieve financial objectives -Invests on a global basis

Invests solely in domestic assets

which type of risk was added in the coverage of capital requirement under Basel II? -Credit risk -Market risk -Operational risk -Systemic risk -Counterparty risk

Operational risk

A fund that invests in companies to take them private is typically called -VC fund -PE fund

PE fund

If a private pension plan fails in the US, what happens to workers pensions? -They lose all their pensions -Pension liabilities are taken over by the PBGC -Pension liabilities are taken over by the Fed

Pension liabilities are taken over by the PBGC (pension benefit guarantee corp)

Which is the primary objective of the HKMA? -Make HK great again -Protect the peg -Keep banks safe

Protect the peg

In the US, Reg Z is intended to: -Protect the banks from default -Protect customers against discrimination -Provide customers with easily comparable information

Provide customers with easily comparable information

Which voluntary code of conduct did major SWFs sign? -Equator Principles -Santiago Principles -Basel Principles -New York Principles

Santiago Principles

which government entity regulates the pension sector in the US? -The Fed -The SEC -The Department of Labor

The Department of Labor

The Federal Open Market Committee consists of -The five senior members of the seven-member Board of Governors. -The seven members of the Board of Governors and seven presidents of the regional Fed banks. -The seven members of the Board of Governors and five presidents of the regional Fed banks. -The twelve regional Fed bank presidents and the chairman of the Board of Governors.

The seven members of the Board of Governors and five presidents of the regional Fed banks

why does the SFC (and other regulators) worry about the rapid growth of synthetic ETFs? -They don't understand the products -They worry that investors don't realize they are taking counterparty exposure -They worry about systemic risk

They worry that investors don't realize they are taking counterparty exposure

A fund that invests in very young companies that only have a prototype is typically called -VC fund -PE fund

VC fund

In the US "breaking the buck" refers to a situation where: -the Euro spot price (EUR/USD) falls below 1 USD -a Money Market Mutual Fund (MMMF)'s NAV (Net Asset Value) goes below $1 -the NAV of a mutual fund exceeds $1 per share

a Money Market Mutual Fund (MMMF)'s NAV (Net Asset Value) goes below $1

Which of the following are common characteristics of both hedge funds and private equity funds? -Organizational structure as partnerships -Fee structure with a combination of management fee and performance fee -High denomination -High portfolio diversification -A, b and c -B c and d -A c and d -A b and d -All of the above -None of the above

a b c

One of the disadvantages of investing through mutual funds is -No control over investments -Costs irrespective of performance -Dependence on other investors behavior -All of the above -None of the above

all of above

Investors in mutual funds benefit most from denomination intermediaion when they seek to invest in -Small Stocks -Bonds

bonds (not small)

Demographic trends and changes in retirement patterns suggest that Social Security funding problems will ease over the next few decades. t/f

false

The government organization responsible for the conduct of monetary policy in the United States is the U.S. Treasury. -True -False

false, the fed

Which legislation gave birth to the first investment banks (e.g. Morgan Stanley)? -Gramm Leach Bliley Act -ERISA -Glass Steagall Act

glass steagall

Which principle of insurance most distinguishes insurance from derivatives? -Insurable Interest -Utmost Good Faith -Indemnity

indemnity

Which principle of insurance explains why you can buy health insurance cheaper through your employer than individually? -Insurable Interest -Law of Large Numbers -Indemnity

law of large numbers

In the US, Social Security is a ________ -fully funded pension plan. -federally insured private pension plan. -government sponsored private pension plan. -"pay-as-you-go" system.

pay-as-you-go

Core investment banking activities such as corporate finance advisory and IPOs underwriting take place in the -Primary market -Secondary market

primary