Fin 350 Enthusiastic Study / snaptutorial.com
- 1. FIN 350 Quiz 4 For more classes visit www.snaptutorial.com Question 1 Bonds that are secured by personal property are called Question 2 Leveraged buyouts are commonly financed by the issuance of: Question 3 Bonds issued by ____ are backed by the federal government. Question 4 The Treasury has relied heavily on ____-year bonds to finance the U.S. budget deficit. Question 5 The coupon rate of most variable-rate bonds is tied to
- 2. Question 6 Assume that you purchased corporate bonds one year ago that have no protective covenants. Today, it is announced that the firm that issued the bonds plans a leveraged buyout. The market value of your bonds will likely ____ as a result. Question 7 ____ require the owner to clip coupons attached to the bonds and send them to the issuer to receive coupon payments. Question 8 Assume U.S. interest rates are significantly higher than German rates. A U.S. firm with a German subsidiary could achieve a lower financing rate, without exchange rate risk by denominating the bonds in Question 9 Which of the following would not be a likely example of a protective covenant provision? Question 10 A ten-year, inflation-indexed bond has a par value of $10,000 and a coupon rate of 5 percent. During the first six months since the bond was issued, the inflation rate was 2 percent. Based on this information, the coupon payment after six months will be $____.
- 3. Question 11 A call provision on bonds normally Question 12 When firms issue ____, the amount of interest and principal to be paid is based on specified market conditions. The amount of the repayment may be tied to a Treasury bond price index or even to a stock index. Question 13 Bonds that are not secured by specific property are called Question 14 Investors in Treasury notes and bonds receive ____ interest payments from the Treasury. Question 15 When would a firm most likely call bonds? Question 16 When two securities have the same expected cash flows, the value of the ____ security will be higher than the value of the ____ security. Question 17
- 4. If investors rely strictly on modified duration to estimate the percentage change in the price of a bond, they will tend to ____ the price decline associated with an increase in rates and ____ the price increase associated with a decrease in rates. Question 18 As interest rates consistently rise over a specific period, the market price of a bond you own would likely ____ over this period. (Assume no major change in the bond's default risk.) Question 19 The appropriate discount rate for valuing any bond is the Question 20 Which of the following bonds is most susceptible to interest rate risk from an investor's perspective? Question 21 If analysts expect that the demand for loanable funds will decrease, and the supply of loanable funds will increase, they would most likely expect interest rates to ____ and prices of existing bonds to ____. Question 22
- 5. Which of the following will most likely cause bond prices to increase? (Assume no possibility of higher inflation in the future.) Question 23 As interest rates increase, long-term bond prices Question 24 From the perspective of investing institutions, the most attractive foreign bonds offer a ____ and are denominated in a currency that ____ over the investment horizon. Question 25 The bonds that are most sensitive to interest rate movements have Question 26 If a financial institution's bond portfolio contains a relatively large portion of ____, it will be ____. Question 27 As interest rates consistently decline over a specific period, the market price of a bond you own would likely ____ over this period. (Assume no major change in the bond's default risk.) Question 28
- 6. With a(n) ____ strategy, funds are allocated to bonds with a short term to maturity and bonds with a long term to maturity. Thus, this strategy allocates some funds to achieving a relatively high return and other funds to covering liquidity needs. Question 29 In the ____ strategy, funds are allocated to bonds with a short term to maturity and bonds with a long term to maturity. Question 30 Which of the following formulas best describes the value of a bond? ******************************************************** FIN 350 Quiz 5 Week 6 For more classes visit www.snaptutorial.com Question 1 Mortgage-backed securities are assigned ratings by:
- 7. Question 2 Mortgage companies specialize in Question 3 An institution that originates and holds a fixed-rate mortgage is adversely affected by ____ interest rates; the borrower who was provided the mortgage is adversely affected by ____ interest rates. Question 4 ____ are backed by conventional mortgages. Question 5 ____ economic growth will probably ____ the risk premium on mortgages and ____ the price of mortgages. Question 6 Fannie Mae and Freddie Mac experienced financial problems during the credit crisis because they: Question 7 Collateralized mortgage obligations (CMOs) are generally perceived to have Question 8
- 8. Which of the following is not a common type of mortgage-backed security according to your text? Question 9 A mortgage with low initial payments that increase over time without ever leveling off is a Question 10 Which of the following will typically require homeowners to ultimately request a new mortgage? Question 11 Rates for adjustable-rate mortgages are commonly tied to the Question 12 A ____ mortgage allows borrowers to initially make small payments on the mortgage, which are then increased on a graduated basis over the first five to ten years; payments then level off from there on. Question 13 The interest rate on a second mortgage is ____ on a first mortgage created at the same time, because the second mortgage is ____ the existing first mortgage in priority claim against the property in the event of default.
- 9. Question 14 Financial institutions that hold fixed-rate mortgages in their asset portfolios are exposed to ____ risk, because they commonly use funds obtained from short-term customer deposits to make long-term mortgage loans. Question 15 From the perspective of the lending financial institution, interest rate risk is Question 16 The ____ is a value-weighted index of stock prices of 500 large U.S. firms. Question 17 The ____ is a value-weighted average of stock prices of 30 large U.S. firms. Question 18 ____ are employed by brokerage firms and execute orders for clients on the floor of the NYSE. Question 19
- 10. A firm can best avoid the time lag between registering new securities with the SEC and actually selling them by Question 20 When a firm buys some of its shares that it had previously issued, this is referred to as a: Question 21 The first-time issuance of shares by a specific firm to the public is referred to as a(n) Question 22 The prevailing price per share divided by the firm's earnings per share is known as the Question 23 American Depository Receipts (ADRs) are similar to Question 24 ____ sell shares to investors and use the proceeds to invest in portfolios of international stocks created and managed by portfolio managers. Question 25
- 11. Initial public offerings (IPOs) perform ____ on the day following the IPO and ____ for periods of a year or longer after the IPO. Question 26 "Pink sheets" are traded on the Question 27 The process by which the lead underwriter solicits indications of interest by institutional investors in an IPO at various possible ____ prices is referred to as ____. Question 28 ____ are portfolios of international stocks created and managed by various financial institutions. Question 29 A firm will typically attempt to sell shares from a secondary offering Question 30 A new stock issuance by a specific firm that already has stock outstanding is referred to as a(n) ********************************************************
- 12. FIN 350 Quiz 6 For more classes visit www.snaptutorial.com Question 1 A stock's average return is 10 percent. The average risk-free rate is 7 percent. The standard deviation of the stock's return is 4 percent, and the stock's beta is 1.5. What is the Treynor Index for the stock? Question 2 The ____ index can be used to measure risk-adjusted performance of a stock while controlling for the stock's beta. Question 3 Technical analysis relies on the use of ____ to make investment decisions. Question 4 The Sharpe Index measures the Question 5
- 13. The limitations of the dividend discount model are most pronounced for a firm that Question 6 The January effect refers to the ____ pressure on ____ stocks in January of every year. Question 7 If the returns of two stocks are perfectly correlated, then Question 8 Which of the following is not commonly used as the estimate of a stock's volatility? Question 9 Stock prices of U.S. firms primarily involved in exporting are likely to be ____ affected by a weak dollar and ____ affected by a strong dollar. Question 10 The limitations of the dividend discount model are more pronounced when valuing stocks Question 11
- 14. ____ is (are) not a firm-specific factor(s) that affect(s) stock prices. Question 12 The price-earnings valuation method applies the ____ price-earnings ratio to ____ earnings per share in order to value the firm's stock. Question 13 The formula for a stock portfolio's volatility does not contain the Question 14 The ____ is not a measure of a stock's risk. Question 15 A stock's beta can be measured from the estimate of the using regression analysis. Question 16 A(n) ____ is a standardized agreement to deliver or receive a specified amount of a specified financial instrument at a specified price and date. Question 17
- 15. According to the text, a futures contract on one financial instrument to protect a position in a different financial instrument is known as Question 18 If a financial institution expects that the market value of its municipal bonds will decline because of economic conditions, it could hedge its position by ____ futures contracts on ____. Question 19 According to the text, when a financial institution sells futures contracts on securities in order to hedge against a change in interest rates, this is referred to as Question 20 Currency futures may be purchased to hedge ____ or to capitalize on the expected ____ of that currency against the dollar. Question 21 ____ risk is the risk that the position being hedged by a futures contract is not affected in the same manner as the instrument underlying the futures contract. Question 22 An unexpected ____ in the consumer price index tends to create expectations of ____ interest rates and places ____ pressure on Treasury bond futures prices.
- 16. Question 23 Assume that speculators had purchased a futures contract at the beginning of the year. If the price of a security represented by a futures contract ____ over the year, then these speculators would likely have purchased the futures contract for ____ than they can sell it for. Question 24 Municipal Bond Index (MBI) futures Question 25 Interest rate futures are not available on Question 26 The initial margin of a futures contract is typically between ____ percent of a futures contract's full value. Question 27 Systemic risk reflects the risk that a particular event could Question 28 The basis is the Question 29
- 17. If speculators believe interest rates will ____, they would consider ____ a T-bill futures contract today. Question 30 The profits of a financial institution with interest-rate sensitive liabilities and interest rate-insensitive assets are ____ with hedging than without hedging if interest rates decrease. ******************************************************** FIN 350 Quiz 7 For more classes visit www.snaptutorial.com Question 1 Which of the following is most likely to provide currency forward contracts to their customers? Question 2 ____ forecasting is usually based on either the spot rate or the forward rate.
- 18. Question 3 If the spot rate of the British pound is $2, and the 180-day forward rate is $2.05, what is the annualized premium or discount? Question 4 The speculative risk of purchasing a ____ is that the foreign currency value ____ over time. Question 5 In the Wall Street Journal, you observe that the British pound (£) is quoted for $1.65. The Australian dollar (A$) is quoted for $0.60. What is the value of the Australian dollar in British pounds? Question 6 Assume that a British pound put option has a premium of $.03 per unit, and an exercise price of $1.60. The present spot rate is $1.61. The expected future spot rate on the expiration date is $1.52. The option will be exercised on this date if at all. What is the expected per unit net gain (or loss) resulting from purchasing the put option? Question 7 When a government influences factors, such as inflation, interest rates, or income, in order to affect currency's value, this is an example of Question 8 If the U.S. government imposed trade restrictions on U.S. imports, this would ____ the U.S. demand for foreign currencies, and would place
- 19. ____ pressure on the values of foreign currencies (with respect to the dollar). Question 9 The act of capitalizing on the discrepancy between the forward rate premium and the interest rate differential is called Question 10 Currency futures contracts differ from forward contracts in that they Question 11 If a firm planning to hedge receivables is certain of the future direction a spot rate will move, and requires a tailor-made hedge in terms of amount and maturity date, it should use a Question 12 If U.S. interest rates suddenly become much higher than European interest rates (and if it does not cause concern about higher inflation there), the U.S. demand for euros would ____, and the supply of euros to be exchanged for dollars would ____, other factors held constant. Question 13 A system whereby exchange rates are market determined without boundaries but subject to government intervention is called Question 14
- 20. Assume interest rate parity exists. If the spot rate on the British pound is $2 and the 1-year British interest rate is 7 percent, and the 1-year U.S. interest rate is 11 percent, what is the pound's forward discount or premium? Question 15 Assume an equilibrium state in which European inflation and U.S. inflation are both 4 percent. If U.S. inflation suddenly decreased to 2 percent, the euro will ____ against the dollar by approximately ____ percent, according to purchasing power parity. Question 16 When banks obtain funds in the federal funds market, the providers of the funds are Question 17 ____ loans are extended primarily to finance the purchase of fixed assets such as machinery. Question 18 A ____ is a time deposit offered by some large banks to corporations, with a specific maturity date, minimum deposit of $100,000 or more, and a secondary market. Question 19
- 21. When a bank obtains funds through ____, households are not a common provider of the funds. Question 20 When a bank obtains funds through a ____, the provider of the funds receives collateral. Question 21 When banks need funding for just a few days, they would most likely Question 22 Which of the following is not an off-balance sheet activity? Question 23 ____ are the largest bank source of funds (as a percentage of total liabilities). Question 24 ____ is (are) not a major source of funds for commercial banks. Question 25 A ____ is a type of loan commitment. Question 26 Which type of savings account transfers funds to a checking account when checks are written? Question 27
- 22. Commercial banks are not allowed to invest in Question 28 Subordinated notes and debentures are examples of Question 29 ____ loans are primarily used to finance the purchase of fixed assets. Question 30 When a bank in need of funds for a few days sells some of its government securities to a corporation with a temporary excess of funds, then buys them back shortly thereafter, this is a ******************************************************** FIN 350 Quiz 8 For more classes visit www.snaptutorial.com Question 1 Deposit insurance has a limit of:
- 23. Question 2 The moral hazard problem is minimized when deposit insurance premiums are Question 3 The Glass-Steagall Act of 1933 prevented Question 4 Which banking act allowed for the creation of NOW accounts? Question 5 The potential risk that financial problems can spread through financial institutions and the financial system is referred to as: Question 6 Commercial banks ____ restricted to a maximum percentage of their capital to loan to a single customer, and ____ allowed to use borrowed or deposited funds to purchase common stock. Question 7 Commercial banks that are not members of the Federal Reserve System ____ borrow from the Fed, and ____ subject to the Fed's reserve requirements.
- 24. Question 8 Which of the following is an "off-balance-sheet commitment?" Question 9 Which banking act allowed interstate banking? Question 10 ____ is not a characteristics used by the Federal Deposit Insurance Corporation (FDIC) to rate banks. Question 11 National banks are regulated by ____, and state banks are regulated by ____. Question 12 The key reason for regulatory examinations (such as CAMELS ratings) is to Question 13 Which of the following is not a specific criterion the FDIC uses to monitor banks?
- 25. Question 14 During the 2008-2010 period, the ____ was implemented to alleviate the financial problems experienced by banks and other financial institutions with excessive exposure to mortgages or mortgage-backed securities. Question 15 The fee banks pay to the FDIC for deposit insurance is now Question 16 A gap ratio of less than one suggests that Question 17 Which of the following is not a likely method used by a bank to reduce interest rate risk? Question 18 ____ is (are) least likely to be used as a method of reducing interest rate risk. Question 19 When cash outflows temporarily exceed cash inflows, banks are most likely to experience
- 26. Question 20 A bank's net interest margin will likely decline if it has a large amount of Question 21 In a regression of a bank's stock return on an interest rate proxy and market returns, a ____ coefficient for the interest rate variable suggests that bank performance is ____ affected by ____ interest rates. Question 22 The risk of a loss due to closing out a transaction is referred to as ____ risk. Question 23 A bank's net interest margin is commonly defined as Question 24 ____ is (are) least likely to be used as a method of reducing interest rate risk. Question 25 If a bank that relies heavily on short-term deposits expects interest rates to consistently decrease over time, it would allocate most of its loans
- 27. with ____ rates if it desires to maximize its expected returns. It could reduce its exposure to interest rate risk by setting ____ rates on its loans. Question 26 As the secondary market for loans has become active, banks are more able to satisfy their liquidity needs with a ____ proportion of loans while achieving ____ profitability. Question 27 A bank that holds a greater percentage of traditional demand deposits and loans will likely incur ____ non-interest expenses and have a ____ net interest margin than other banks of the same size (assuming that its loan losses are no higher than those at other banks). Question 28 The risk of a loss due to closing out a transaction is referred to as ____ risk. Question 29 The greater the ____, the greater the amount of assets per dollar's worth of equity. Question 30 If a bank desired to maximize its net interest margin, it would best achieve its goal by attempting to obtain most of its funds through ____
- 28. and use most of its funds for ____ (assuming that all loans will be repaid). posits; consumer loans ******************************************************** FIN 350 Quiz 9 For more classes visit www.snaptutorial.com Question 1 Banks G and H are the same size and have similar operations. Bank G holds the minimum level of capital and Bank H holds a higher level of capital. Bank G's return on equity is probably ____ volatile than that of Bank H. Bank G's beta is probably ____ than that of Bank H. Question 2 Banks A and B have the same net income. Bank A has a higher capital ratio and more assets than B. Bank A's return on assets is ____ than Bank B's. Bank A's return on equity is ____ than Bank B's. Question 3
- 29. The risk premium on a commercial bank is ____ related to economic growth and ____ related to management skills. Question 4 Net income measured as a percentage of assets is Question 5 Interest paid on deposits and borrowed funds is called Question 6 ____ results from a bank's sale of securities. Question 7 If a bank has short-term deposits and provides long-term fixed rate loans, and interest rates decline over time, its net interest margin should be: Question 8 Interest income generated from all assets is called Question 9 Changes in ____ are a factor affecting the value of a commercial bank over which the bank has some control.
- 30. Question 10 During the credit crisis, the level of ____ was much higher than in other periods. Question 11 If a bank is too ____ in attempting to avoid loan losses, its net interest margin will be ____. Question 12 When only equity counts as capital, the leverage measure is Question 13 The sum of net interest income, non-interest income, and securities gains, minus provision for loan losses and non-interest expenses equals Question 14 If a bank increases its provisions for loan losses, its interest income is ____, and its noninterest income is ____. Question 15 Which of the following banks would likely have the highest return on equity?
- 31. Question 16 Federal credit unions are regulated and supervised by the Question 17 Savings institutions obtain most of their funds from Question 18 ____ are the primary asset of savings institutions. Question 19 To obtain short-term funds, savings institutions commonly borrow funds in the ____ market. Question 20 Savings institutions can obtain capital by: Question 21 The primary use of credit union funds is Question 22
- 32. The ____ savings institutions hold the most assets in aggregate. Question 23 The risk that a credit union will experience an unanticipated wave of withdrawals without an offsetting amount of new deposits is ____ risk. Question 24 Credit unions obtain most of their funds from Question 25 Which of the following is not an asset of savings institutions? Question 26 Today, credit unions are regulated as to the Question 27 ____ are non-profit organizations composed of members with a common bond. Question 28 ____ do not represent an asset of credit unions. Question 29
- 33. Savings institutions that reduce their amount of ____ will best reduce their exposure to interest rate risk. Question 30 ____ risk is probably the least concern for savings institutions. ******************************************************** FIN 350 Quiz 10 For more classes visit www.snaptutorial.com Question 1 Consumer finance companies primarily focus on Question 2 ____ provide loans to firms that cannot obtain financing from commercial banks. Question 3
- 34. Finance companies participate in the ____ market to reduce interest rate risk. Question 4 Which of the following is not a use of finance company funds? Question 5 The main competition for finance companies in the consumer loan market comes from Question 6 When a finance company purchases equipment for use by another business, the finance company provides financing in the form of Question 7 Finance companies can accumulate capital by doing all of the following except Question 8 A wholly owned subsidiary whose primary purpose is to finance sales of the parent company's products and services, provide wholesale financing to distributors of the parent company's products, and purchase receivables of the parent company is a
- 35. Question 9 ____ finance companies concentrate on purchasing credit contracts from retailers and dealers. Question 10 Finance companies are subject to Question 11 When a finance company's assets are ____ interest rate sensitive than its liabilities and when interest rates are expected to ____, bonds can provide long-term financing at a rate that is completely insulated from rising market rates. Question 12 If finance companies were confident about projections of ____ interest rates, they may consider using the funds obtained from issuing bonds to offer loans with ____ rates. Question 13 Finance companies differ from commercial banks, savings institutions, and credit unions in that they Question 14
- 36. Which of the following is not a source of finance company funds to support operations? Question 15 Finance companies commonly act as ____ for accounts receivable; that is, they purchase a firm's receivables at a discount and are responsible for processing and collecting the balances of these accounts. Question 16 A mutual fund consisting only of stocks of firms that are in a specific industry is an example of a ____ fund. Question 17 Mutual funds composed of stocks that have potential for very high growth, but may also be unproven, are called Question 18 ____ are not exchange-traded funds. Question 19 ____ funds sell shares to wealthy individuals and financial institutions and use the proceeds to invest in securities. Question 20 Mutual funds that are willing to repurchase their shares from investors at any time are referred to as
- 37. Question 21 According to SEC regulations, the majority of the members on a mutual fund's board of directors must be Question 22 Money market funds commonly invest in Question 23 Money market funds invest mostly in Question 24 The ____ of a mutual fund represents the price at which shares can be purchased from a mutual fund. Question 25 Most closed-end funds invest in Question 26 Equity real estate investment trusts invest Question 27 Mutual funds Question 28 ____ funds are open to investment from investors at any time. Question 29
- 38. Mutual funds that are composed of bonds that offer periodic coupon payments are called ____ mutual funds. Question 30 The most common investment by closed-end funds is in ******************************************************** FIN 350 Week 6 Quiz 5 For more classes visit www.snaptutorial.com • Question 1 ____ mortgages enabled more people with relatively lower income, or high existing debt, or a small down payment to purchase homes. • Question 2 ____ economic growth will probably ____ the risk premium on mortgages and ____ the price of mortgages. • Question 3 Rates for adjustable-rate mortgages are commonly tied to the • Question 4
- 39. The interest rate on a second mortgage is ____ on a first mortgage created at the same time, because the second mortgage is ____ the existing first mortgage in priority claim against the property in the event of default. • Question 5 Fannie Mae and Freddie Mac experienced financial problems during the credit crisis because they: • Question 6 A financial institution has a higher degree of interest rate risk on a ____ than a ____. • Question 7 Financial institutions that hold fixed-rate mortgages in their asset portfolios are exposed to ____ risk, because they commonly use funds obtained from short-term customer deposits to make long-term mortgage loans. • Question 8 In a collateralized mortgage obligation (CMO), mortgages are segmented into ____ (or classes). • Question 9 ____ risk is the risk that a borrower may prepay the mortgage in response to a decline in interest rates. • Question 10 For any given interest rate, the shorter the life of the mortgage, the ____ the monthly payment and the ____ the total payments over the life of the mortgage. • Question 11 An institution that originates and holds a fixed-rate mortgage is adversely affected by ____ interest rates; the borrower who was provided the mortgage is adversely affected by ____ interest rates. • Question 12
- 40. Which of the following is not true with respect to a growing- equity mortgage? • Question 13 From the perspective of the lending financial institution, interest rate risk is • Question 14 Collateralized mortgage obligations (CMOs) are generally perceived to have • Question 15 Which of the following will typically require homeowners to ultimately request a new mortgage? • Question 16 "Pink sheets" are traded on the • Question 17 ____ are portfolios of international stocks created and managed by various financial institutions. • Question 18 The largest organized exchange, listing the largest firms, is the • Question 19 A ____ requires that dividends cannot be paid on common stock until all current and previously omitted dividends are paid on preferred stock. • Question 20 Shareholders can most easily measure a firm's performance by monitoring changes in its ____ over time. • Question 21
- 41. Managers of firms may consider a stock repurchase or even a leveraged buyout when they believe their stock is ____ by the market, or a secondary stock offering when they believe their stock is ____ by the market. • Question 22 The prevailing price per share divided by the firm's earnings per share is known as the • Question 23 The transaction costs to the issuing firm in an IPO is usually ____ percent of the funds raised. • Question 24 ____ sell shares to investors and use the proceeds to invest in portfolios of international stocks created and managed by portfolio managers. • Question 25 The ____ is a value-weighted index of stock prices of 500 large U.S. firms. • Question 26 A new stock issuance by a specific firm that already has stock outstanding is referred to as a(n) • Question 27 Which of the following is not a part of the over-the-counter market? • Question 28 ____ are acquisitions that require substantial amounts of borrowed funds. • Question 29
- 42. Initial public offerings (IPOs) perform ____ on the day following the IPO and ____ for periods of a year or longer after the IPO. • Question 30 When a firm buys some of its shares that it had previously issued, this is referred to as a: ********************************************************