Economics is a subfield of Finance (t/f) 1.1
F. Finance is a subfield of Economics. (right answer)
Which of the following is not an example of
... [Show More] firm capital? 1.1
Financial markets
Which of the following are examples of firm capital? 1.1
Cash, Labor, Machinery
Capital is defined as a financial asset. (t/f) 1.1
T. Capital is defined as a financial asset.
Corporate finance is devoted to understanding various types of financial instruments. (t/f) 1.1
F. Investments is devoted to understanding various types of financial instruments. (right answer)
Which of the following is an example of firm capital? 1.1
Cash
Corporate finance focuses on the decision making by the management of the firm. (t/f) 1.1
T. Corporate finance focuses on the decision making by the management of the firm.
What are the three important areas of finance discussed in this section?1.1
Corporate Finance, Investments, and Banking/financial institutions
Banks make money when interest rates they charge to borrowers are less than interest rates they pay depositors. (t/f) 1.1
F. Banks make money when interest rates they charge to borrowers are MORE than interest rates they pay depositors. (right answer)
Stocks and bonds are two types of financial instruments. t/f 1.1
T. Stocks and bonds are two types of financial instruments.
Stock represents ownership in a particular company. t/f 1.2
T. Stock represents ownership in a particular company.
Companies can raise capital by issuing bonds or stocks. t/f 1.2
T. Companies can raise capital by issuing bonds or stocks.
A stock is a debt instrument issued by corporations. t/f 1.2
F. A stock represents ownership in a company (right answer)
A Treasury bond is a debt instrument issued by corporations. t/f 1.2
F. A Treasury bond is a debt instrument issued by governments. (right answer)
A bond is a debt instrument issued by corporations or governments. t/f 1.2
T. A bond is a debt instrument issued by corporations or governments.
A stock is a share of ______________ in a particular company. 1.2
ownership 1.2
A bond is similar to a loan. t/f 1.2
T A bond is similar to a loan.
Primary financial markets are markets where issuers place new securities with investors. t/f 1.3
T. Primary financial markets are markets where issuers place new securities with investors.
What are the two ways a syndicate can place a bond? 1.3
Competitive sale or negotiated sale
An IPO is a seasoned equity offering. t/f 1.3
false. IPO is new equity offering (right answer)
An IPO occurs on the primary market. t/f 1.3
T An IPO occurs on the primary market.
Syndicates are generally made up of investment banks and other institutional investors. t/f 1.3
T Syndicates are generally made up of investment banks and other institutional investors.
While competitive sales allow underwriters to submit bids to purchase bonds, negotiated sales do not. t/f 1.3
F negotiated and competitive sales both submit bids. negotiated sales more involved (right answer)
NASDAQ is the world's largest secondary financial market. t/f 1.4
F The NYSE is the world's largest secondary financial market. (right)
Auction markets have a physical location. t/f 1.4
T Auction markets have a physical location. (right)
Dealer markets have a physical location. t/f 1.4
F Auction markets have a physical location. Dealer markets do not. (right)
Nasdaq is an example of an auction market. t/f 1.4
F Nasdaq is an example of a dealer market. (right)
Stocks that are listed on dealer markets generally have a single dealer for each stock. t/f 1.4
F Stocks that are listed on dealer markets generally have multiple dealers for each stock. (right)
When dealers have to compete with one another, transaction costs will generally ___________. 1.4
decrease1.4
Markets are where prices are determined. t/f 1.4
T Markets are where prices are determined.
The NYSE specialist has an objective to provide liquidity to the market. t/f 1.5
T The NYSE specialist has an objective to provide liquidity to the market.
The NYSE specialist will charge a higher price to sellers of the stock and a lower price to the buyer of the stock. t/f 1.5
F The NYSE specialist will charge a lower price to sellers of the stock and a higher price to the buyer of the stock. (right)
The ask price of stock A is $56.75 while the bid price for stock A is $56.71. What is the bid ask spread? 1.5
.04
56.75-56.71 = 0.04
The ask price of stock A is $215.54 while the bid price for stock A is $215.14. What is the bid ask spread? 1.5
.40
215.54-215.14 = 0.40
The bid-ask spread is compensation to the specialist for providing liquidity to the market. t/f 1.5
T The bid-ask spread is compensation to the specialist for providing liquidity to the market.
What are the two types of orders that are used by investors? 1.6
Market Orders and Limit Orders 1.6
Market orders are __________ sensitive while limit orders are _____________ sensitive. 1.6
time, price 1.6
A market order to buy a stock would execute at the current ask price. t/f 1.6
T A market order to buy a stock would execute at the current ask price. 1.6
A market order to sell a stock would execute at the current ask price. t/f 1.6
False. The order would execute at the current bid price.
A limit order to buy a stock at $101.55 would execute at the current ask price. t/f 1.6
False. The order would execute when the ask price is at or below $101.55.
A limit order to buy a stock at $101.55 would execute when the ask price is at or below $101.55. t/f 1.6
T A limit order to buy a stock at $101.55 would execute when the ask price is at or below $101.55.
Which of the following best explains the role of prices? 1.7
Prices convey information, Prices affect the distribution of income, Prices affect incentives
Efficient markets are those in which prices are volatile. t/f 1.7
f Efficient markets are those in which prices reflect all relevant information. right
Efficient markets will often have mispriced securities. t/f 1.7
F Markets that are efficient will have prices that fully reflect the available information about a specific security. Markets that are inefficient will have securities that are mispriced, or the security prices will not reflect all available information. right
Inefficient markets are those in which prices will respond quickly to new information. t/f 1.7
f Inefficient markets are those in which prices will respond slowly to information. right
Inefficient markets will often have mispriced securities. t/f 1.7
t Inefficient markets will often have mispriced securities. right
Because in an efficient market all available information is built into the price of a stock - investment patterns and trends to "get rich quickly" are not easily discernable and it is difficult to predict the price t/f 1.7
t In an efficient market, prices are not predictable. R
In an inefficient market, prices will slowly respond to new information. t/f 1.7
t In an inefficient market, prices will slowly respond to new information. r
In an efficient market, new information will move prices almost immediately. t/f 1.7
t In an efficient market, new information will move prices almost immediately. r
Suppose you bought a stock for $45 one year ago. Today the stock is currently priced at $47.42. If the stock does not pay a dividend, what is the dollar return for this stock? 1.8
2.42
47.42-45 = 2.42
Suppose you bought a stock for $45 one year ago. Today the stock is currently priced at $47.42. If the stock does not pay a dividend, what is the percentage return for this stock? 1.8
.0538
(47.42-45)/45 = 0.0538 or 5.38%
Suppose you bought a stock for $22.10 one year ago. Today the stock is currently priced at $22.08. The stock recently paid a $4 dividend, what is the dollar return for this stock? 1.8
3.98
22.08-22.10 + 4 = 3.98
Suppose you bought a stock for $22.10 one year ago. Today the stock is currently priced at $22.08. The stock recently paid a $4 dividend, what is the percentage return for this stock? 1.8
.1801
(22.08-22.10 + 4)/22.10 = 0.1801 or 18.01%
Suppose you bought a stock for $101.44 one year ago. Today the stock is currently priced at $109.54. If the stock does not pay a dividend, what is the dollar return for this stock? 1.8
8.10
109.54-101.44 = 8.10
Suppose you bought a stock for $101.44 one year ago. Today the stock is currently priced at $109.54. If the stock does not pay a dividend, what is the percentage return for this stock? 1.8
.0799
(109.54-101.44)/101.44 = 0.0799 or 7.99%
Suppose you bought a stock for $19.84 one year ago. Today the stock is currently priced at $18.45. The stock recently paid a $3.50 dividend, what is the percentage return for this stock? 1.8
.1064
(18.45-19.84+3.50)/19.84 = 0.1064 or 10.64%
Firms with high unexpected earnings usually exhibit large positive returns on the earnings announcement day. t/f 1.8
t Firms with high unexpected earnings usually exhibit large positive returns on the earnings announcement day. r
Firms with low unexpected earnings usually exhibit large positive returns on the earnings announcement day. t/f 1.8
f. Firms with low unexpected earnings usually exhibit large negative returns on the earnings announcement day. r
Statement of cashflows indirect method. video scf 0707
-current assets-operating act
-long term assets-investing act (depreciation change in operating act)
EQUALS
-current liabilities-operating act
-long term liability-financing act
-stockholders equity-financing act (income in RE go to operating act and dividend go to financing act)
Firms with low unexpected earnings usually exhibit large negative returns on the earnings announcement day. 1.9
maximize 1.9 [Show Less]