Question 1

Which of the follow regulates the primary market in which securities are originally issued to the public?

Accepted Answer

A)  The Securities Act of 1933 
B)  The Gramm-Leach-Biley Act 
C)  The Securities Exchange Act of 1934 
D)  The Glass-Steagall Act 
A)  The Securities Act of 1933 
B)  The Gramm-Leach-Biley Act 
C)  The Securities Exchange Act of 1934 
D)  The Glass-Steagall Act

Question 2

An implication of the Efficient Market Hypothesis is that it is very hard for an actively managed mutual fund to earn above average returns. This is true for all of the following reasons EXCEPT

Accepted Answer

A)  new information is predictable and therefore already incorporated into the stock prices. 
B)  new information is by definition unpredictable, thus hard to incorporate into stock prices. 
C)  actively managed mutual funds typically charge fees of about 1.5%. 
D)  index funds make no attempt to analyze stocks. 
A)  new information is predictable and therefore already incorporated into the stock prices. 
B)  new information is by definition unpredictable, thus hard to incorporate into stock prices. 
C)  actively managed mutual funds typically charge fees of about 1.5%. 
D)  index funds make no attempt to analyze stocks.

Question 3

Which of the follow regulates the secondary market and created the Securities Exchange Commission (SEC)?

Accepted Answer

A)  The Securities Act of 1933 
B)  The Gramm-Leach-Biley Act 
C)  The Securities Exchange Act of 1934 
D)  The Glass--Steagall Act 
A)  The Securities Act of 1933 
B)  The Gramm-Leach-Biley Act 
C)  The Securities Exchange Act of 1934 
D)  The Glass--Steagall Act

Question 4

The average tax rate of a corporation with ordinary income of $105,000 and a tax liability of $24,200 is

Accepted Answer

A)  46 percent. 
B)  23 percent. 
C)  34 percent. 
D)  15 percent. 
A)  46 percent. 
B)  23 percent. 
C)  34 percent. 
D)  15 percent.

Question 5

Mortgage default rates were low from the mid 1990s through 2006 because home prices were rising and lenders allowed borrowers who were having difficulty making payments to refinance on the built up home equity.

Accepted Answer

A) True 
 B)False

Question 6

In the OTC market, the prices at which securities are traded result from both competitive bids and negotiation.

Accepted Answer

A) True 
 B)False

Question 7

The eurocurrency market is a market for short-term bank deposits denominated in U.S. dollars or other easily convertible currencies.

Accepted Answer

A) True 
 B)False

Question 8

The Gramm-Leach-Biley Act

Accepted Answer

A)  does not allows business combinations between commercial banks, investment banks and insurance companies. 
B)  allows business combinations between commercial banks and investment banks, but not insurance companies. 
C)  allows business combinations between commercial banks, investment banks and insurance companies. 
D)  was signed during the Great Depression because of the financial crisis. 
A)  does not allows business combinations between commercial banks, investment banks and insurance companies. 
B)  allows business combinations between commercial banks and investment banks, but not insurance companies. 
C)  allows business combinations between commercial banks, investment banks and insurance companies. 
D)  was signed during the Great Depression because of the financial crisis.

Question 9

Trading is carried out on the floor of the New York Stock Exchange by

Accepted Answer

A)  the negotiation process. 
B)  the auction process. 
C)  a telecommunications network. 
D)  investment bankers. 
A)  the negotiation process. 
B)  the auction process. 
C)  a telecommunications network. 
D)  investment bankers.

Question 10

The Securities Act of 1933 focuses on regulating the sale of securities in the primary market, whereas the 1934 Act deal with the regulations governing the transactions in the secondary market.

Accepted Answer

A) True 
 B)False

Question 11

In an efficient market if a company announced sales of a new product are lower than expected, what would you expect to happen to the stock price?

Accepted Answer

A)  It would not change. 
B)  It would increase. 
C)  It would decrease. 
D)  It would move it the same direction as the market in general. 
A)  It would not change. 
B)  It would increase. 
C)  It would decrease. 
D)  It would move it the same direction as the market in general.

Question 12

The tax liability of a corporation with ordinary income of $1,500,000 is ________.

Accepted Answer

A)  $498,250 
B)  $510,000 
C)  $585,000 
D)  $690,000 
A)  $498,250 
B)  $510,000 
C)  $585,000 
D)  $690,000

Question 13

All of the following are functions of security exchanges EXCEPT

Accepted Answer

A)  allocating scarce capital. 
B)  aiding in new financing. 
C)  creating continuous markets. 
D)  holding demand deposits. 
A)  allocating scarce capital. 
B)  aiding in new financing. 
C)  creating continuous markets. 
D)  holding demand deposits.

Question 14

The key participants in financial transactions are individuals, businesses, and governments. Individuals are net ________ of funds, and businesses are net ________ of funds.

Accepted Answer

A)  demanders; suppliers 
B)  users; providers 
C)  suppliers; demanders 
D)  purchasers; sellers 
A)  demanders; suppliers 
B)  users; providers 
C)  suppliers; demanders 
D)  purchasers; sellers

Question 15

The tax liability of a corporation with ordinary income of $105,000 is ________.

Accepted Answer

A)  $42,000 
B)  $35,700 
C)  $23,950 
D)  $24,200 
A)  $42,000 
B)  $35,700 
C)  $23,950 
D)  $24,200

Question 16

Mortgage-backed securities are securities that represent claims on the cash flows generated by a pool of mortgages.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following assist companies in raising capital, advise firms on major transactions such as mergers or financial restructuring, and engage in trading and market making activities?

Accepted Answer

A)  Investment Banks 
B)  Securities Exchanges 
C)  Mutual Funds 
D)  Commercial Banks 
A)  Investment Banks 
B)  Securities Exchanges 
C)  Mutual Funds 
D)  Commercial Banks

Question 18

The Over-the-Counter (OTC) exchange is not an organization but an intangible market for trading securities which are not listed by the organized exchanges.

Accepted Answer

A) True 
 B)False

Question 19

All of the following are true about mortgage-backed securities EXCEPT:

Accepted Answer

A)  They represent claims on the cash flows generated by a pool of mortgages. 
B)  All of the cash flows from these securities are guaranteed by the U.S. government. 
C)  They can be purchased by individual investors, pension funds, and mutual funds. 
D)  The primary risk associated with them is that homeowners may not be able or may not choose to repay the loan. 
A)  They represent claims on the cash flows generated by a pool of mortgages. 
B)  All of the cash flows from these securities are guaranteed by the U.S. government. 
C)  They can be purchased by individual investors, pension funds, and mutual funds. 
D)  The primary risk associated with them is that homeowners may not be able or may not choose to repay the loan.

Question 20

In efficient market is one where

Accepted Answer

A)  prices of stocks move up and down widely without apparent reason. 
B)  prices of stocks remain steady for long periods of time. 
C)  prices of stocks are unaffected by market news. 
D)  prices of stocks incorporate new information quickly and adjust appropriately to their true value. 
A)  prices of stocks move up and down widely without apparent reason. 
B)  prices of stocks remain steady for long periods of time. 
C)  prices of stocks are unaffected by market news. 
D)  prices of stocks incorporate new information quickly and adjust appropriately to their true value.

Which of the follow regulates the primary market in which securities are originally issued to the public?

An implication of the Efficient Market Hypothesis is that it is very hard for an actively managed mutual fund to earn above average returns. This is true for all of the following reasons EXCEPT

Which of the follow regulates the secondary market and created the Securities Exchange Commission (SEC)?

The average tax rate of a corporation with ordinary income of $105,000 and a tax liability of $24,200 is

Mortgage default rates were low from the mid 1990s through 2006 because home prices were rising and lenders allowed borrowers who were having difficulty making payments to refinance on the built up home equity.

In the OTC market, the prices at which securities are traded result from both competitive bids and negotiation.

The eurocurrency market is a market for short-term bank deposits denominated in U.S. dollars or other easily convertible currencies.

The Gramm-Leach-Biley Act

Trading is carried out on the floor of the New York Stock Exchange by

The Securities Act of 1933 focuses on regulating the sale of securities in the primary market, whereas the 1934 Act deal with the regulations governing the transactions in the secondary market.

In an efficient market if a company announced sales of a new product are lower than expected, what would you expect to happen to the stock price?

The tax liability of a corporation with ordinary income of $1,500,000 is ________.

All of the following are functions of security exchanges EXCEPT

The key participants in financial transactions are individuals, businesses, and governments. Individuals are net of funds, and businesses are net of funds.

The tax liability of a corporation with ordinary income of $105,000 is ________.

Mortgage-backed securities are securities that represent claims on the cash flows generated by a pool of mortgages.

Which of the following assist companies in raising capital, advise firms on major transactions such as mergers or financial restructuring, and engage in trading and market making activities?

The Over-the-Counter (OTC) exchange is not an organization but an intangible market for trading securities which are not listed by the organized exchanges.

All of the following are true about mortgage-backed securities EXCEPT:

In efficient market is one where

The Role of Managerial Finance

Financial Statements and Ratio Analysis

Cash Flow and Financial Planning

Time Value of Money

Interest Rates and Bond Valuation

Stock Valuation

Risk and Return

The Cost of Capital

Capital Budgeting Techniques

Capital Budgeting Cash Flows and Risk Refinements

Leverage and Capital Structure

Payout Policy

Working Capital and Current Assets Management

Current Liabilities Management

Filters

Exam 2: The Financial Market Environment

Which of the follow regulates the primary market in which securities are originally issued to the public?

An implication of the Efficient Market Hypothesis is that it is very hard for an actively managed mutual fund to earn above average returns. This is true for all of the following reasons EXCEPT

Which of the follow regulates the secondary market and created the Securities Exchange Commission (SEC)?

The average tax rate of a corporation with ordinary income of $105,000 and a tax liability of $24,200 is

Mortgage default rates were low from the mid 1990s through 2006 because home prices were rising and lenders allowed borrowers who were having difficulty making payments to refinance on the built up home equity.

In the OTC market, the prices at which securities are traded result from both competitive bids and negotiation.

The eurocurrency market is a market for short-term bank deposits denominated in U.S. dollars or other easily convertible currencies.

The Gramm-Leach-Biley Act

Trading is carried out on the floor of the New York Stock Exchange by

The Securities Act of 1933 focuses on regulating the sale of securities in the primary market, whereas the 1934 Act deal with the regulations governing the transactions in the secondary market.

In an efficient market if a company announced sales of a new product are lower than expected, what would you expect to happen to the stock price?

The tax liability of a corporation with ordinary income of $1,500,000 is ________.

All of the following are functions of security exchanges EXCEPT

The key participants in financial transactions are individuals, businesses, and governments. Individuals are net ________ of funds, and businesses are net ________ of funds.

The tax liability of a corporation with ordinary income of $105,000 is ________.

Mortgage-backed securities are securities that represent claims on the cash flows generated by a pool of mortgages.

Which of the following assist companies in raising capital, advise firms on major transactions such as mergers or financial restructuring, and engage in trading and market making activities?

The Over-the-Counter (OTC) exchange is not an organization but an intangible market for trading securities which are not listed by the organized exchanges.

All of the following are true about mortgage-backed securities EXCEPT:

In efficient market is one where

The Role of Managerial Finance

Financial Statements and Ratio Analysis

Cash Flow and Financial Planning

Time Value of Money

Interest Rates and Bond Valuation

Stock Valuation

Risk and Return

The Cost of Capital

Capital Budgeting Techniques

Capital Budgeting Cash Flows and Risk Refinements

Leverage and Capital Structure

Payout Policy

Working Capital and Current Assets Management

Current Liabilities Management

Filters

The key participants in financial transactions are individuals, businesses, and governments. Individuals are net of funds, and businesses are net of funds.