There are three types of major financial markets today: primary, secondary, and
derivatives markets. The NYSE and NASDAQ are both examples of derivatives
markets.
When directly owning a real estate investment, the actual title is held by the investors.
True
False
It is much easier to select specific stocks and bonds than it is to select an open-end
mutual fund share.
True
False
Four seats on the Federal Open Market Committee (FOMC) are allocated to Federal
Reserve Bank presidents on an annual rotating basis.
An unmarried domestic partner usually has no legal claim on the probate estate of their
deceased partner who died without naming them in the will.
True
False
A small percentage of mutual fund investors take advantage of automatic reinvestment
of the current income received from their mutual fund.
True
False
Eurobonds are bonds denominated in the issuer’s home currency, but are issued outside
their home country.
American options can only be exercised at maturity.
Accrued interest owed to the bond seller increases as the next coupon payment date
approaches.
The majority of banks are nationally chartered and insured by the FDIC.
A negotiated non-standardized agreement between a buyer and seller (with no
third-party involvement) to exchange an asset for cash at some future date with the
price set today is called a forward agreement.
Everything else equal, an effective annual rate will be greater than the bond equivalent
yield on the same security.
Which of the following is the least appropriate reason for using credit?
a.To take advantage of free credit
b.To consolidate debts
c.To obtain an education
d.To buy something you would likely buy soon but today it is on sale
Shad wants to consider the cost per use of a high-end, desk-top computer server he is
considering for his web site business. The computer costs $3,750 and has a life
expectancy of four years. If Shad feels he would use the computer three days a week,
on average, what is Shad’s cost per use?
a.$2
b.$6
c.$18
d.$24
Blue-chip stocks typically have betas of.
a.less than 0.0.
b.0.0 to 0.5
c.1.0
d.1.5 or more.
Convertible bonds are
I. options attached to bonds that give the bondholder the right to purchase stock at a
preset price without giving up the bond.
II. bonds in which the issue matures (converts) a little each year.
III. bonds collateralized with certain types of automobiles.
IV. bonds that may be converted to a certain number of shares of stock determined by
the conversion ratio.
A.I only
B.I and II only
C.I, II, and III
D.IV only
E.I and III only
Janice Leno has the following assets and debts listed on her balance sheet:
Liquid Assets $3,687
Tangible assets $61,241
Investment assets $34,289
Short-term liabilities $4,631
Long-term liabilities $24,134
Janice’s asset-to-debt ratio is
a.3.45
b.2.54
c.3.96
d.0.29
Lina has 20/40/15 automobile liability coverage and is involved in an accident that is
her fault. Damages suffered by the other parties in the accident are as follows:
First person-bodily injury$10,000
Second person-bodily injury$12,000
Third person-bodily injury$25,000
Property damage$18,000
How much of these claims will not be covered by the insurance company and therefore
come out of Lina’s budget?
a.$10,000
b.$7,000
c.$5,000
d.$3,000
You can make changes in your group health care plan at any time during the year.
a.True
b.False
Most investors own common stocks because their expected return over time can
average ______ percent from the combination of dividends and capital gains.
a.3
b.6
c.9
d.12
One-hundred-eighty-day commercial paper can be bought at a 3.75 percent discount.
What are the bond equivalent yield and the effective annual rate on the commercial
paper? Why do these rates differ?
What are the major advantages a bank gains by expanding into international bank
services? What are three disadvantages of international expansion?
Discuss the major differences between large banks and small banks. Which have had
higher ROAs? Why?
What are the advantages and disadvantages of foreign investing? How does an ADR
help overcome the disadvantages?
A stock is priced at $27. An American call option on this stock with a $25 strike must
be worth at least how much? Numerically show why.
The euro has had a notable impact on the global financial system by being an important
currency for international transactions.
6. Deregulation of foreign markets has allowed many new investors to participate in
international investing.
A U.S. firm has a European subsidiary that earns euros. The subsidiary has borrowed
dollars at a floating rate of interest. What kind of risk does the subsidiary have? What
kind of swap could be used to limit the subsidiary’s risk? Be specific.
Why have FNMA and Freddie Mac, considered government-sponsored enterprises
(GSEs), been in the news lately? Explain.