- Which is not a reason for a company to go public?
A. Lower compliance/administrative/legal/costs
B. Raise capital
C. Potential growth in portfolio
D. Easier access to capital markets - What is not a reason that a company might invest in the money markets?
A. Excess cash
B. Short-term investment
C. Safe investment
D. Diversify portfolio
E. Lower interest rates - You have taken a position on a stock using an option. If the stock’s price drops, you will get a level gain no matter how far prices fall, but you could go bankrupt if the stock’s price rises. You have___.
A. Bought a call option
B. Bought a put option
C. Written a call option
D. Written a put option
E. Written a straddle - Money market securities exhibit which of the following?
I. Large denomination
II. Maturity greater than one year
III. Low default risk
IV. Contractually determined cash flows
A. I, II, and IIl
B. I, III, and IV
C. II, III, and IV
D. II and IV
E. I, II, III, and IV
- Which one of the following statements about commercial paper is NOT true? \
Commercial paper issued in the United States
a. is an unsecured short-term promissory note
b. has a maximum maturity of 270-days
c. is virtually always rated by at least one ratings agency
d. has no secondary market
e. carries an interest rate above the prime rate - The process of packaging and/or selling mortgages that are then used to back publicly traded debt securities is called
a. collateralization
b. securitization
market capitalization
d. stock diversification
e. mortgage globalization - Mortgage payments are______ on a 15-year fixed-rate mortgage than on a 30-year fixed-rate mortgage, and_____ is paid on a 15-year mortgage than on a 30-year mortgage.
A. lower; less interest
B. lower; less principal
C. higher; less interest
D. higher; more principal
E. higher; more interest - With a fixed-rate mortgage, the _ bears the interest rate risk and with an ARM the _____bears the interest rate risk.
A. borrower; lender
B. borrower; borrower
C. lender; lender
D. lender; borrower
E. federal government; borrower - Which of the following is true?
A. forward contracts have no default risk
B. futures contracts require an initial margin requirement be paid
C. forward contracts are marked to market daily
D. forward contract buyers and sellers do not know who the counterparty is
E. futures contracts are only traded over the counter - What is NOT true about derivatives?
a. a derivative is a financial security whose payoff is linked to another, previously issued security
b. in many derivatives, two parties agree to exchange a standard quantity of an asset at a predetermined price at a specific date in the future
c. derivatives are leveraged financial instruments
d. derivatives trades are all backed by exchanges
e. derivatives are used for speculation and for hedging
Sample Solution
