Exam 17: Financial Markets

Last year Stealth Bank received $100 million in interest payments from borrowers. $25 million in loans were written off as uncollectible. It paid out $30 million in interest to its depositors and collected $25 million for various fees it charged. Administration costs were $22 million and taxes were $3 million. What was the value of Stealth Bank's accounting profits?

In 2004, Ted and Diane paid 20% down and took out a five-year mortgage for the balance of the $265,000 price of a home. After deducting interest, their monthly payments toward the principle balance owed on the mortgage was reduced by $2,000.00 each year. If they were to sell their home in 2009, it would sell for $215,000. What is the equity in their home?

Why would a large publically traded corporation likely prefer issuing bonds as a way to raise new money as opposed to issuing more shares?

A financial gain earned by purchasing stock in a publically traded company and subsequently selling the investment at higher price is commonly referred to as a _____________ .

Each year banks typically offer a wide range of ____________ comprised of ______________________from a variety of different companies.

A _____________ is a firm that has sold its stock by making it available to be bought and sold by outside investors.

Briefly describe what a "bond" is and give three examples that identify the issuers of the most common types of bonds that are available to investors.

How would a sustained increase in the market price of its shares directly benefit a publically traded company?

The stock of a business firm is divided into _________________ .

Jackie has invested $25,000 for a 10 period at a guaranteed interest rate of 9%. If Jackie decides to sell her investment before the 10 year period has ended, she may receive less if the interest rates at that time are lower. Jackie is a

Briefly explain how it is possible for most Americans to accumulate considerable financial wealth during their lifetimes.

Investors who believe that the stock is _____________ , relative to the fundamental value of its future expected profits, will sell their shares to those who believe that the stock is __________.

In choosing between the range of alternative investments typically available to U.S. households, which of the following will play a role in influencing their selection of a particular investment type?

What do stocks, bonds, securitized mortgage assets and other financial investments all have in common?

Small companies typically prefer____________ to borrowing from a bank because it is a source of funding where the company is not obligated to _____________________ .

Which of the following is not a typical question that must be answered with regard to a private company that is owned by a large number of shareholders?

Holly and Josh paid 10% down for their $245,000 home in 2004. If they sell their house for $255,000 in 2010, what will the value of their equity be?

_______________ of well-to-do individuals often put their own money into small new companies at an early stage of development, in exchange for owning some portion of the firm.

The term __________ refers to the __________ that a bond is expected to pay at the time of purchase.

Venture capitalists typically create wealth by investing in a start up firm when its stock is less valuable, and then subsequently selling that stock for a higher price during the firm's _____________________ ,