LSUS MBA 727 FINAL EXAM/ LSUS MBA PRACTICE EXAM 2025 QUESTIONS AND
ANSWERS
Financial market participants who pro-
Surplus units
vide funds are called
Those financial markets that facilitate the
Money markets
flow of short-term funds are known as
Which of the following is a capital market
A ten-year bond
instrument?
Which of the following is a money market
commercial paper
security?
relatively high liquidity, low expected re-
Money market securities generally have
turn, and a low degree of credit risk
The Securities and Exchange Commis-
Securities Exchange Act of 1934
sion(SEC) was established by the
Which of the following is a nondepository
Mutual fund
financial institution?
securities have a ma-
turity of one year or less;
Money market; money market
securities generally
have relatively high liquidity.
Which of the following transactions
A firm that was privately held engages in
would not be considered a secondary
an offering of stock to the public
market transaction?
Which of the following are not considered
Mortgage backed securities
money market securities?
The Securities Exchange Commis- decide whether a public issue is fairly
sion(SEC) does NOT priced.
The secondary markets provide liquidity
to investors after their initial purchase
of the security. This liquidity encourages
them to purchase the security at the ini-
Discuss how secondary markets benefit tial offer. The current market price also
funds issuers reflects current prospects for the firm and
the competitiveness of the issue relative
to similar securities. Corporate treasur-
ers follow their stocks' price closely be-
cause the stock price reflects how well
, LSUS MBA 727 FINAL EXAM/ LSUS MBA PRACTICE EXAM 2025 QUESTIONS AND
ANSWERS
their firm and the market are performing.
The current security price also provides
information about the cost of obtaining
any additional funds.
The price of any financial instrument is
the present value of future cash flows dis-
counted at an appropriate rate. A small
change in interest rates causes a large
change in present value of distant cash
What determines the price of financial flows. Hence, the prices of long-term in-
instruments? Which are riskier, capital struments. In addition, distant cash flows
market instruments or money market in- for stocks are not known with certain-
struments? Why? ty. 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.
primary markets are used for the is-
suance of new securities while sec-
ondary markets are used for trading of
Distinguish between primary and sec-
existing securities. Money markets fa-
ondary markets. Distinguish between
cilitate the trading of short-term(money
money and capital markets.
market) instruments while capital mar-
kets facilitate the trading of long-term
(capital market) instruments.
With perfect financial markets, all in-
formation about any securities for sale
would be freely available to investors, in-
formation about surplus and deficit units
Distinguish between perfect and imper- would be freely available, and all secu-
fect security markets. Explain why the rities could be unbundled into any size
existence of imperfect markets creates a desired. In reality, markets are imperfect,
need for finacial intermediaries. so that surplus and deficit units do not
have free access to information, and se-
curities cannot be unbundled as desired.
Financial intermediaries are needed to
facilitate the exchange of funds between
, LSUS MBA 727 FINAL EXAM/ LSUS MBA PRACTICE EXAM 2025 QUESTIONS AND
ANSWERS
surplus and deficit units. They have the
information to provide this service and
can even repackage deposits to provide
the amount of funds that borrowers de-
sire.
The Securities Act of 1933 was intended
to assure complete disclosure of relevant
What was the purpose of the Securities financial information on publicly offered
Act of 1933? What was the purpose of securities, and prevent fraudulent prac-
the Securities Exchange Act of 1934? tices when selling these securities. The
Do these laws prevent investors from Securities Exchange act of 1934 extend-
making poor investment decisions? Ex- ed the disclosure requirements to sec-
plain. ondary market issues. it also declared a
variety of deceptive practices illegal, but
does not prevent poor investments.
A mutual fund sells shares to investors,
pools the funds, and invests the funds
What is the function of a mutual fund? in a portfolio of securities. Mutual funds
Why are mutual funds popular among are popular because they can help indi-
investors? How does a money market viduals diversify while using professional
mutual fund differ from a stock or bond expertise to make investment decisions.
fund? A money market fund invests in money
market securities, whereas other mutual
funds normally invest in stocks or bonds.
The required return to implement a giv-
en business project will be
if interest rates are lower. This im-
lower, greater
plies that businesses will demand a
quantity of loanable
funds when interest rates are lower.
As a result of more favorable economic
conditions, there is a(n) demand for
increased, outward
loanable funds, causing an shift in
the demand curve.
The federal government's demand for
loanable funds is . If the bud- interest-inelastic, increase
get deficit is expected to increase, the
ANSWERS
Financial market participants who pro-
Surplus units
vide funds are called
Those financial markets that facilitate the
Money markets
flow of short-term funds are known as
Which of the following is a capital market
A ten-year bond
instrument?
Which of the following is a money market
commercial paper
security?
relatively high liquidity, low expected re-
Money market securities generally have
turn, and a low degree of credit risk
The Securities and Exchange Commis-
Securities Exchange Act of 1934
sion(SEC) was established by the
Which of the following is a nondepository
Mutual fund
financial institution?
securities have a ma-
turity of one year or less;
Money market; money market
securities generally
have relatively high liquidity.
Which of the following transactions
A firm that was privately held engages in
would not be considered a secondary
an offering of stock to the public
market transaction?
Which of the following are not considered
Mortgage backed securities
money market securities?
The Securities Exchange Commis- decide whether a public issue is fairly
sion(SEC) does NOT priced.
The secondary markets provide liquidity
to investors after their initial purchase
of the security. This liquidity encourages
them to purchase the security at the ini-
Discuss how secondary markets benefit tial offer. The current market price also
funds issuers reflects current prospects for the firm and
the competitiveness of the issue relative
to similar securities. Corporate treasur-
ers follow their stocks' price closely be-
cause the stock price reflects how well
, LSUS MBA 727 FINAL EXAM/ LSUS MBA PRACTICE EXAM 2025 QUESTIONS AND
ANSWERS
their firm and the market are performing.
The current security price also provides
information about the cost of obtaining
any additional funds.
The price of any financial instrument is
the present value of future cash flows dis-
counted at an appropriate rate. A small
change in interest rates causes a large
change in present value of distant cash
What determines the price of financial flows. Hence, the prices of long-term in-
instruments? Which are riskier, capital struments. In addition, distant cash flows
market instruments or money market in- for stocks are not known with certain-
struments? Why? ty. 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.
primary markets are used for the is-
suance of new securities while sec-
ondary markets are used for trading of
Distinguish between primary and sec-
existing securities. Money markets fa-
ondary markets. Distinguish between
cilitate the trading of short-term(money
money and capital markets.
market) instruments while capital mar-
kets facilitate the trading of long-term
(capital market) instruments.
With perfect financial markets, all in-
formation about any securities for sale
would be freely available to investors, in-
formation about surplus and deficit units
Distinguish between perfect and imper- would be freely available, and all secu-
fect security markets. Explain why the rities could be unbundled into any size
existence of imperfect markets creates a desired. In reality, markets are imperfect,
need for finacial intermediaries. so that surplus and deficit units do not
have free access to information, and se-
curities cannot be unbundled as desired.
Financial intermediaries are needed to
facilitate the exchange of funds between
, LSUS MBA 727 FINAL EXAM/ LSUS MBA PRACTICE EXAM 2025 QUESTIONS AND
ANSWERS
surplus and deficit units. They have the
information to provide this service and
can even repackage deposits to provide
the amount of funds that borrowers de-
sire.
The Securities Act of 1933 was intended
to assure complete disclosure of relevant
What was the purpose of the Securities financial information on publicly offered
Act of 1933? What was the purpose of securities, and prevent fraudulent prac-
the Securities Exchange Act of 1934? tices when selling these securities. The
Do these laws prevent investors from Securities Exchange act of 1934 extend-
making poor investment decisions? Ex- ed the disclosure requirements to sec-
plain. ondary market issues. it also declared a
variety of deceptive practices illegal, but
does not prevent poor investments.
A mutual fund sells shares to investors,
pools the funds, and invests the funds
What is the function of a mutual fund? in a portfolio of securities. Mutual funds
Why are mutual funds popular among are popular because they can help indi-
investors? How does a money market viduals diversify while using professional
mutual fund differ from a stock or bond expertise to make investment decisions.
fund? A money market fund invests in money
market securities, whereas other mutual
funds normally invest in stocks or bonds.
The required return to implement a giv-
en business project will be
if interest rates are lower. This im-
lower, greater
plies that businesses will demand a
quantity of loanable
funds when interest rates are lower.
As a result of more favorable economic
conditions, there is a(n) demand for
increased, outward
loanable funds, causing an shift in
the demand curve.
The federal government's demand for
loanable funds is . If the bud- interest-inelastic, increase
get deficit is expected to increase, the
