Exam 3: Financial Indices, Market Information, and Economic Data

Insiders can use privileged information legally if:

In the Flow of Funds Accounts, a negative amount recorded under a liability item indicates that, for the time period represented, borrowing exceeded debt repayments.

The following situations may be covered by insider trading laws in the United States. Please examine each situation described and indicate whether in your opinion a violation of insider trading laws might have occurred. What kind of violation, if any? a. James Smith works for Cohen and Cooper, a local law firm and while browsing in his firm's law library discovers a new report from a legal client of his colleague, lawyer Roscoe Adams, that predicts serious financial problems if the client proceeds with its recently drafted strategic plan. Smith subsequently discovers discreetly that the strategic plan is to be launched next week. He also learns that Roscoe is selling the client's stock short through his broker. Smith quietly advises Roscoe not to make the intended security transactions and then lets the matter drop. b. Samuel Joule learns from conversations with Sarah Conklin, a bartender at a local restaurant and bar, that neighboring Locket Corporation has recently developed a secret air warning device that may help prevent air collisions and may be worth tens of millions of dollars once it is announced to the government and the aircraft industry. Joule does not work for Locket, though he has been dating Miss Conklin for some time. Sarah Conklin also does not work for Locket. Both of these individuals decide to purchase 1,000 shares of Locket's common stock before Locket holds its press conference to announce the new air collision device. Joule and Conklin will use a bank loan to finance the purchase of Locket's shares. A wedding is planned if the transaction succeeds financially.

Yields on bonds shown in the Wall Street Journal are current yields.

In 2008, of the $14.4 trillion gross domestic product of the United States, approximately

The total liabilities of US households is approximately $14.5 trillion.

Financial information on individual security issuers may be obtained from:

The lemons problem applies equally well to used cars and borrowers.

Most bond trades on the major securities exchanges are round-lot transactions.

Information asymmetries cannot be eliminated by government regulation of markets.

The statement "Investors who use insider information may earn excess profits" best reflects the:

The banks of the Federal Reserve System publish financial information in weekly, monthly and quarterly releases. Federal Reserve publications include:

The best measure currently available of overall stock market wealth on the United States is the

The following situations may be covered by insider trading laws in the United States. Please examine each situation described and indicate whether in your opinion a violation of insider trading laws might have occurred. What kind of violation, if any? a. The chief financial officer of Start Corporation reads an internal memorandum criticizing the firm's recent oil field development investments and picks up his phone to call his broker, placing an order to short sell the firm's shares when the market opens in the morning. b. Corren Professional Corporation, a CPA firm, assists Selkirk Industrial Corporation with its quarterly and annual financial reports. Jim Roberts, a CPA with Corren, after reviewing the latest information provided by Selkirk's CEO, calls a friend and suggests making certain stock and bond trades involving Selkirk's securities. Roberts will not benefit financially from these suggested trades and refuses to be involved in the transactions.

Insider trading is more difficult to get away with today because of the growing use of electronic surveillance systems by

A security which carries a set maturity date, name of the issuing company or governmental unit and coupon rate is a bond.

The contributions made by the Federal Reserve's Flow of Funds (FOF) Accounts to our understanding of and participation in the nation's financial system include which of the following items?

Dealer prices appearing on a quote sheet or computer screen generally apply to odd-lot transactions.

The best measure currently available for US wealth is the Wilshire 5000.

Of the $14.4 trillion US gross domestic product in 2008, approximately $10 trillion was personal consumption expenditures.