Homework answers / question archive / University of New Haven FINC 2213 Quiz 3 (Chap 2,5) True/False Indicate whether the statement is true or false

University of New Haven FINC 2213 Quiz 3 (Chap 2,5) True/False Indicate whether the statement is true or false

Accounting

Share With

---

University of New Haven

FINC 2213

Quiz 3 (Chap 2,5)

True/False

Indicate whether the statement is true or false.

1)Small company stocks with modest market capitalizations do not meet the listing requirements for major exchanges like the NYSE or NASDAQ, so they trade their shares on over-the-counter exchanges. 

 

2.            An SPO represents the first time issuance of stock by a company that is going public.

3.            The NASDAQ stock market is an example of a physical location exchange.

 

4.            If Aetna wants to sell 5 million shares of GE and CALPERS, a large employee pension fund in California, is interested in buying 5 million shares of GE, this transaction is likely to occur privately using an ECN.

 

5.            The value of a put option goes up when the value of the underlying stock increases in value.

 

6.            Because of financial regulations, banks are able to offer cheaper rates on their products than credit unions.

 

7.            A collateralized mortgage obligation or CMO where a number of mortgages are packaged together, rated and sold to investors is an example of securitization.

 

8.            Rome Italy is one of the most important financial centers in the world.

 

9.            A chain of convenience stores that sell gasoline has lost their major supplier of gasoline. Until they can contract with a new supplier they will likely go to the spot market to get the gasoline they need so as not to lose customers.

 

10.          Private equity firms instead of buying stock in a firm buy entire companies.

 

Multiple Choice

Identify the choice that best completes the statement or answers the question.

 

11.          Which of the following statements about the markets is INCORRECT?

a.            The S&P 500 is more significant than the DJIA because it contains the top companies in all the major industries

b.            The DOW Jones Industrial average (DJIA) is only based on 30 large stocks that represent only about 20% or so of U.S. stocks.

c.             Although there may be times when stock market returns are negative, over the long term the returns are positive.

d.            The Nasdaq composite index is an average of the largest 100 companies listed on the NASDAQ exchange.

e.            Stock quotes, which only used to be available by calling a broker before modern telecommunication systems evolved, are now readily available from many sources on the internet.

 

 

12.          Which of the following financial institutions would help to issue an IPO?

a.            Investment bank.

b.            Insurance company

c.             Commercial bank

d.            Brokerage firm.

e.            Mutual Fund company

13.          Deferred transactions take place in which of the following markets?

a.            Money markets.

 

b.            Capital markets.

c.             Spot markets.

d.            Futures markets.

e.            Primary markets.

14.          Which of the following statements is INCORRECT?

a.            Human Resource professionals working for MNC’s now have to deal with more cultural issues than ever before.

b.            Regulations of financial transactions in a globalized economy is challenging because virtually no country regulator is willing to cede their authority to a global governing body which means a hodge podge of regulations stilll exists.

c.             With such a large percentage of the global market capitalization for companies outside of the U.S., a well diversified portfolio should include many foreign stocks.

d.            A collateralized mortgage obligation or CMO is a securitized insturment built from individual mortgages that are packaged and sold to investors as bonds.

e.            A closely held corporation is a publicly held company with very few shareholders owning the stock.

15.          A physical asset market would trade all of the following except:

a.            Bonds

b.            Real Estate

c.             Wheat

d.            Machinery

e.            Oil

16.          You recently sold 100 shares of Microsoft stock to your brother at a family reunion. At the reunion your brother gave you a check for the stock and you gave your brother the stock certificates which can be used to deposit the shares of stock into his brokerage account.. Which of the following best describes this transaction?

a.            This is an example of a derivative market transaction.

b.            This is an example of a primary market transaction.

c.             This is an example of a money market transaction.

d.            This is an example of a direct transfer of capital.

e.            This is an example of an exchange of physical assets.

17.          Which of the following statements is INCORRECT?

a.            An example of a financial intermediary is a bank.

b.            A market is a venue where goods and services are exchanged.

c.             A bull market is one that is trending downwards.

d.            The existence of bribery and business elites in a country usually impedes economic functioning.

e.            Financial markets bring together providers of capital with users of capital.

 

18.          Which of the following statements is INCORRECT?

a.            Hedging is a technique that uses derivatives to protect against price changes in some asset such as oil prices. This is a strategy popular with some airlines.

b.            The recent financial crisis demonstrated that markets and economies around the world are linked like never before so that a problem in one area can ripple around the world.

c.             Technological advances have made it easier to move money around the world, but unfortunately, this also works for criminals and terrorists as well as legitimate businesses.

d.            The global nature of business begs for global regulations, but many countries are loath to relinquish control to an international body.

 

e.            South Korea is considered one of the BRICS countries.

19.          William Patterson, CEO of a small tech firm, needs to borrow money for 6 months to buy some raw materials for manufacturing. What market will he need to look to in order to get his loan?

a.            Capital markets

b.            Money markets

c.             Futures markets

d.            Physical asset markets

e.            Spot markets

20.          Which of the following investments would most likely lose money?

a.            Owning a gold ETF when gold prices are in a bull market.

b.            Owning a call option on the DOW Industrial index in a bear market.

c.             Owning shares of Ford when the economy is booming and auto sales are soaring.

d.            Owning a put option on the S&P 500 index in a bear market.

e.            Owning a call option on Intel when its earnings have been good and its news is favorable.

 

Numeric Response

 

21.          You are buying your first house for $220,000, and are paying $30,000 as a down payment. You have arranged to finance the remaining $190,000 30-year mortgage with a 7% nominal interest rate and monthly payments. What are the equal monthly payments you must make?

 

22.          What's the future value of $2,000 after 3 years if the appropriate interest rate is 8%, compounded monthly?

 

23.          What is the FV of $ 500 compounded quarterly for 5 years at 12% interest?

 

 

 

Matching

 

 

a.            Public markets  f.             Futures markets

b.            Capital markets g. Pension fund

c.             Call option           h. Life insurance company

d.            Physical location exchange          i.              Commercial bank

e.            Primary markets               j.             Hedge fund

24.          This financial insturment was originally designed to provide absolute (positive) returns in any kind of market. It typically requires very high minimum investments. Many institutions that offer these kinds of investments are located in Fairfield county right here in Connecticut.

25.          Wells Fargo is an example of this type of financial institution that accepts deposits from its customers and uses that money to make loans to both individuals and businesses.

26.          CALPERS is a retirement plan for public employees in California.

27.          An instrument whose value increases when the value of an underlying asset from which it is derived goes up in value. 

 

28.          Natural Baking Company uses large quantities of wheat in its production. In April it decides that it would like to lock in the cost of purchasing wheat for the month of September. To do this, it will need to purchase the appropriate wheat contracts in what markets?

29.          A financial institution that accepts premiums from its cclients, invests them in such assets as stocks and real estate and makes payments to the beneficiaries of insured parties.

30.          The New York Stock Exchange (NYSE).

31.          Sprucewood Industries is a private corporation that is interested in going public to raise capital for expansion. Its IPO will be issued in what markets.

32.          Elaine Speranzo is the CFO of a manufacturing firm.. She wants to borrow $ 10 million for 10 years for a large project. She will neet to go to what markets to obtain this money.

33.          Standardized stock contracts trade on the 15 established stock exchanges in the U.S. What is the name given to these markets?