D076 OA Retake: Questions With Correct Solutions
(100%)
What are the purposes of financial markets? Right Ans - To provide
liquidity and determine prices
In which financial market are securities such as stocks and bonds are
traded after their initial issuance? Right Ans - Secondary market
What kind of market primarily allows institutions to borrow and lend in
the short term? Right Ans - Money market
A local start-up company just hit its five-year anniversary and is planning
an initial public offering sometime this year. In order to issue public stock,
which market will the company use? Right Ans - Primary market
What is the primary role of financial institutions? Right Ans - To
conduct financial transactions such as investments, loans, and deposits
What is a depository institution? Right Ans - An institution that accepts
and pays interest on deposits of money, as well as extends loans
A large corporation is looking to merge with another large corporation.
Which financial institution can help them do this? Right Ans -
Investment bank
Which type of financial institution deals mainly with providing for
retirement through employers? Right Ans - Pension fund
How do insurance companies pay policyholders when a claim is made?
Right Ans - They use returns from stocks and bonds.
Which financial institution ensures that a nation's economy remains
healthy by controlling the amount of money circulating in the economy?
Right Ans - Central bank
Unemployment rate is which type of economic indicator? Right Ans -
Lagging
,The Federal Reserve sometimes adjusts the interest rate at which
commercial banks can borrow from it. What is the purpose of adjusting the
interest rate? Right Ans - To regulate inflation and unemployment
What would an inverted yield curve signal? Right Ans - It may indicate
an economic downturn.
In what way are coincident indicators useful? Right Ans - They are
analyzed during economic shifts to provide information about the current
state of the economy.
Which responsibility is a focus of the U.S. Securities and Exchange
Commission? Right Ans - To protect investors
Which type of financial institution provides individuals and firms access to
financial markets? Right Ans - Investment institutions
Which financial institution includes entities that receive money from
institutional investors and wealthy individuals to buy troubled companies
to improve them and earn returns by selling them or going public? Right
Ans - Private equity
Yield curve is which type of economic indicator? Right Ans - Leading
About a year ago, the short-term Treasury bill had 1.54% interest and the
long-term Treasury note had 2.54% interest. This week, the 1-year
Treasury bill has an interest rate of 3.13%, while the 10-year Treasury note
has an interest rate of 2.28%. What does this information indicate about
the future economy? Right Ans - It may indicate an economic downturn.
Which term reflects a person's beliefs about right and wrong, good and bad,
or just and unjust? Right Ans - Moral
What characterizes an ethical action? Right Ans - An ethical action is
based on accepted standards of conduct.
Lucas is a financial advisor working for Bullzai, Inc. He is faced with a
dilemma. Bullzai has started changing its practices in order to increase
, profit. As a financial advisor, he is now supposed to suggest to clients to
invest in portfolios that will not do as well as the portfolios that Bullzai is
invested in. This is an accepted practice done by other businesses in the
industry, and it complies with all standards set by the government.
However, Lucas knows that this practice is not in his clients' best interest.
What type of dilemma is Lucas facing? Right Ans - Moral
Which type of error would result in a set repercussion or penalty given by
the government? Right Ans - Legal
Nora is an investment manager, which means that she is paid to invest
other people's money. To meet her goal for the month, she is seeking to
invest money from clients in an investment that is risky but potentially has
a higher return. What about this situation represents an ethical dilemma?
Right Ans - Nora is considering investing in a risky asset just to meet her
monthly goal.
What are the effects of attempting to maximize shareholder value for a
business in an unethical way? Right Ans - It often leads to decreased
shareholder value for the business.
Endothon Company has decided to move its production from the United
States to a foreign country. Which situation below would constitute an
unethical action by the company? Right Ans - Saving money by paying
inadequate wages to workers overseas
Why would bondholders set bond contracts that are very strict to deter the
company from taking on risky projects? Right Ans - Bondholders are
primarily interested in making sure they will be paid back.
Which kind of projects are bondholders interested in? Right Ans - Safe
projects with a higher chance of providing sufficient compensation
Which scenario is an example of an agency problem? Right Ans - A
manager purchases a company car and allocates it as a company expense.
How can agency costs be mitigated? Right Ans - Aligning managers'
interests with shareholders' interests
(100%)
What are the purposes of financial markets? Right Ans - To provide
liquidity and determine prices
In which financial market are securities such as stocks and bonds are
traded after their initial issuance? Right Ans - Secondary market
What kind of market primarily allows institutions to borrow and lend in
the short term? Right Ans - Money market
A local start-up company just hit its five-year anniversary and is planning
an initial public offering sometime this year. In order to issue public stock,
which market will the company use? Right Ans - Primary market
What is the primary role of financial institutions? Right Ans - To
conduct financial transactions such as investments, loans, and deposits
What is a depository institution? Right Ans - An institution that accepts
and pays interest on deposits of money, as well as extends loans
A large corporation is looking to merge with another large corporation.
Which financial institution can help them do this? Right Ans -
Investment bank
Which type of financial institution deals mainly with providing for
retirement through employers? Right Ans - Pension fund
How do insurance companies pay policyholders when a claim is made?
Right Ans - They use returns from stocks and bonds.
Which financial institution ensures that a nation's economy remains
healthy by controlling the amount of money circulating in the economy?
Right Ans - Central bank
Unemployment rate is which type of economic indicator? Right Ans -
Lagging
,The Federal Reserve sometimes adjusts the interest rate at which
commercial banks can borrow from it. What is the purpose of adjusting the
interest rate? Right Ans - To regulate inflation and unemployment
What would an inverted yield curve signal? Right Ans - It may indicate
an economic downturn.
In what way are coincident indicators useful? Right Ans - They are
analyzed during economic shifts to provide information about the current
state of the economy.
Which responsibility is a focus of the U.S. Securities and Exchange
Commission? Right Ans - To protect investors
Which type of financial institution provides individuals and firms access to
financial markets? Right Ans - Investment institutions
Which financial institution includes entities that receive money from
institutional investors and wealthy individuals to buy troubled companies
to improve them and earn returns by selling them or going public? Right
Ans - Private equity
Yield curve is which type of economic indicator? Right Ans - Leading
About a year ago, the short-term Treasury bill had 1.54% interest and the
long-term Treasury note had 2.54% interest. This week, the 1-year
Treasury bill has an interest rate of 3.13%, while the 10-year Treasury note
has an interest rate of 2.28%. What does this information indicate about
the future economy? Right Ans - It may indicate an economic downturn.
Which term reflects a person's beliefs about right and wrong, good and bad,
or just and unjust? Right Ans - Moral
What characterizes an ethical action? Right Ans - An ethical action is
based on accepted standards of conduct.
Lucas is a financial advisor working for Bullzai, Inc. He is faced with a
dilemma. Bullzai has started changing its practices in order to increase
, profit. As a financial advisor, he is now supposed to suggest to clients to
invest in portfolios that will not do as well as the portfolios that Bullzai is
invested in. This is an accepted practice done by other businesses in the
industry, and it complies with all standards set by the government.
However, Lucas knows that this practice is not in his clients' best interest.
What type of dilemma is Lucas facing? Right Ans - Moral
Which type of error would result in a set repercussion or penalty given by
the government? Right Ans - Legal
Nora is an investment manager, which means that she is paid to invest
other people's money. To meet her goal for the month, she is seeking to
invest money from clients in an investment that is risky but potentially has
a higher return. What about this situation represents an ethical dilemma?
Right Ans - Nora is considering investing in a risky asset just to meet her
monthly goal.
What are the effects of attempting to maximize shareholder value for a
business in an unethical way? Right Ans - It often leads to decreased
shareholder value for the business.
Endothon Company has decided to move its production from the United
States to a foreign country. Which situation below would constitute an
unethical action by the company? Right Ans - Saving money by paying
inadequate wages to workers overseas
Why would bondholders set bond contracts that are very strict to deter the
company from taking on risky projects? Right Ans - Bondholders are
primarily interested in making sure they will be paid back.
Which kind of projects are bondholders interested in? Right Ans - Safe
projects with a higher chance of providing sufficient compensation
Which scenario is an example of an agency problem? Right Ans - A
manager purchases a company car and allocates it as a company expense.
How can agency costs be mitigated? Right Ans - Aligning managers'
interests with shareholders' interests
