Davidson; Management - 3rd Australasian Edition



1.
Which of the following is not an example of capital market securities?
A.
common stocks
B.
convertible bonds
C.
commercial paper
D.
mortgages


2.
Convertible notes are
A.
hybrid securities
B.
corporate bonds.
C.
state government bonds
D.
Treasury Indexed bonds


3.
The secondary markets for capital market securities have facilitated economic growth
    in general because
A.
they help provide marketability for capital market claims.
B.
they have increased people's willingness to buy capital market claims.
C.
they make people more willing to invest because they can more easily
         diversify their risk.
D.
all of the above


4.
Everything else being equal, a bond will sell at a higher yield if it
A.
has a call provision.
B.
has low default risk.
C.
can be converted to stock.
D.
is listed on an exchange.


5.
The biggest supplier of funds in the capital markets are
A.
financial institutions
B.
state and local governments
C.
federal government
D.
households and non profits


6.
Regulators provide a valuable function for the capital markets because they
A.
try to keep the market participants honest.
B.
try to prevent excessive speculation from destabilizing the market.
C.
make sure all pertinent information about publicly traded securities is disclosed.
D.
all of the above


7.
A capital market financing is most likely to finance
A.
new plant and equipment.
B.
seasonal inventory needs.
C.
a quarterly dividend payment.
D.
the sale of common stock.


8.
The household sector is the largest surplus sector and invests in the capital market
A.
directly by purchasing stocks and bonds.
B.
directly by issuing assets payable in the capital market.
C.
both directly (owning stocks) and indirectly (pension fund reserves, etc))
D.
both a and c above


9.
The largest investor in n Commonwealth Government Securities (CGS) is:
A.
Commonwealth of Australia
B.
Reserve Bank of Australia
C.
life insurance companies
D.
households


10.
Life insurance companies and superannuation funds buy corporate bonds for which two major reasons?
A.
tax sheltering and high yield
B.
liquidity and high after-tax returns
C.
liability maturity matching and high after-tax returns
D.
low risk and liquidity


11.
All of the following bond terms relate to maturity except
A.
serial.
B.
debenture.
C.
sinking fund.
D.
call provision.


12.
Securitization of loan portfolios, such mortgage loans, will occur if
A.
the financial market will pay more for the loan portfolio than the issued asset-backed securities.
B.
a financial guarantee is obtained from a commercial bank.
C.
the financial market will pay more for the issued asset-backed securities than the loan portfolio.
D.
the borrowers permit their loan to be securitized.


13.
Bonds issued by foreign entities in the United States are called:
A.
foreign bonds
B.
American depository receipts
C.
Yankee bonds
D.
Samurai bonds


14.
The demand for junk bonds came primarily from
A.
life insurance companies
B.
savings & loans association
C.
pension funds
D.
all of the above


15.
The quality of a financial guarantee depends on the reputation and financial strength of the
A.
the guarantor
B.
the investor
C.
the borrower
D.
none of the above


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