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Chapter 1-2 questions
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Questions for chapters 1 & 2 :Q1/ A bond issued by the state of Alabama is priced to yield 6.45%. If you are in the 20% tax bracket, this bond
would provide you with an equivalent taxable yield of _.
Q2/ Consider the three stocks in the following table. Pt represents price at time t, and Qt represents
shares outstanding at time t. Stock C splits two-for-one in the last period.
P0 Q0 P1 Q1 P2. Q2
91 100 96 100 96 100
51 200 46 200 46 200
102 200 112 200 56 400
A : market value-weighted?
B : equally weighted?
Q3/ One of the purpose of derivatives markets is that it transfers risk from one party to another.
The ANSWER is D.
Q4/ Which one of the following is the government agency which regulates the financial markets in the Saudi
Arabia?
Finance Ministry
Tadawul
Saudi Arabian Monetary Authority
Capital Market Authority
I guess Tadawul is the right ANSWER.
, Q5/ A municipal bond is a debt obligation issued by state or local governments.
ANSWER: True.
Q6/ The Sarbanes-Oxley Act requires firms that the creation of a new board to oversee the auditing of their firms.
I guess it’s True but Am not sure yet because I found it in the slides -
accounting/audit.
Q7/ An investor who follows a fully passive strategy will maintain a relatively constant mix of asset classes
whilecontinually buying and selling individual securities.
The Right ANSWER: move money between asset classes as well as try to select the best performers in
each class.
Q8/ Antitakeover strategy is a mechanism for mitigating potential agency problems
The right ANSWER is A
Q9/ Price-weighted indexes ignore stock splits which affect stock prices.
The right ANSWER: The effect a company has on the index is dependent solely on the price per share.
Q10/ Financial assets do not contribute to the country's productive capacity either directly or indirectly.
The right ANSWER is B
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