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Wall Street Questions with Correct Answers 100% Pass
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Wall Street Questions with Correct Answers 100% Pass For what purposes are stocks primarily used? (Hint: they're almost never used to raise capital for the corporation issuing the stock.) - Stock allows founders/owners to transfer ownership (and cash out). Stocks are speculative investments (inv...

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  • December 5, 2024
  • 14
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • wall street questions with correct answers 100 pa

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Wall Street Questions with Correct Answers 100% Pass


For what purposes are stocks primarily used? (Hint: they're almost never used to raise capital for the

corporation issuing the stock.) - ✔✔Stock allows founders/owners to transfer ownership (and cash out).

Stocks are speculative investments (investors hoping the price increases) and an income stream

(dividends)


(Week 1, Lecture 2: Starts around slide 10)


Why is there a tradeoff between opportunism and restraint, and how do traders solve this problem? -

✔✔Traders have to balance their own self-interest with having long-term success. If they become too self-

interested in the short term, they will lose credibility and trust. They restrain from cheating too much for

more profitability in the short term and sustained long-term success.


Why did opportunism thrive in the bond market in the 1980s? - ✔✔There were no face-to-face

relationships as trades happened through computers or over the phone which created weak reputational

networks. Traders were separated from customers by the sale force. The most opportunistic firms often

provided the most profit so customers accepted some degree of opportunism. Many traders also believed

that customers expected them to be opportunistic, but they were unable to predict which trades they will

get cheated on. There was also a culture of opportunism that everyone bought into. If your co-workers

are being blatantly opportunistic, you will be opportunistic as well.


What does it mean to say that markets are socially constructed institutions? (This is a key unifying idea of

the course.) - ✔✔People ("actors") behave within networks and institutions that the people themselves

continuously create (and recreate). Through interaction, people construct norms, scripts, and strategies

that guide their future behavior.


(Week 1, Lecture 2: Starts around slide 12)


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Crafted for Academic Insight by KatelynWhitman. All rights reserved © 2025

, How did real, material structures enable opportunism and hyperrationality in 1980s bond markets? -

✔✔One example of this was the pit in the CBOT. Traders that had more experience and had more respect

would stand on the upper tiers of the pit. New and inexperienced traders would sit at the lower levels of

the pit until they moved up over time. Those at the bottom had little exposure and couldn't do as many

trades as those at the top.


How do futures markets act as cartels? - ✔✔Futures markets act as cartels that police their boundaries

and ensure that fair competition exists within those boundaries while eliminating competition from

outside them.


(Week 2, Lecture 2: Slide 14)


Explain the formula that "to arrive" contracts + standardized grading ⇒ futures markets. (To do this, you

should define both "to arrive" contracts and standardization.) - ✔✔"To arrive" contracts eliminated

uncertainty about wheat prices for farmers and shippers but opened the door to speculators willing to

absorb the risk of price uncertainty → Selling short.


Name at least three arguments that proponents of electronic trading made against open-outcry (pit)

trading, and explain how pit traders responded. - ✔✔Pit trading was too slow


Not as efficient


Didn't allow for everyone to be involved in the trades


Greater liquidity with Electronic trading, because it brings more traders


Pit traders primarily believed that the market needed to be a face-to-face interaction to avoid

opportunism.


Why did corporations shift towards large, diversified conglomerates in the 1960s and 1970s? -

✔✔Manager pay was tied to size more than profit. Big companies were invulnerable to takeover and




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Crafted for Academic Insight by KatelynWhitman. All rights reserved © 2025

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