FIN 3244 Study Guide - Quiz Guide: Secondary Mortgage Market, Aroldis Chapman, Financial Intermediary

132 views15 pages

beigebutterfly895

12 Aug 2016

School

Department

Course

Professor

For unlimited access to Study Guides, a Grade+ subscription is required.

Document Summary

Questions: briefly define: equity securities, debt securities, and securitized loans. Equity securities are securities that represent residual ownership in a firm. Stock is the most common type of equity security. Debt securities are financial securities issued by firms and governments to borrow money. In exchange for purchasing debt securities, purchasers have a legal rights to principal and interest. Government treasuries and corporate bonds are common types of debt securities. Securitized loans are loans that are tradable (can be bought and sold) in financial markets. Yes, it is possible that a saver"s asset could be a borrower"s liability. A bond issued by a corporation is a liability to the corporation because it represents a loan that the firm is legally obliged to pay back. From the point of view of the saver who buys the bond, however, the bond is an asset because it represents a financial claim on the corporation that issued the bond.

Related Questions

Question 1.1. Effectively planning your spending and saving decisions provides for: (Points : 2)

A foundation for wise money management today
Will guarantee you a million dollars
Financial prosperity in the future
Both A and B
Both A and C

Question 2.2. The majority of people invest their money to: (Points : 2)

Enhance their current income
Accumulate funds for major expenditures
Save for retirement
Shelter their income from taxes
All of the above

Question 3.3. The federal government regulates securities markets through the: (Points : 2)

Department of Commerce
Federal Reserve System
National Association of Securities Dealers
Securities and Exchange Commission
Federal Securities Agency

Question 4.4. A certified financial planner can provide you with a companyâs ______ describing the firm and the security issue it wishes to sell. (Points : 2)

advertisement
prospectus
underwriting journal
dealer newsletter
None of these

Question 5.5. What investment portfolio is most diversified? (Points : 2)

Equal amounts of stock in IBMÂ®, IntelÂ®, and MicrosoftÂ®
Municipal bonds issued by New York, Houston, and Chicago
One-year, five-year, and ten-year certificates of deposit
100 shares of Wal-Mart stock, an IBM bond, and a two-year certificate of deposit

Question 6.6. What are the returns from shares of stock? (Points : 2)

Stock splits
Capital depreciation
Dividends
The ability to buy bonds

Question 7.7. The total interest that has accumulated after more than one interest period is called: (Points : 2)

Simple interest
Compound interest
Variable interest
Fixed interest

Question 8.8. An investment plan is: (Points : 2)

A statement that states how money is to be invested to obtain a specified goal
A statement that shows how much you owe
A plan to go into debt
A plan to cover your losses

Question 9.9. Ask price is: (Points : 2)

The price you sell a security
The price the security is worth
The price at which one can purchase a security
None of these

Question 10.10. The process of choosing securities from different industries and different risk levels is called: (Points : 2)

Discount broking
Asset Management
Diversification
Compounding
None of these

ceruleankangaroo744

Many businesses find it generally more efficient to enlist the services of a financial institution when it comes time to raise capital: IE. Investment Banks: An organization that underwrites and distributes new investment securities and helps business obtain financing. Commercial Banks: The traditional department store type of financing serving a variety of savers and borrowers. Financial Service Corporations: A firm that offers a wide range of financial services, including investment banking, brokerage operations, insurance, and commercial banking. Credit Unions: Cooperative association whose members have a common bond such as employees of the same firm. Pension Funds: Retirement plans funded by corporations or government agencies. Life Insurance Companies: Take annual premium payments and invest these funds in stocks, bonds, or real estate and make payments to beneficiaries of the insured parties. Mutual Funds: Corporations that accept money from savers and then use these funds to buy stocks, long-term bonds, or short-term debt issued by business or government. They typically pool funds to reduce risk by diversification. Exchange Traded Funds (ETFs): Buy a portfolio of stocks of a certain type of business sector. IE. media companies, oil companies, Chinese companies, etc. and then sell their own shares to the public. Hedge Funds: Not regulated by the Securities and Exchange Commission (SEC). Typically have large minimum investments of over $1 million and marketed to individuals an institutions with high net worth. Private Equity Companies: Target, buy, and then manage entire firms. Most of the money used to buy these companies is borrowed. Why are the various financial instruments considered claims against a company's future cash flows ?

Answer True or False to each of the next five (5) statements.

1. Treasury Bills are issued through competitive bidding process at discount from par.

2. In the capital market both short term and long term securities are traded, whereas only short term securities are traded in the money market.

3. Free cash flow represents the amount of money available to the firm, after it has met all operating needs and paid for investments in net fixed assets.

4. Three ratios of liquidity are net working capital, current ratio and acid - test ratio

5. The income statement represents changes within a time period, while the balance sheet reflects levels as at a particular period.

Choose the letter a, b, c, or d that carries the appropriate response:

6. _______________ Serve as intermediaries channelling the savings of individuals, businesses, and governments into loans and investments.

(a) Financial markets

(b) Financial institutions

(d) OTC markets

7. Of the following group of ratios, which would show the combined effect of liquidity, asset management and debt on the overall operating results?

(a) Liquidity ratios

(b) Debt ratios

(d) Profitability ratios

8. XYZ Company Ltd. has EBIT of $1,500,00 million and a 15% tax rate. It had $270,000 in depreciation expenses with a $250,000 increase in working capital. It had another $170,000 in capital expenditures. What is its free cash flow?

(a) $1,125,000

(b) $ 2,850,000

(d) $ 1,500,000

9. Fast Cash Limited charges 1 percent (%) per week on their loans. Assume there are exactly 52 weeks in a year. What is the effective annual rate?

(a) 55.36%

(b) 67.77%

(d) 57.35%

10. _________________ is an annuity that provides its holder with payment dollars at the beginning of each year.

(a) An annuity due

(b) A warrant

(d) An ordinary annuity

11. All of the following statements about bonds are true, except one. Choose the false statement.

(a) If the value of a bond, B_o, is less than its par value, the bond is selling at a discount.

(b) Bonds with short maturities will have less interest rate risk than bonds with longer maturities and equal features.

(d) The discount rate of a bond is synonymous with the bond's required return.

12. The present value of a bond's _____________________________ determines the value of the bond.

(a) Dividend

(b) Coupon payment and maturity value

(c) Coupon payment

(d) Maturity value

13. If the returns on one asset move in the same direction as the returns on another asset then the asset are:

(a) Positively correlated

(b) not correlated

(c) negatively correlated

(d) perfectly positively correlated.

14. Another term for non-diversifiable risk is:

(a) Systematic risk

(b) non- systematic risk

(d) both b and c

15. All of the following statements about stock valuation are true, except one. Choose the false statement.

(a) It is easier to value stock than it is to find the value of bonds.

(b) The value of a share of stock depends on the cash flows investors can expect to by owning that stock

(d) The present value of a stock's dividend determines the value of the stock.

ivorybutterfly448

FIN 3244 Study Guide - Quiz Guide: Secondary Mortgage Market, Aroldis Chapman, Financial Intermediary

Document Summary

Get access

Related Documents

FIN 3244 Study Guide - Quiz Guide: Federal Deposit Insurance Corporation, Federal Open Market Committee, Initial Public Offering

FIN 3244 Study Guide - Final Guide: Net Profit, Main Source, Treasury Stock

FIN 3244 Midterm: fin3244 test 3 rvw.docx

Related Questions