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FNCE 3050 EXAM 2 QUESTIONS AND ANSWERS
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FNCE 3050 EXAM 2 QUESTIONS ANDANSWERS
1. Primary markets refer to what activities? Select all true statements.
a) Trading existing securities (i.e. new bonds & stock)
b) Trading new securities (i.e. new bonds & stock)
c) Primary markets can be private
d) Primary markets can be public - ANSWER B, C, and D
What is a stock index?
a) A hypothetical portfolio of stocks
b) A hypothetical stock exchange
c) A hypothetical derivative
d) A hypothetical stock - ANSWER A
What is a derivative?
a) It is a security
b) A series of cash flows that occur at even or uneven intervals, and may or may
not be of equal amounts.
c) A financial contract that derives its value from the price of another financial
asset
d) A series of cash flows that occur at even intervals, and of equal amounts. -
ANSWER C
What is the primary tool of the US (and every) Central Bank to influence the
economy?
a) To regulate the level of the stock market
, b) To ensure banks don't fail
c) To regulate the cost of credit
d) To regulate the federal deficit - ANSWER C
Regarding interest rates, select two true statements.
a) There is one interest rate used for all borrowing of any kind and any maturity
b) Interest rates vary quite a bit, depending on the risk in the transaction
c) Interest rates can move up and down with changes in market conditions
d) Interest rates do not move up and down with changes in market conditions -
ANSWER B and C
here are many types of risk an investor should consider when investing in a bond
(or lending money). Which of the below are risks found in bonds? Select all true
statements.
a) Inflation Risk
b) Dividend Risk
c) Default Risk
d) Liquidity Risk - ANSWER A, C, and D
There are several theories about why yield curves are shaped the way they are.
Select the yield curve theory below that corresponds to the following concept.
"Yield curves are usually upward-sloping because of the relative supply and
demand for various debt instruments of various maturities".
a) Unbiased Expectations
b) Liquidity Premium
c) Market Segmentation
d) None: the statement is not a valid yield curve theory. - ANSWER C
There are several theories about why yield curves are shaped the way they are.
Select the yield curve theory below that corresponds to the following concept.
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