Exam 2: The Financial System and the Economy

​Which of the following risks is only faced by investors in debt securities?

The periodic payments on equity securities are called

Suppose you are an investor with a choice between three securities that are identical in every way except in terms of their rates of return and risk.Which investment provides the highest expected return? Investment A: $\quad$ Total return = 10 percent with probability 50 percent $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Total return = 20 percent with probability 50 percent Investment B: $\quad$ Total return = 12 percent with probability 50 percent $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Total return = 20 percent with probability 50 percent Investment C: $\quad$ Total return = 5 percent with probability 60 percent $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Total return = 25 percent with probability 40 percent Investment D: $\quad$ Total return = 5 percent with probability 60 percent $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Total return = 7 percent with probability 40 percent

A risk averse investor will choose an investment​

Interest payments are

In the United States, the biggest issuers of securities are

Everything else remaining unchanged, a decrease in the supply of security A and a decrease in the demand for security B will cause the price of security A to_____ and the price of security B to_____ .

Which of the following is true of a financial market?

Everything else remaining unchanged, an increase in the supply of security A and a decrease in the demand for security B will cause the price of security A to_____ and the price of security B to_____ .

Suppose the quantity demanded for a security is B_D = 150 ? 0.1b, And the quantity supplied of the security is B_S = 50 + 0.1b, Where b is the price of the security in dollars.Suppose that the supply curve shifts to B_S = 75 + 0.1b. The equilibrium quantity of the security

Four friends- Phillips, Eliza, John, and Jacob are associated with Redhood Ltd.in different ways.Phillips is the CEO of Redhood Ltd., Melissa works as an accountant while John owns some shares of Redhood Ltd.and Jacob has some debt securities issued by the company.​Who is likely to be paid last in case of a bankruptcy?

​Mobi's is a new company that manufactures premium apparel for men.It needs fund for expanding its production units and is planing to issue the first lot of shares.These shares will be traded in the .

Suppose you are an investor with a choice between three securities that are identical in every way except in terms of their rates of return and risk. Investment A: $\quad$ Total return = 10 percent with probability 50 percent $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Total return = 20 percent with probability 50 percent Investment B: $\quad$ Total return = 12 percent with probability 40 percent $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Total return = 14 percent with probability 60 percent Investment C: $\quad$ Total return = 10 percent with probability 60 percent $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Total return = 30 percent with probability 40 percent a.Which investment provides the highest expected return? Show your work by calculating the expected return of all three investments. b.Calculate the standard deviation of all three investments. c.What type of investor might prefer investment A? Who might prefer investment B?

The periodic payments on debt securities are called

A security has a price of $3,000 and an amount to be repaid in a single payment of $3,400.What is the amount of interest on the security?

Suppose you are an investor with a choice between three investments in debt securities that are identical in every way except in terms of their interest rates and taxability. Investment A: $\quad$ Interest rate 10 percent, tax rate 40 percent of interest income Investment B: $\quad$ Interest rate 8 percent, tax rate 30 percent of interest income Investment C: $\quad$ Interest rate 6.5 percent, tax rate 0 percent Which investment provides the highest after-tax return? Show your work.

Investors who wish to reduce their risk should

Risk that cannot be eliminated by diversification is referred to as

If the demand for a company's stock decreases​, supply remaining unchanged,

Consider the following four debt securities, which are identical in every characteristic except as noted: W: $\quad$ A corporate bond rated AAA X: $\quad$ A corporate bond rated BBB Y: $\quad$ A corporate bond rated AAA with a shorter time to maturity than bonds W and X Z: $\quad$ ?A corporate bond rated AAA with the same time to maturity as bond Y that trades in a More liquid market than bonds W, X, or Y Which of the following is the most likely order of the interest rates (yields to maturity) of the bonds from highest to lowest?