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Final Exam Questions with 100% Verified
Answers
Mortgage fees paid by the homeowner at, or prior to, closing upon the purchase of a house
typically include all but which one of the following? - ✅✅prepayment penalty
Which one of the following entities is an actual government agency dealing with mortgages? -
✅✅GNMA
Common stocks typically have which of the following that bonds do NOT have? - ✅✅Voting
rights
If all preferred dividend payments that have been missed must be paid before any common
stock dividend can be paid, the preferred stock is called _____________ preferred stock. -
✅✅cumulative
The preliminary version of a security offer that is circulated to potential buyers before SEC
approval (registration) is obtained is called a - ✅✅red herring prospectus.
Which of the following information is NOT usually found in a Wall Street Journal stock quote? -
✅✅stock rating
On the NASDAQ system, the inside quotes are the - ✅✅highest bid and lowest ask
Which of the following indexes are value-weighted? - ✅✅NYSE Composite
S&P 500
NASDAQ Composite
,In a ____________ offering the firm preregisters with the SEC any securities it wishes to sell
over the next two years. - ✅✅shelf
The stamp on a prospectus accompanying a new issue that indicates the issue has not yet been
approved for sale by the SEC is called the - ✅✅red herring.
The preemptive right is designed to - ✅✅allow existing shareholders to buy shares of the new
offering if they desire
A U.S. investor has borrowed pounds, converted them to dollars, and invested the dollars in the
United States to take advantage of interest rate differentials. To cover the currency risk, the
investor should - ✅✅buy pounds forward.
A U.S. bank borrowed dollars, converted them to euros, and invested in euro-denominated CDs
to take advantage of interest rate differentials. To cover the currency risk the investor should -
✅✅sell euros forward.
If a firm has more foreign currency assets than liabilities, and no other foreign currency
transactions, it has - ✅✅positive net exposure.
The levels of foreign currency assets and liabilities at banks have ___________ in recent years,
and the level of foreign currency trading has ____________. - ✅✅increased; increased
If interest rate parity holds and the annual German nominal interest rate is 3 percent and the
U.S. annual nominal rate is 5 percent and real interest rates are 2 percent in both countries,
then inflation in Germany is about _______________ than in the United States. - ✅✅2 percent
lower
The largest center for trading in foreign exchange is - ✅✅London.
,Which of the following conditions may lead to a decline in the value of a country's currency? -
✅✅High inflation
Large current account deficit
An increase in which of the following would increase the price of a call option on common
stock, ceteris paribus? - ✅✅Stock price
Stock price volatility
Interest rates
A professional futures trader who buys and sells futures for his own account throughout the
day but typically closes out his positions at the end of the day is called a - ✅✅day trader.
A contract that gives the holder the right to sell a security at a preset price only immediately
before contract expiration is a(n) - ✅✅European put option.
A higher level of which of the following variables would make a put option on common stock
more valuable, ceteris paribus? - ✅✅Stock price volatility
Exercise price
A speculator may write a put option on stock with an exercise price of $15 and earn a $3
premium only if he thought - ✅✅the stock price would stay above $12.
You have taken a stock option position and, if the stock's price drops, you will get a level gain
no matter how far prices fall, but you could go bankrupt if the stock's price rises. You
have________________________________. - ✅✅written a call option.
You have taken a stock option position and, if the stock's price increases, you could lose a fixed
small amount of money, but if the stock's price decreases, your gain increases. You must have
________________________________. - ✅✅bought a put option
, In a bear market, which option positions make money? - ✅✅Writing a call
Buying a put
Measured by the amount outstanding, the largest type of derivative market in the world is the -
✅✅swap market.
An agreement between two parties to exchange a series of specified periodic cash flows in the
future based on some underlying instrument or price is a(n) - ✅✅swap contract.
An interest rate floor is designed to protect an institution from - ✅✅falling interest rates.
A contract wherein the buyer agrees to pay a specified interest rate on a loan that will be
originated at some future time is called a(n) - ✅✅forward rate agreement.
A bank lender is concerned about the creditworthiness of one of its major borrowers. The bank
is considering using a swap to reduce its credit exposure to this customer. Which type of swap
would best meet this need? - ✅✅Credit default swap
The type of swap most closely linked to the subprime mortgage crisis is the ____________. -
✅✅credit default swap
Primary markets - ✅✅markets in which users of funds (e.g., corporations and governments)
raise funds by issuing financial instruments (e.g., stocks and bonds)
Secondary markets - ✅✅markets where existing financial instruments are traded among
investors (e.g., exchange traded: NYSE and over-the-counter: NASDAQ)
Money markets - ✅✅markets that trade debt securities with maturities of one year or less
(e.g. CDs and U.S. Treasury bills) little or no risk of capital loss, but low return
Final Exam Questions with 100% Verified
Answers
Mortgage fees paid by the homeowner at, or prior to, closing upon the purchase of a house
typically include all but which one of the following? - ✅✅prepayment penalty
Which one of the following entities is an actual government agency dealing with mortgages? -
✅✅GNMA
Common stocks typically have which of the following that bonds do NOT have? - ✅✅Voting
rights
If all preferred dividend payments that have been missed must be paid before any common
stock dividend can be paid, the preferred stock is called _____________ preferred stock. -
✅✅cumulative
The preliminary version of a security offer that is circulated to potential buyers before SEC
approval (registration) is obtained is called a - ✅✅red herring prospectus.
Which of the following information is NOT usually found in a Wall Street Journal stock quote? -
✅✅stock rating
On the NASDAQ system, the inside quotes are the - ✅✅highest bid and lowest ask
Which of the following indexes are value-weighted? - ✅✅NYSE Composite
S&P 500
NASDAQ Composite
,In a ____________ offering the firm preregisters with the SEC any securities it wishes to sell
over the next two years. - ✅✅shelf
The stamp on a prospectus accompanying a new issue that indicates the issue has not yet been
approved for sale by the SEC is called the - ✅✅red herring.
The preemptive right is designed to - ✅✅allow existing shareholders to buy shares of the new
offering if they desire
A U.S. investor has borrowed pounds, converted them to dollars, and invested the dollars in the
United States to take advantage of interest rate differentials. To cover the currency risk, the
investor should - ✅✅buy pounds forward.
A U.S. bank borrowed dollars, converted them to euros, and invested in euro-denominated CDs
to take advantage of interest rate differentials. To cover the currency risk the investor should -
✅✅sell euros forward.
If a firm has more foreign currency assets than liabilities, and no other foreign currency
transactions, it has - ✅✅positive net exposure.
The levels of foreign currency assets and liabilities at banks have ___________ in recent years,
and the level of foreign currency trading has ____________. - ✅✅increased; increased
If interest rate parity holds and the annual German nominal interest rate is 3 percent and the
U.S. annual nominal rate is 5 percent and real interest rates are 2 percent in both countries,
then inflation in Germany is about _______________ than in the United States. - ✅✅2 percent
lower
The largest center for trading in foreign exchange is - ✅✅London.
,Which of the following conditions may lead to a decline in the value of a country's currency? -
✅✅High inflation
Large current account deficit
An increase in which of the following would increase the price of a call option on common
stock, ceteris paribus? - ✅✅Stock price
Stock price volatility
Interest rates
A professional futures trader who buys and sells futures for his own account throughout the
day but typically closes out his positions at the end of the day is called a - ✅✅day trader.
A contract that gives the holder the right to sell a security at a preset price only immediately
before contract expiration is a(n) - ✅✅European put option.
A higher level of which of the following variables would make a put option on common stock
more valuable, ceteris paribus? - ✅✅Stock price volatility
Exercise price
A speculator may write a put option on stock with an exercise price of $15 and earn a $3
premium only if he thought - ✅✅the stock price would stay above $12.
You have taken a stock option position and, if the stock's price drops, you will get a level gain
no matter how far prices fall, but you could go bankrupt if the stock's price rises. You
have________________________________. - ✅✅written a call option.
You have taken a stock option position and, if the stock's price increases, you could lose a fixed
small amount of money, but if the stock's price decreases, your gain increases. You must have
________________________________. - ✅✅bought a put option
, In a bear market, which option positions make money? - ✅✅Writing a call
Buying a put
Measured by the amount outstanding, the largest type of derivative market in the world is the -
✅✅swap market.
An agreement between two parties to exchange a series of specified periodic cash flows in the
future based on some underlying instrument or price is a(n) - ✅✅swap contract.
An interest rate floor is designed to protect an institution from - ✅✅falling interest rates.
A contract wherein the buyer agrees to pay a specified interest rate on a loan that will be
originated at some future time is called a(n) - ✅✅forward rate agreement.
A bank lender is concerned about the creditworthiness of one of its major borrowers. The bank
is considering using a swap to reduce its credit exposure to this customer. Which type of swap
would best meet this need? - ✅✅Credit default swap
The type of swap most closely linked to the subprime mortgage crisis is the ____________. -
✅✅credit default swap
Primary markets - ✅✅markets in which users of funds (e.g., corporations and governments)
raise funds by issuing financial instruments (e.g., stocks and bonds)
Secondary markets - ✅✅markets where existing financial instruments are traded among
investors (e.g., exchange traded: NYSE and over-the-counter: NASDAQ)
Money markets - ✅✅markets that trade debt securities with maturities of one year or less
(e.g. CDs and U.S. Treasury bills) little or no risk of capital loss, but low return
