Question 1

When a company repurchases its own common stock,it is likely that

Accepted Answer

A)  the stock price will increase because the company views the stock as undervalued. 
B)  the stock price will decrease because the company is creating artificial demand for its stock. 
C)  the stock price will remain the same as this is simply an internal transaction. 
D)  the board of directors will be fired for incompetence. 
A)  the stock price will increase because the company views the stock as undervalued. 
B)  the stock price will decrease because the company is creating artificial demand for its stock. 
C)  the stock price will remain the same as this is simply an internal transaction. 
D)  the board of directors will be fired for incompetence.

Question 2

Organized stock exchanges provide the benefits of a continuous market,fair security pricing,and helping businesses raise new capital.

Accepted Answer

A) True 
 B)False

Question 3

The telecommunications system that provides a national information linkup among brokers and dealers operating in the over-the-counter market is called

Accepted Answer

A)  NCIS. 
B)  NSQA. 
C)  NASDAQ. 
D)  NASQ. 
A)  NCIS. 
B)  NSQA. 
C)  NASDAQ. 
D)  NASQ.

Question 4

Which of the following is NOT a valid theory that attempts to explain the shape of the term structure of interest rates?

Accepted Answer

A)  the unbiased expectations theory 
B)  the liquidity preference theory 
C)  the market segmentation theory 
D)  the Fisher Effect theory 
A)  the unbiased expectations theory 
B)  the liquidity preference theory 
C)  the market segmentation theory 
D)  the Fisher Effect theory

Question 5

Over time,there has been a high correlation between actual rates of return on securities and the securities' standard deviations of returns.

Accepted Answer

A) True 
 B)False

Question 6

The stock market with the most stringent listing requirements is the

Accepted Answer

A)  New York Stock Exchange (NYS
E) . 
B)  NASDAQ Stock Market. 
C)  American Stock Exchange (AMEX). 
D)  All organized exchanges have the same listing requirements in order to make trading fair for all investors. 
A)  New York Stock Exchange (NYS
E) . 
B)  NASDAQ Stock Market. 
C)  American Stock Exchange (AMEX). 
D)  All organized exchanges have the same listing requirements in order to make trading fair for all investors.

Question 7

Which of the following relationships is true regarding the costs of issuing the following securities?

Accepted Answer

A)  common stock > bonds > preferred stock 
B)  preferred stock > common stock > bonds 
C)  bonds > common stock > preferred stock 
D)  common stock > preferred stock > bonds 
A)  common stock > bonds > preferred stock 
B)  preferred stock > common stock > bonds 
C)  bonds > common stock > preferred stock 
D)  common stock > preferred stock > bonds

Question 8

Financial intermediaries issue their own indirect securities and use the proceeds to purchase the direct securities of other economic units.

Accepted Answer

A) True 
 B)False

Question 9

Examine the securities below and identify the security with the highest liquidity premium,the highest default risk premium,and the highest maturity premium.
a.30-year U.S.Government Treasury bond maturing in 2025
b.25-year Bbb-rated corporate bond maturing in 2030,actively traded on the New York Exchange
c.10-year Aaa-rated corporate bond maturing in 2020,thinly traded on a regional exchange
d.3-month U.S.Treasury bill

Accepted Answer

The 10-year Aaa-rated corporate bond has

Question 10

In August 2004,Google first sold its common stock to the public at $85 per share and raised $1.76 billion.This is an example of

Accepted Answer

A)  a primary market transaction. 
B)  a secondary market transaction. 
C)  a venture capital firm transaction. 
D)  a money-market transaction. 
A)  a primary market transaction. 
B)  a secondary market transaction. 
C)  a venture capital firm transaction. 
D)  a money-market transaction.

Question 11

The risk premium would be greater for an investment in an oil and gas exploration in unproven fields than an investment in preferred stock because

Accepted Answer

A)  oil and gas exploration investments have a greater variability in possible returns. 
B)  the preferred stock is more liquid. 
C)  the inflation rate would vary more with oil and gas exploration investments. 
D)  both A and B 
A)  oil and gas exploration investments have a greater variability in possible returns. 
B)  the preferred stock is more liquid. 
C)  the inflation rate would vary more with oil and gas exploration investments. 
D)  both A and B

Question 12

General Motors raises money by selling a new issue of common stock.This transaction occurs in

Accepted Answer

A)  the secondary market. 
B)  the capital market. 
C)  the money market. 
D)  the futures market. 
A)  the secondary market. 
B)  the capital market. 
C)  the money market. 
D)  the futures market.

Question 13

A basis point is equal to

Accepted Answer

A)  one percent. 
B)  one-tenth of one percent. 
C)  one-hundredth of one percent. 
D)  one-half of one percent. 
A)  one percent. 
B)  one-tenth of one percent. 
C)  one-hundredth of one percent. 
D)  one-half of one percent.

Question 14

A corporation sells securities to an investment banking firm on January 1st.The next day an international oil crisis causes stock prices to drop dramatically.The corporation is immune from the drop in price of its stock due to which function of the investment banking firm?

Accepted Answer

A)  hedging 
B)  distributing 
C)  reinsurance 
D)  underwriting 
A)  hedging 
B)  distributing 
C)  reinsurance 
D)  underwriting

Question 15

Activities of the investment banker include

Accepted Answer

A)  assuming the risk of selling a security issue. 
B)  selling new securities to the ultimate investors. 
C)  providing advice to firms issuing securities. 
D)  all of the above 
A)  assuming the risk of selling a security issue. 
B)  selling new securities to the ultimate investors. 
C)  providing advice to firms issuing securities. 
D)  all of the above

Question 16

A "Dutch auction" was used by Google to raise money in 2004.A Dutch auction involves

Accepted Answer

A)  selling bonds in Europe. 
B)  allowing investors to submit bids saying how many shares they'd like to buy and at what price. 
C)  allowing investment banking firms to submit bids on how many shares they are willing to sell and at what price. 
D)  hiring a Dutch firm to sell a company's securities at auction. 
A)  selling bonds in Europe. 
B)  allowing investors to submit bids saying how many shares they'd like to buy and at what price. 
C)  allowing investment banking firms to submit bids on how many shares they are willing to sell and at what price. 
D)  hiring a Dutch firm to sell a company's securities at auction.

Question 17

Stocks listed on the New York Stock Exchange must be traded exclusively on the NYSE in order to maintain the high standards set by the exchange.

Accepted Answer

A) True 
 B)False

Question 18

The negotiated purchase is the most prevalent method of securities distribution in the private sector.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following represents the correct ordering of standard deviation of returns over the period 1926 to 2014 (from highest to lowest standard deviation of returns)?

Accepted Answer

A)  Treasury bills, long-term corporate bonds, long-term government bonds, common stocks 
B)  common stocks, long-term government bonds, long-term corporate bonds, Treasury bills 
C)  Treasury bills, long-term government bonds, long-term corporate bonds, common stocks 
D)  Treasury bills, long-term government bonds, common stocks, long-term corporate bonds 
A)  Treasury bills, long-term corporate bonds, long-term government bonds, common stocks 
B)  common stocks, long-term government bonds, long-term corporate bonds, Treasury bills 
C)  Treasury bills, long-term government bonds, long-term corporate bonds, common stocks 
D)  Treasury bills, long-term government bonds, common stocks, long-term corporate bonds

Question 20

Transactions in the futures markets involve current payments for goods which will be delivered at some future agreed upon date.

Accepted Answer

A) True 
 B)False

When a company repurchases its own common stock,it is likely that

Organized stock exchanges provide the benefits of a continuous market,fair security pricing,and helping businesses raise new capital.

The telecommunications system that provides a national information linkup among brokers and dealers operating in the over-the-counter market is called

Which of the following is NOT a valid theory that attempts to explain the shape of the term structure of interest rates?

Over time,there has been a high correlation between actual rates of return on securities and the securities' standard deviations of returns.

The stock market with the most stringent listing requirements is the

Which of the following relationships is true regarding the costs of issuing the following securities?

Financial intermediaries issue their own indirect securities and use the proceeds to purchase the direct securities of other economic units.

In August 2004,Google first sold its common stock to the public at $85 per share and raised $1.76 billion.This is an example of

The risk premium would be greater for an investment in an oil and gas exploration in unproven fields than an investment in preferred stock because

General Motors raises money by selling a new issue of common stock.This transaction occurs in

A basis point is equal to

A corporation sells securities to an investment banking firm on January 1st.The next day an international oil crisis causes stock prices to drop dramatically.The corporation is immune from the drop in price of its stock due to which function of the investment banking firm?

Activities of the investment banker include

A "Dutch auction" was used by Google to raise money in 2004.A Dutch auction involves

Stocks listed on the New York Stock Exchange must be traded exclusively on the NYSE in order to maintain the high standards set by the exchange.

The negotiated purchase is the most prevalent method of securities distribution in the private sector.

Which of the following represents the correct ordering of standard deviation of returns over the period 1926 to 2014 (from highest to lowest standard deviation of returns)?

Transactions in the futures markets involve current payments for goods which will be delivered at some future agreed upon date.

An Introduction to the Foundations of Financial Management

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

International Business Finance

Cash,receivables,and Inventory Management

Filters

Exam 2: The Financial Markets and Interest Rates

When a company repurchases its own common stock,it is likely that

Organized stock exchanges provide the benefits of a continuous market,fair security pricing,and helping businesses raise new capital.

The telecommunications system that provides a national information linkup among brokers and dealers operating in the over-the-counter market is called

Which of the following is NOT a valid theory that attempts to explain the shape of the term structure of interest rates?

Over time,there has been a high correlation between actual rates of return on securities and the securities' standard deviations of returns.

The stock market with the most stringent listing requirements is the

Which of the following relationships is true regarding the costs of issuing the following securities?

Financial intermediaries issue their own indirect securities and use the proceeds to purchase the direct securities of other economic units.

In August 2004,Google first sold its common stock to the public at $85 per share and raised $1.76 billion.This is an example of

The risk premium would be greater for an investment in an oil and gas exploration in unproven fields than an investment in preferred stock because

General Motors raises money by selling a new issue of common stock.This transaction occurs in

A basis point is equal to

A corporation sells securities to an investment banking firm on January 1st.The next day an international oil crisis causes stock prices to drop dramatically.The corporation is immune from the drop in price of its stock due to which function of the investment banking firm?

Activities of the investment banker include

A "Dutch auction" was used by Google to raise money in 2004.A Dutch auction involves

Stocks listed on the New York Stock Exchange must be traded exclusively on the NYSE in order to maintain the high standards set by the exchange.

The negotiated purchase is the most prevalent method of securities distribution in the private sector.

Which of the following represents the correct ordering of standard deviation of returns over the period 1926 to 2014 (from highest to lowest standard deviation of returns)?

Transactions in the futures markets involve current payments for goods which will be delivered at some future agreed upon date.

An Introduction to the Foundations of Financial Management

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

International Business Finance

Cash,receivables,and Inventory Management

Filters