FIN 305 WEEK 4 COMPREHENSIVE STUDY
GUIDE 2026 FULL QUESTIONS AND
SOLUTIONS GRADED A+
◍ are mortgages where borrowers are considered to beof high credit quality.
Answer: prime mortgages
◍ The periodic cash flow, C, must be ______ for the pv annuity formula to
work (i.e., it can not change from period to period)..
Answer: constant
◍ This is the "stock market"The two dominant stock exchanges are the NYSE
and NASDA
Q. .
Answer: secondary market for equity securities
◍ are calculated in the same way as single-payment yields (note the 360-day
year).The _____is calculated as the annualized percentage difference
between the initial selling price of the securities and the contracted
repurchase price..
Answer: repo yield
◍ Initial Public Offering (IPO).
Answer: The first time a company issues publicly traded shares to the
general public.
◍ The MBSs that _____ guarantees carry the full faith and credit of the US
government..
Answer: Ginnie Mae
◍ CFC (CASH FLOW TO CREDITORS) STEP 5 IN CASH FLOW
ANALYSIS.
, Answer: INTEREST - NET NEW BORROWING (LONG TERM DEBT
NEW-OLD)
◍ Certain money market securities are "___________," meaning that they
make a single (face value + interest) payment at maturity.These securities
are quoted in terms of the _______(definition coming).
Answer: single-payment securitiesSingle-payment yield
◍ In the _________ of a country, securities of issuers not domiciled in the
country are sold and traded.
Answer: foreign market
◍ Firms with high fixed operating costs:A tend to have low variable costsB
tend to have high variable costsC tend to have low operating leverageD tend
to have low sales levels.
Answer: A
◍ a level stream of payments that lasts a fixed number of periods.
Answer: annuity
◍ refers to the sensitivity of profits to the firm'sfixed costs of production..
Answer: operating leverage
◍ Customer Build: Churn (leave).
Answer: (churn %)(Beg Cust)
◍ Which of the following is most correct?.
Answer: In an efficient market, investors will sell an overvalued stock,
which will drive its price down.
◍ examples of federally insured mortgages.
Answer: Federal Housing Administration (FHA), Veterans Affairs (VA),
Rural Housing Service(RHS), Office of Public and Indian Housing (PIH)
◍ Conventional mortgages that meet the underwriting guidelines of Fannie
Mae andFreddie Mac (e.g., loan size, credit score, DTI, LTV).▪ That is, they
can be bought by these GSEs and packaged into agency MBSs..
Answer: conforming mortgages
,◍ Income Statement: INTX.
Answer: (int exp %) (NP + LTD)
◍ ▪ If the securitization is based on the pool of consumer credit (other than
mortgages), the resulting securities are called __________▪ Taking a step
further, any debt obligations can be included in the pool ofassets such as
corporate loans, bonds, and even other securitized products.
Answer: asset-backed securities (ABSs).
◍ subsequent instances where the company issues new shares..
Answer: seasoned equity offering
◍ strips are also known as.
Answer: treasury zero-coupon bonds
◍ ______ bear little interest rate risk.▪ The market price remains close to the
par value.
Answer: FRNs
◍ Which of these is the investor's combination of securities that achieves the
highest expected return for a given level of risk?.
Answer: Efficient portfolio.
◍ Other money market securities are "________." They make a single face
value payment at maturity, and trade for less than that today..
Answer: discount securities
◍ Some securities are hybrids of.
Answer: debt and equity
◍ Interest rate (or YTM) > coupon rate.
Answer: ▪ You are not willing to pay $1,000 for these payments.▪ Note that
the price of a bond with the higher coupon rate (=YTM) is $1,000. Sothis
bond should be cheaper than $1,000.▪ The bond sells at discount
◍ Income Statement: EBT.
Answer: OPEX - INTX
, ◍ The present value of mortgage payments should be equal to the ______
amount today..
Answer: mortgage loan
◍ ▪_________ = index return is the simple average of stock returns.▪ _______
= index return is the weighted-average of stock returns, where weights are in
proportion to their market cap..
Answer: Equal weightedValue weighted
◍ It is like the bond equivalent yield, except:▪ Assumes a 360-day year▪ Uses
the terminal price as the base price (in the denominator).
Answer: discount yield
◍ Each mortgage is subject to _______▪ By pooling mortgages, we can
eliminate _________ (i.e., diversification).
Answer: idiosyncratic risk.
◍ Each country should concentrate on producing that product which it does
well. This is called the law of:A absolute advantageB communicative
advantageC comparative advantageD trade disadvantage.
Answer: C
◍ It is a form of (gov't or corporate) long-term borrowing.▪ It is a certificate
that shows a borrower owes a specified sum and thedates on which the
interest and principal must be paid..
Answer: bond
◍ This is a flexible method to value stocks.You can see how it would change
if, say, there were three phases ratherthan two.
Answer: multiple growth phases
◍ Investors who buy securities in _______ will pay the issuing corporation no
more than the price they think ________ will set for those securities..
Answer: primary marketssecondary markets
◍ (Income Statement) - SG&A.
Answer: total cust and aq exp + other SG&A exp
GUIDE 2026 FULL QUESTIONS AND
SOLUTIONS GRADED A+
◍ are mortgages where borrowers are considered to beof high credit quality.
Answer: prime mortgages
◍ The periodic cash flow, C, must be ______ for the pv annuity formula to
work (i.e., it can not change from period to period)..
Answer: constant
◍ This is the "stock market"The two dominant stock exchanges are the NYSE
and NASDA
Q. .
Answer: secondary market for equity securities
◍ are calculated in the same way as single-payment yields (note the 360-day
year).The _____is calculated as the annualized percentage difference
between the initial selling price of the securities and the contracted
repurchase price..
Answer: repo yield
◍ Initial Public Offering (IPO).
Answer: The first time a company issues publicly traded shares to the
general public.
◍ The MBSs that _____ guarantees carry the full faith and credit of the US
government..
Answer: Ginnie Mae
◍ CFC (CASH FLOW TO CREDITORS) STEP 5 IN CASH FLOW
ANALYSIS.
, Answer: INTEREST - NET NEW BORROWING (LONG TERM DEBT
NEW-OLD)
◍ Certain money market securities are "___________," meaning that they
make a single (face value + interest) payment at maturity.These securities
are quoted in terms of the _______(definition coming).
Answer: single-payment securitiesSingle-payment yield
◍ In the _________ of a country, securities of issuers not domiciled in the
country are sold and traded.
Answer: foreign market
◍ Firms with high fixed operating costs:A tend to have low variable costsB
tend to have high variable costsC tend to have low operating leverageD tend
to have low sales levels.
Answer: A
◍ a level stream of payments that lasts a fixed number of periods.
Answer: annuity
◍ refers to the sensitivity of profits to the firm'sfixed costs of production..
Answer: operating leverage
◍ Customer Build: Churn (leave).
Answer: (churn %)(Beg Cust)
◍ Which of the following is most correct?.
Answer: In an efficient market, investors will sell an overvalued stock,
which will drive its price down.
◍ examples of federally insured mortgages.
Answer: Federal Housing Administration (FHA), Veterans Affairs (VA),
Rural Housing Service(RHS), Office of Public and Indian Housing (PIH)
◍ Conventional mortgages that meet the underwriting guidelines of Fannie
Mae andFreddie Mac (e.g., loan size, credit score, DTI, LTV).▪ That is, they
can be bought by these GSEs and packaged into agency MBSs..
Answer: conforming mortgages
,◍ Income Statement: INTX.
Answer: (int exp %) (NP + LTD)
◍ ▪ If the securitization is based on the pool of consumer credit (other than
mortgages), the resulting securities are called __________▪ Taking a step
further, any debt obligations can be included in the pool ofassets such as
corporate loans, bonds, and even other securitized products.
Answer: asset-backed securities (ABSs).
◍ subsequent instances where the company issues new shares..
Answer: seasoned equity offering
◍ strips are also known as.
Answer: treasury zero-coupon bonds
◍ ______ bear little interest rate risk.▪ The market price remains close to the
par value.
Answer: FRNs
◍ Which of these is the investor's combination of securities that achieves the
highest expected return for a given level of risk?.
Answer: Efficient portfolio.
◍ Other money market securities are "________." They make a single face
value payment at maturity, and trade for less than that today..
Answer: discount securities
◍ Some securities are hybrids of.
Answer: debt and equity
◍ Interest rate (or YTM) > coupon rate.
Answer: ▪ You are not willing to pay $1,000 for these payments.▪ Note that
the price of a bond with the higher coupon rate (=YTM) is $1,000. Sothis
bond should be cheaper than $1,000.▪ The bond sells at discount
◍ Income Statement: EBT.
Answer: OPEX - INTX
, ◍ The present value of mortgage payments should be equal to the ______
amount today..
Answer: mortgage loan
◍ ▪_________ = index return is the simple average of stock returns.▪ _______
= index return is the weighted-average of stock returns, where weights are in
proportion to their market cap..
Answer: Equal weightedValue weighted
◍ It is like the bond equivalent yield, except:▪ Assumes a 360-day year▪ Uses
the terminal price as the base price (in the denominator).
Answer: discount yield
◍ Each mortgage is subject to _______▪ By pooling mortgages, we can
eliminate _________ (i.e., diversification).
Answer: idiosyncratic risk.
◍ Each country should concentrate on producing that product which it does
well. This is called the law of:A absolute advantageB communicative
advantageC comparative advantageD trade disadvantage.
Answer: C
◍ It is a form of (gov't or corporate) long-term borrowing.▪ It is a certificate
that shows a borrower owes a specified sum and thedates on which the
interest and principal must be paid..
Answer: bond
◍ This is a flexible method to value stocks.You can see how it would change
if, say, there were three phases ratherthan two.
Answer: multiple growth phases
◍ Investors who buy securities in _______ will pay the issuing corporation no
more than the price they think ________ will set for those securities..
Answer: primary marketssecondary markets
◍ (Income Statement) - SG&A.
Answer: total cust and aq exp + other SG&A exp
