Finance Questions

The preemptive right is designed to a. Allow management to diffuse stock ownership any voting power b. Allow managers to preempt a stock offering if they do not like the terms of the deal c. Allow existing shareholders the right to sell their existing shares before the new offer d. Allow existing shareholders to buy shares of the new offering if they desire e. None of the above

True or False: American options can only be exercised at maturity

True or False: Market makers try to make money on the bid/ask spread.

A MBB differs from a pass-through mortgage security in that a. The MBB does not result in the removal of mortgages from the balance sheet. b. A MBB holder has no prepayment risk. c. Cash flows on a MBB are not directly passed through from mortgages. d. All of the above. e. a) and b) above.

True or False: Currency swaps can be used to hedge currency risk.

True or False: The largest category of mortgages by dollar volume is commercial mortgages.

An interest rate collar is a. Writing a floor and writing a cap b. Buying a cap and writing a floor c. An option on a futures contract d. Buying a cap and buying a floor e. None of the above

If all preferred dividend payments that have been missed must be paid before any common stock dividend can be paid the preferred stock is called _____ preferred stock. a. Cumulative b. Participating c. Nonparticipating d. Voting e. Dual class

Measured by the amount outstanding, the largest type of derivative market in the world is the a. Futures market b. Forward market c. Swap market d. Options market e. Credit forward market

The largest single holders of common stock (in dollar terms) are ultimately a. Pension funds b. Households c. Mutual funds d. Brokers and dealers e. Life insurance firms

You have taken a stock option position and if the stock's price increases you could lose a fixed small amount of money, but if the stock's price decreases your gain increases. You must have ________________________________. a. Bought a call option b. Bought a put option c. Written a call option d. Written a put option e. Purchased a straddle

In terms of volume of trading and market value of firms traded the ________ is the largest U.S. stock market. In terms of number of firms traded the ___________ is the largest in the U.S. a. NYSE ; NYSE b. NASDAQ ; NYSE c. NYSE ; AMEX d. NYSE ; NASDAQ e. NASDAQ ; AMEX

Which of the following is true for loan originators? A) They usually hold mortgages on their balance sheet over the long term. B) They often issue mortgage-backed bonds to finance their operations. C) Their income largely comes from origination fees. D) They are almost exclusively run by large banks

Common stock typically has which of the following? a. Tax-free dividend income. b. Fixed cash flows in the form of guaranteed dividends. c. A set maturity date. d. Voting rights.

An interest rate floor is designed to protect an institution from a. Falling interest rates b. Falling bond prices c. Increased credit risk on loans d. Swap counterparty credit risk e. a) and b) above

True or False: A type of absentee ballot that allows a representative to vote on behalf of the stockholder is called a proxy.

Under participating preferred stock, a. Preferred shares can be converted to common shares at a pre-specified price. b. Preferred shareholders can have more than one vote for the board of directors. c. Dividends can increase if a company meets performance targets. d. Preferred shareholders get a priority say on shareholder initiatives.

True or False: under cumulative voting, if a shareholder owns 51% of a company's stock, he or she is assured of the ability to elect the entire board of directors.

True or False: Investors in mortgages want borrowers to refinance when interest rates fall because it allows them to collect origination fees.

Market makers: a. Trade for their own account. b. Typically use limit orders. c. Provide liquidity in secondary markets. d. all of the above e. none of the above