Essay about Finance

2334 Words Dec 8th, 2014 10 Pages
FINA 3386.01 Spring 2014 Exam 3
Name:______________________________ ID:___________________________
Multiple choice (2 points each) 1. Which of the following statements is incorrect? a. A stock is a certificate representing partial ownership in a corporation. b. Like debt securities, common stock is issued by firms to obtain funds. c. Stocks are issued by corporations to raise short-term funds. d. The secondary stock market enables investors to sell stocks that they had previously purchased. ANS: C 2. Firms assume ____ risk when they issue preferred stock than when they issue bonds. The payment of dividends on preferred stock ____ be omitted without the firm being forced into bankruptcy. a. more; can b. less; can c.
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are typically very large. b. satisfy Nasdaq's listing requirements. c. are typically owned by various institutional and individual investors. d. none of the above ANS: D 8. Sudden favorable news about the performance of a firm will make investors believe that the firm's stock is ____ at its prevailing price. a. overvalued b. fixed c. appropriate d. undervalued ANS: D 9. ____ are not barriers to corporate control to eliminate agency problems. a. Leveraged buyouts b. Antitakeover amendments c. Poison pills d. Golden parachutes ANS: A 10. American Depository Receipts (ADRs) are similar to a. stock options. b. bank deposits. c. stocks. d. bonds. ANS: C 11. A(n) ____ is a standardized agreement to deliver or receive a specified amount of a specified financial instrument at a specified price and date. a. option contract b. brokerage contract c. financial futures contract d. margin call ANS: C 12. ____ take positions in futures to reduce their exposure to future movements in interest rates or stock prices. a. Hedgers b. Day traders c. Position traders d. None of the above ANS: A 13. ____ trade futures contracts for their own account. a. Commission brokers b. Floor brokers c. Commission traders d. Floor traders ANS: D 14. If the prices of Treasury bonds ____, the value of an existing Treasury bond futures contract should ____. a. increase; be unaffected b. decrease; be unaffected c.

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