Deck 1: Introduction

Question 1

Collateralized debt obligations (CBO)are backed by one of the following:

A) Pools of mortgages
B) Low Investment-grade corporate bonds
B) Pools of commercial or personal loans

Answer 1

B

Question 2

An order which is activated only when the price of the stock reaches or passes through a predetermined limit is called the:

A) stop order.
B) day order.
C) limit order.
D) market order.

Answer 2

A

Question 3

In a book market,orders are ranked by price and time.That is,one the bid (buy)side of the book,a high priced limit order has priority over a lower priced order.On the offer (ask)side of the book,a low priced limit order has priority.

Answer 3

True

Question 4

Dow Jones Industrial Average Index (DJIA)is consisted of a price-weighted average of 30 large "blue chip" stocks.

Question 5

Julia earns $60,000 each year for two consecutive years.She has an option to invest in treasury funds to earn a 5% interest today,and consume the entire amount in the second year.Alternatively,she can choose to borrow money at 5% against the second period's income.Assume that the optimum decision for her is to invest money at 5%.Determine the maximum amount she could consume in period 2.

A) $60,000
B) $0
C) $123,000
D) $117,143

Question 6

Which of the following security's value is contingent on the performance of an underlying security?

A) Treasury Bill
B) Option
C) Corporate Bond
D) Equity

Question 7

List and discuss the characteristics of various types of financial securities.

Question 8

List and discuss the characteristics of various types of financial markets.

Question 9

In case of government bonds,non-competitive bidders have price uncertainty and competitive bidders face volume uncertainty.

Question 10

Given a typical set of indifference curves and a budget constraint for a 1-period (2-date)consumption model,where will the optimum consumption pair (for date 1 and date 2)be found on the graph and why is it optimal?

Question 11

Stocks are traded only in the listing exchange.For example,the fact that IBM is listed in NYSE implies that it can only be traded in NYSE

Question 12

List the factors that affect risk.