Exam 10: Financial Markets: Allocating Financial Resources

Lydia sells her ancestral property for a handsome amount of money. She invests this money in various securities. She decides not to trade the securities for a while and lets her money increase with the growth of the overall market. However, after almost eight years, when she feels that the value of the securities has risen considerably, Lydia sells her stocks and receives high returns on her investment. In this scenario, Lydia has used the _____ investment strategy.

An online food delivery service goes out of business owing to stiff competition. The company has long overdue taxes because of which its stockholders do not receive the proceeds of the company after its dissolution. In this case, the company is not able to fulfill the _____ of its stockholders.

Futures Life Insurance is an insurance company in South Africa. The insurance company uses its large pool of financial capital, which it accumulates by collecting premiums from its policyholders, to purchase corporate stocks of different multinational companies. In this scenario, Futures Life Insurance is a(n) _____.

Aaron buys 300 shares in a tobacco company. Within a year, he receives a capital gain on his stocks. This means that:

A drawback of actively managed funds is:

Lina, along with ten of her colleagues, starts a financial cooperative to financially assist each other. The members pool their savings in the cooperative, and they can also take loans from it on a low interest rate. Members of the cooperative benefit from higher returns on savings and lower rates on loans. In this scenario, the cooperative started by Lina and her colleagues exemplifies a(n) _____.

Grenville Osborn Corp., a commercial bank in the United States, faces legal action for its private dealings in the securities market and in selling insurance. The Grenville Osborn & Co. is in violation of the:

Samuel assists his clients in investing in the stock market. He not only acts as an agent by buying and selling corporate stocks and bonds on behalf of them, but also provides them with services like financial consultation and market research for a fee. In this scenario, Samuel plays the role of a(n) _____.

Jeremy holds 14.5% shares of stock in an automobile company. As per the company norms, if the company issues new stock, as an existing stockholder, Jeremy can buy 14.5% of the new shares before the stock is offered to the other investors of the company. Which of the following common stockholder rights does this scenario exemplify?

Clanston Corp., a steel manufacturing giant, announces its plans to merge with another steel manufacturing company, Tralesta Corp. Peter is a major stockholder in Clanston Corp., and his experience suggests that the merger is not going to be a profitable one. Which of the following basic shareholder rights must Peter use to express his disapproval of the merger?

Olivia owns convertible securities in a company that manufactures electrical appliances. If the conversion ratio for the convertible securities is 50, it means that:

Which of the following is the main reason for private placements being less expensive than public offerings?