BUS340 Financial Markets and Institutions

Mid-term Test

(Mock Questions and Answers)

Financial Markets代写 Test Duration: ONE hour. Please answer ALL the questions. [TOTAL: 100 marks] This test includes 20 multiple choice questions…

Test Duration: ONE hour. Please answer ALL the questions. [TOTAL: 100 marks]

This test includes 20 multiple choice questions (MCQ). Each MCQ: 5 marks. Please choose ONE best answer for each MCQ.

Question 1

According to the liquidity premium theory of interest rates,

A.long-term spot rates are totally unrelated to expectations of future short-term rates.

B.the term structure must always be upward sloping.

C.investors prefer certain maturities and will not normally switch out of those maturities.

D.long-term spot rates are higher than the average of current and expected future short-term rates.

E.investors are indifferent between different maturities if the long-term spot rates are equal to the average of current and expected future short-term rates.

Question 2 Financial Markets代写

Which of the following indexes are value-weighted?

I.NYSE Composite

II.S&P 500

III. NASDAQ Composite

IV.Dow Jones Industrial Average

A.I, II, III, and IV

B.I only

C.II only

D.II, III, and IV only

E.I, II, and III only

Question 3

A European investor can earn a 4.75 percent annual interest rate in Europe or 2.75 percent per year in the United States. If the spot exchange rate is $1.58 per euro, at what one-year forward rate would an investor be indifferent between the U.S. and European investments?

A. $1.2484

B.$1.6108

C.$1.5235

D.$1.5498

E.$1.5977

Question 4

In a ____________ offering the firm preregisters with the SEC any securities it wishes to sell over the next two years.

A.rights

B.full underwritten

C.general cash

D.shelf

E.best efforts

Question 5 Financial Markets代写

Ethanol Lawn Mowers issued 500,000 shares to the public. The gross proceeds were $31,250,000 and the net proceeds were $30 million. Merrel Bench was the lead underwriter and deal negotiator, but 10 other investment bankers (one of which was Golden Sax) were also used to put up capital and help sell the issue. Which of the following statements is/are correct?

I.The public paid $62.50 a share.

II.Golden Sax was the originating house.

III. The spread per share was $3.50.

IV.Merrel Bench is the sole book running manager.

V.This offer was a syndicated deal.

A.I, II, and IV only

B.III and V only

C.I, IV, and V only

D.II and III only

E.I and V only

Question 6

An 8% coupon (paid quarterly) bond, with a $1,000 face value and 10 years remaining to maturity, is selling at $915. What is the yield to maturity on this bond?

A.5.50% per year

B.7.35% per year

C.9.32% per year

D.11.29% per year

E.14.22% per year

Question 7

An investor starts with €1 million and converts it to £694,500, which is then invested for one year. In a year the investor has £736,170, which she then converts back to euros at an exchange rate of 0.68 pounds per euro. The annual euro rate of return earned was _____.

A.7.55 percent

B.6.00 percent

C.7.45 percent

D.8.13 percent

E.8.26 percent

Question 8 Financial Markets代写

A 10-year annual payment corporate bond has a market price of $1,050. It pays annual interest of $100 and its required rate of return is 9 percent. By how much is the bond mispriced?

A.$0.00

B.Overpriced by $14.18

C.Underpriced by $14.18

D.Overpriced by $9.32

E.Underpriced by $9.32

Question 9

On July 1, 2012 (61 days since last coupon payment), you purchase a $10,000 par T-note (coupon paid semi-annually) that matures in five years. The coupon rate is 8 percent and the price quote is 98:6. The last coupon payment was May 1, 2012, and the next payment is November 1, 2012 (123 days after you purchased and became the T-note owner). The accrued interest is

A.$132.61.

B.$101.00.

C.$50.54.

D.$40.65.

E.$35.67.

Question 10

If a firm has more foreign currency assets than liabilities, and no other foreign currency transactions, it has

A.positive net exposure.

B.negative net exposure.

C.a fully balanced position.

D.zero net exposure.

Question 11 Financial Markets代写

A T-bond with a $10,000 par is quoted at a bid of 92:11 and an ask of 92:17. If you bought the bond and then immediately sold it at the same quotes, how much money would you gain or lose (ignore commissions)?

A.$12.50

B.-$12.50

C.-$18.75

D.$18.75

E.$0.00

Question 12

According to the unbiased expectations theory,

A.the term structure will most often be upward sloping.

B.liquidity premiums are negative and time varying.

C.the long-term spot rate is an average of the current and expected future short-term interest rates.

D.markets are segmented and buyers stay in their own segment.

E.forward rates are less than the expected future spot rates.

Financial Markets代写
Financial Markets代写

Question 13

Which of the following financial instruments is/are money market securities?

A.Commercial paper

B.Common stock

C.US treasury bonds

D.US treasury notes

E.None of the options

Question 14 Financial Markets代写

5A security has an expected return less than its required return. This security is______.

A.selling at a premium to par

B.selling at a discount to par

C.selling for more than its PV

C.selling for less than its PV

D.a zero coupon bond

Question 15

Is the statement below true or false?

With TIPS, the security’s coupon rate is changed every six months by the inflation rate as measured by the CPI.

A.True

B.False

Question 16

A stock you are evaluating is expected to experience supernormal growth in dividends of 12 percent over the next three years. Following this period, dividends are expected to grow at a constant rate of 4 percent. The stock paid a dividend of $1.50 last year and the required rate of return on the stock is 11 percent. What is the stock’s fair present value?

A.$16.24

B.$21.56

C.$24.25

D.$27.46

E.None of these choices are correct

Question 17 Financial Markets代写

A corporation seeking to sell new equity securities to the public for the first time in order to raise cash for capital investment would most likely

A.conduct an IPO with the assistance of an investment banker

B.engage in a secondary market sale of equity

C. conduct a private placement to a large number of potential buyers

D.place an ad in the Wall Street Journal soliciting retail suppliers of funds

E.none of the above

Question 18

Suppose that the current one-year Treasury-bill rate is 3.15 percent and the expected one-year rate 12 months from now is 4.25 percent. According to the unbiased expectations theory, what should be the current rate for a two-year Treasury security?

A) 3.70 percent

B) 4.15 percent

C) 2.36 percent

D) 4.74 percent

E) 5.50 percent

Question 19

Is the statement below true or false?

A callable bond is one where the issuer is required to retire a certain amount of the outstanding bonds each year to ensure that all the bond principal is paid by final maturity.

A.True

B.False

Question 20 Financial Markets代写

Depository institutions include

A.banks.

B.thrifts.

C.finance companies.

D.all of these choices are correct.

E.banks and thrifts.

 
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