Question 1

The real rate of return is the return earned above the

Accepted Answer

A)  default risk premium. 
B)  risk-adjusted return. 
C)  inflation risk premium. 
D)  variability of returns measured by standard deviation.

Question 2

All of the following are typically advantages of private placements except:

Accepted Answer

A)  speed. 
B)  reduced flotation costs. 
C)  financial flexibility. 
D)  the possibility of future SEC registration.

Question 3

The yield curve in 2009 was very low,with short-term rates close to zero and long-term rates below 5 percent.What factors contributed to such low interest rates?

Accepted Answer

The answer of The yield curve in 2009 was very...

Question 4

Which of the following is not a benefit provided by the existence of organized security exchanges?

Accepted Answer

A)  providing a continuous market 
B)  establishing and publicizing fair security prices 
C)  helping businesses raise new capital 
D)  standardization of all debt agreements

Question 5

Investment banking firms offer to facilitate the sale of securities to the public in a variety of ways.Which of the following methods guarantees the corporation with a pre-determined price for the securities?

Accepted Answer

A)  a best efforts basis 
B)  a commission basis 
C)  a competitive bid 
D)  an underwriting

Question 6

Cash markets are often referred to as spot markets.

Accepted Answer

A) True 
 B)False

Question 7

Individuals,corporations,and governments can be either savings deficit units or savings surplus units.

Accepted Answer

A) True 
 B)False

Question 8

For a firm to have its securities listed on an exchange,it must meet certain requirements.These usually include measures of profitability,size,market value,and public ownership.

Accepted Answer

A) True 
 B)False

Question 9

The investment banker performs what three basic functions?

Accepted Answer

A)  underwriting, distributing, and regulating 
B)  underwriting, advising, and price-pegging 
C)  underwriting, distributing, and advising 
D)  underwriting, distributing, and negotiating

Question 10

On the basis of number of shares traded,more stocks are traded over the counter than on organized exchanges.

Accepted Answer

A) True 
 B)False

Question 11

The term structure of interest rates usually indicates that longer terms to maturity have higher expected returns.

Accepted Answer

A) True 
 B)False

Question 12

A commitment fee is

Accepted Answer

A)  an amount paid on the unused portion of a loan in a private placement. 
B)  an amount paid by an investment banker to ensure the sale of securities. 
C)  paid by investors to guarantee that a company will borrow from them. 
D)  paid by bondholders to secure the right to convert bonds into common stock.

Question 13

In a private placement,the securities are offered and sold to a limited number of investors.

Accepted Answer

A) True 
 B)False

Question 14

Because they occur in private,stricter regulations are placed on the private placement of securities.

Accepted Answer

A) True 
 B)False

Question 15

The need for extensive regulation of investment banking firms is limited due to the highly competitive nature of that industry.

Accepted Answer

A) True 
 B)False

Question 16

The bid price is the price that a dealer will pay for a security; the asked price is the price at which she will sell a security.

Accepted Answer

A) True 
 B)False

Question 17

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.

Question 18

Which of the following statements is false?

Accepted Answer

A)  Brokers purchase securities for their own account. 
B)  Most corporate bond trading takes place over the counter. 
C)  Broker-dealers stand ready to buy and sell specific securities at selected prices. 
D)  none of the above

Question 19

Money market transactions include which of the following?

Accepted Answer

A)  any security that is paid for with cash 
B)  30-year U.S. Treasury bonds 
C)  all securities paid for with the proceeds of a money market account 
D)  securities that have a maturity of less than one year

Question 20

All of the following are benefits of organized stock exchanges except:

Accepted Answer

A)  increased stock price volatility. 
B)  continuous markets. 
C)  fair security prices. 
D)  easier access to new capital for business expansion.

Exam 2: The Financial Markets and Interest Rates

The real rate of return is the return earned above the

All of the following are typically advantages of private placements except:

The yield curve in 2009 was very low,with short-term rates close to zero and long-term rates below 5 percent.What factors contributed to such low interest rates?

Which of the following is not a benefit provided by the existence of organized security exchanges?

Investment banking firms offer to facilitate the sale of securities to the public in a variety of ways.Which of the following methods guarantees the corporation with a pre-determined price for the securities?

Cash markets are often referred to as spot markets.

Individuals,corporations,and governments can be either savings deficit units or savings surplus units.

For a firm to have its securities listed on an exchange,it must meet certain requirements.These usually include measures of profitability,size,market value,and public ownership.

The investment banker performs what three basic functions?

On the basis of number of shares traded,more stocks are traded over the counter than on organized exchanges.

The term structure of interest rates usually indicates that longer terms to maturity have higher expected returns.

A commitment fee is

In a private placement,the securities are offered and sold to a limited number of investors.

Because they occur in private,stricter regulations are placed on the private placement of securities.

The need for extensive regulation of investment banking firms is limited due to the highly competitive nature of that industry.

The bid price is the price that a dealer will pay for a security; the asked price is the price at which she will sell a security.

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

Which of the following statements is false?

Money market transactions include which of the following?

All of the following are benefits of organized stock exchanges except: