LSUS MBA 727 EXAM 1 EXAM WITH
CORRECT ACTUAL QUESTIONS AND
CORRECTLY WELL DEFINED ANSWERS
LATEST ALREADY GRADED A+ 2025 – 2026
The price that competitive and non competitive bidders will pay at a Treasury
bill auction is the - ANSWERS-lowest price entered by a competitive bidder
Which of the following securities is most likely to be used in a repo
transaction? - ANSWERS-treasury bill
In the T-bill auction process, the competitive bidder is guaranteed a
_________and a noncompetitive bidder is guaranteed a________________. -
ANSWERS-maximum price, given quantity
Assume an investor purchased a six-month T-bill with a $10,000 par value for
$9,000 and sold it ninety days later for $9,100. What is the yield? - ANSWERS-
Yt=SP-PP/SP x 365/n=$9100-$9000/$9000 x 365/90=4.51%
,Assume an investor purchased six-month commercial paper with a face value
of $1,000,000 for $940, 000. What is the yield? - ANSWERS-Ycp=$1,000,000-
$940,000/$940,000 x 360/180 = 12.76%
Stanford Corporation arranged a repurchase agreement in which it purchased
securities for $4,900,000 and will sell the securities back for $5,000,000 in 40
days. What is the yield (or repo rate) to Stanford Corporation? - ANSWERS-
Repo rate = SP-PP/PP x 360/n= $5,000,000-
$4,900,000/$4,900,000x360/40=18.37%
Phil purchased an NCD a year ago in the secondary market for $980,000. The
NCD matures today at a price of $1,000,000, and Phil received $45,000 in
interest. What is Phil's return on the NCD? - ANSWERS-Yield = SP-
PP+Interest/PP = $1,000,000-$980,000+$45,000/$980,000 = 6.63%
_____________securities have a maturity of one year or less;
_____________securities generally have relatively high liquidity. - ANSWERS-
Money market; money market
Which of the following transactions would not be considered a secondary
market transaction? - ANSWERS-A firm that was privately held engages in an
offering of stock to the public
Which of the following are not considered money market securities? -
ANSWERS-Mortgage backed securities
The Securities Exchange Commission(SEC) does NOT - ANSWERS-decide
whether a public issue is fairly priced.
, Discuss how secondary markets benefit funds issuers - ANSWERS-The
secondary markets provide liquidity to investors after their initial purchase of
the security. This liquidity encourages them to purchase the security at the
initial offer. The current market price also reflects current prospects for the
firm and the competitiveness of the issue relative to similar securities.
Corporate treasurers follow their stocks' price closely because the stock price
reflects how well their firm and the market are performing. The current
security price also provides information about the cost of obtaining any
additional funds.
What determines the price of financial instruments? Which are riskier, capital
market instruments or money market instruments? Why? - ANSWERS-The
price of any financial instrument is the present value of future cash flows
discounted at an appropriate rate. A small change in interest rates causes a
large change in present value of distant cash flows. Hence, the prices of long-
term instruments. In addition, distant cash flows for stocks are not known
with certainty. Changing economic prospects can cause very large changes in
current stock values. Money market instruments have predictable cash flows
and mature in one year or less, so they are much less risky.
Distinguish between primary and secondary markets. Distinguish between
money and capital markets. - ANSWERS-primary markets are used for the
issuance of new securities while secondary markets are used for trading of
existing securities. Money markets facilitate the trading of short-term(money
market) instruments while capital markets facilitate the trading of long-term
(capital market) instruments.
Distinguish between perfect and imperfect security markets. Explain why the
existence of imperfect markets creates a need for finacial intermediaries. -
ANSWERS-With perfect financial markets, all information about any securities
for sale would be freely available to investors, information about surplus and
deficit units would be freely available, and all securities could be unbundled
CORRECT ACTUAL QUESTIONS AND
CORRECTLY WELL DEFINED ANSWERS
LATEST ALREADY GRADED A+ 2025 – 2026
The price that competitive and non competitive bidders will pay at a Treasury
bill auction is the - ANSWERS-lowest price entered by a competitive bidder
Which of the following securities is most likely to be used in a repo
transaction? - ANSWERS-treasury bill
In the T-bill auction process, the competitive bidder is guaranteed a
_________and a noncompetitive bidder is guaranteed a________________. -
ANSWERS-maximum price, given quantity
Assume an investor purchased a six-month T-bill with a $10,000 par value for
$9,000 and sold it ninety days later for $9,100. What is the yield? - ANSWERS-
Yt=SP-PP/SP x 365/n=$9100-$9000/$9000 x 365/90=4.51%
,Assume an investor purchased six-month commercial paper with a face value
of $1,000,000 for $940, 000. What is the yield? - ANSWERS-Ycp=$1,000,000-
$940,000/$940,000 x 360/180 = 12.76%
Stanford Corporation arranged a repurchase agreement in which it purchased
securities for $4,900,000 and will sell the securities back for $5,000,000 in 40
days. What is the yield (or repo rate) to Stanford Corporation? - ANSWERS-
Repo rate = SP-PP/PP x 360/n= $5,000,000-
$4,900,000/$4,900,000x360/40=18.37%
Phil purchased an NCD a year ago in the secondary market for $980,000. The
NCD matures today at a price of $1,000,000, and Phil received $45,000 in
interest. What is Phil's return on the NCD? - ANSWERS-Yield = SP-
PP+Interest/PP = $1,000,000-$980,000+$45,000/$980,000 = 6.63%
_____________securities have a maturity of one year or less;
_____________securities generally have relatively high liquidity. - ANSWERS-
Money market; money market
Which of the following transactions would not be considered a secondary
market transaction? - ANSWERS-A firm that was privately held engages in an
offering of stock to the public
Which of the following are not considered money market securities? -
ANSWERS-Mortgage backed securities
The Securities Exchange Commission(SEC) does NOT - ANSWERS-decide
whether a public issue is fairly priced.
, Discuss how secondary markets benefit funds issuers - ANSWERS-The
secondary markets provide liquidity to investors after their initial purchase of
the security. This liquidity encourages them to purchase the security at the
initial offer. The current market price also reflects current prospects for the
firm and the competitiveness of the issue relative to similar securities.
Corporate treasurers follow their stocks' price closely because the stock price
reflects how well their firm and the market are performing. The current
security price also provides information about the cost of obtaining any
additional funds.
What determines the price of financial instruments? Which are riskier, capital
market instruments or money market instruments? Why? - ANSWERS-The
price of any financial instrument is the present value of future cash flows
discounted at an appropriate rate. A small change in interest rates causes a
large change in present value of distant cash flows. Hence, the prices of long-
term instruments. In addition, distant cash flows for stocks are not known
with certainty. Changing economic prospects can cause very large changes in
current stock values. Money market instruments have predictable cash flows
and mature in one year or less, so they are much less risky.
Distinguish between primary and secondary markets. Distinguish between
money and capital markets. - ANSWERS-primary markets are used for the
issuance of new securities while secondary markets are used for trading of
existing securities. Money markets facilitate the trading of short-term(money
market) instruments while capital markets facilitate the trading of long-term
(capital market) instruments.
Distinguish between perfect and imperfect security markets. Explain why the
existence of imperfect markets creates a need for finacial intermediaries. -
ANSWERS-With perfect financial markets, all information about any securities
for sale would be freely available to investors, information about surplus and
deficit units would be freely available, and all securities could be unbundled
