Question 1

Efficiency in financial markets means that .&#10;A)social well-being will be maximized&#10;B)all investments will keep their value&#10;C)overall yields will increase&#10;D)fairness will always be maintained

Accepted Answer

C

Question 2

Agreements reached in financial trading are generally considered fair as long as.&#10;A)everyone profits from the exchange&#10;B)all traders involved are professionals&#10;C)everyone has the same information&#10;D)they are reached through good-faith bargaining

Accepted Answer

Agreements reached through good-faith bargaining are considered fair because all parties involved have had an opportunity to negotiate and come to a mutually acceptable arrangement. This ensures that the terms of the agreement are reasonable and equitable for all involved. Profitability, professionalism, and having the same information may contribute to a fair agreement, but they are not sufficient on their own.

Question 3

Financial service people are most fundamentally in the business of selling .&#10;A)savings&#10;B)investments&#10;C)stocks&#10;D)bonds

Accepted Answer

Financial service people are most fundamentally in the business of selling investments which include stocks, bonds, mutual funds, and other securities. Other products and services such as savings accounts, checking accounts, and loans are also offered to complement their investment products, but their primary goal is to help clients invest and grow their wealth.

Question 4

Due to the wide variety of financial products available,it is incumbent on the broker to help the customer select those that are .&#10;A)suitable&#10;B)liquid&#10;C)cheapest&#10;D)least risky

Accepted Answer

It is the broker's responsibility to ensure that the financial products selected are suitable for the customer based on their financial goals, risk tolerance, and other relevant factors. While liquidity, cost, and risk are important considerations, suitability should be the primary concern.

Question 5

If people in financial markets have unequal access to information,.&#10;A)it is always unfair&#10;B)this can happen in spite of their expertise&#10;C)it should not impact their ability to make good decisions&#10;D)a law has probably been broken

Accepted Answer

Unequal access to information can occur even among experts in the financial market. This can happen due to a variety of factors such as insider trading, selective disclosure and less transparent markets. While it may be unfair, it is not always illegal and can impact decision-making.

Question 6

Deception is an ever-present danger in financial selling mostly because .&#10;A)the customer has to rely on the seller for all of the relevant information&#10;B)financial salespeople often do not know very much about the securities they sell&#10;C)there are not many laws that regulate financial services&#10;D)no one ever has all the information at a given time

Accepted Answer

Deception is more likely to occur when the customer is heavily reliant on the seller for information and the seller may withhold or manipulate information to their advantage. Additionally, financial selling involves complex products and terminology that the customer may not fully understand, making them vulnerable to deceptive tactics. While there are some laws regulating financial services, they do not eliminate the danger of deception completely. Finally, it is true that no one ever has all the information at a given time, but this does not necessarily lead to deception in financial selling.

Question 7

Takeover offers must now be accompanied by enough time so that .&#10;A)shareholders have opportunity to consider the offer carefully&#10;B)consumers can decide whether to buy stock in the company&#10;C)abusive tender offers can be rescinded by government action&#10;D)there can be an orderly transition of control

Accepted Answer

The purpose of requiring enough time for a takeover offer is to give shareholders the opportunity to carefully consider the offer and make an informed decision. This ensures that the shareholders can weigh the benefits and risks of the offer and make a decision that is in their best interest.

Question 8

Financial dealings most fundamentally require the value of _.&#10;A)freedom&#10;B)time&#10;C)trust&#10;D)competence

Accepted Answer

Trust is the most fundamental requirement in financial dealings as it enables parties to have confidence in each other's ability to fulfill their financial obligations and to be honest and transparent in their dealings. Without trust, financial transactions would be risky and uncertain, leading to higher transaction costs and reduced economic activity. While freedom, time, and competence are also important factors in financial dealings, they are secondary to trust.

Question 9

A financial broker may be tempted to &#34;churn&#34; because by doing so he can _ .&#10;A)sell more shares&#10;B)artificially inflate yields&#10;C)get more customers&#10;D)earn additional commissions

Accepted Answer

Churning is a deceptive practice where a broker excessively trades securities in a client's account for the purpose of generating more commissions. Therefore, the broker will earn additional commissions by churning the account.

Question 10

Doing business in the financial markets most fundamentally presupposes that will be respected.&#10;A)power&#10;B)fairness&#10;C)freedom&#10;D)ideas

Accepted Answer

Doing business in the financial markets requires trust and confidence among individuals and institutions. This can only happen if there is a sense of fairness and trustworthiness. Without these qualities, the market cannot function properly. While power and ideas may play a role in financial markets, they are not as fundamentally necessary as fairness. Freedom is also important, but it is closely tied to fairness and cannot exist independently of it.

Deck 11: Ethics in Finance