Question 1

Write a short note on the regulation of the U.S.securities markets.

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Question 2

Why is diversification recommended for investors?

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Question 3

Would a corporation seeking to raise capital sell its new shares on the stock market? If not, why not?

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Question 4

Should stock market speculation be encouraged or discouraged?

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Question 5

Explain how derivates were used to increase risk making the financial crisis of 2007-2009 more severe.

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Question 6

Corporate income is taxed twice-once in the form of corporate income tax and the second time when the owner must pay income tax on dividends.What are the effects of this double taxation?

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Question 7

An investor is trying to decide whether to put his funds into stocks or bonds.He expects rising interest rates over the next year and higher inflation.Your advice?

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Question 8

What are the two critically important functions for corporate financing performed by stock exchanges?

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Question 9

Why are bonds risky to a corporation?

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Question 10

Explain why using leverage to purchase risky securities is so popular.

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Question 11

As an investor, would you agree to the statement "put all your eggs in one basket?" Substantiate your answer.

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Question 12

Explain how "herd behavior" affects the stock market, and contributes to recession.

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Question 13

Explain how mutual funds are advantageous to small investors.

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Question 14

Explain how a diversified portfolio can reduce fluctuations in returns even when the economy as a whole is experiencing contractions and expansions.

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Question 15

What is the stock market's role in achieving efficient use of resources?

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Question 16

Why is plowback the overwhelming favorite among choices of sources of funds for financing corporate investment?

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Question 17

How is it possible to have a separation between ownership and control of a major corporation? What specific type of market imperfection can cause this?

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Question 18

Assume Jean-Claude purchased real estate for $500,000 using $50,000 of which is his own money and $450,000 which he borrowed at an 8% interest rate.If the value increased by 10% in one year and he sold the property, what was Joe's rate of return on his investment? If the value of the property had declined by 2%, what would have been the rate of return on his investment?

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Question 19

From the viewpoint of the individual investor, are stocks or bonds riskier? Explain.

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Question 20

Explain why bond prices and interest rates are inversely related.

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Quiz 9: Securities Business Finance and the Economy the Tail That Wags the Dog