Term
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Definition
T/F
A type of absentee ballot that allows a representative to vote on behalf of the stockholder is called a proxy. |
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Term
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Definition
T/F
An order to buy shares of stock at a specified price or better is called a limit order. |
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Term
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Definition
T/F
The NYSE defines the simultaneous buying and selling of 15 or more different stocks with a total value of at least $1 million dollars to be block trading and such trades are subject to trading curbs. |
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Term
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Definition
T/F
A long term investor in a high marginal tax bracket will normally prefer a dollar capital gain to a dollar of dividend yield. |
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Term
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Definition
T/F
In the event of bankruptcy a firm's janitor must be paid all the salary owed him before stockholders receive anything. |
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Term
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Definition
T/F
At year end a firm has assets of $100 and debts due of $120. In this situation the stockholders must pay an additional $20 out of their pocket |
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Term
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Definition
T/F
In cumulative voting, a stockholder who owns 51% of the shares can be assured of the ability to elect the entire board of directors |
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Term
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Definition
T/F
During the quiet period, the firm may not release any information about the firm to the public. |
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Term
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Definition
T/F
Preferred stockholders have a claim senior to common stock but junior to bondholders. |
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Term
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Definition
T/F
A market order is normally executed in 15 minutes or less but the buyer has three days to actually pay for the stock |
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Term
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Definition
T/F
The market in which firms sell new securities to raise cash is called the secondary market. |
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Term
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Definition
T/F
Preferred stock where the firm cannot pay a preferred dividend unless a common stock dividend is also paid is termed as cumulative preferred stock |
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Term
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Definition
T/F
Dual class stock refers to firms with both common and preferred stock outstanding |
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Term
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Definition
T/F
If the stock markets are weak form efficient, stock prices reflect all historic public information about a firm |
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Term
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Definition
T/F
IPOs are sometimes sold via a rights offering |
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Term
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Definition
Common stocks typically have which of the following that bonds do not have:
-voting rights
-fixed cash flows
-set maturity date
-tax deductibility of cash flows to investors |
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Term
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Definition
| With _____ voting, all directors up for election are voted on by the shareholders at the same time in one general direction |
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Term
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Definition
| If all preferred dividend payments that have been missed must be paid before any common stock dividends can be paid the preferred stock is called ____ preferred stock |
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Term
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Definition
| in 2004 about 20% of the shares of the top one hundred non-US companies (ranked by sales) were owned by US residents. Most of these stocks were held in the form of ___ |
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Term
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Definition
If the net proceeds are greater than the gross proceeds in an underwritten offering...
-the investment banker made a profit on the spread
-the issuing company underpriced its securities
-the issue fails to occur
-the SEC rescinds the issue
-none of the above |
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Term
| Allow existing shareholders to buy shares of the new offering if they desire |
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Definition
| The preemptive right is designed to... |
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Term
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Definition
| The NASDAQ automatic order execution system for individual traders placing buy or sell orders of 1000 or fewer shares is called the.... |
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Term
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Definition
| The preliminary version of a security offer that is circulated to potential buyers before SEC approval (registration) is obtained is called a ______. |
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Term
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Definition
| A shelf registration allows firms the opportunity to avoid the normal ______ day waiting period by allowing preregistration of securities for up to ____ years. |
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Term
-Investment banks generally cannot be specialists
-Specialists help maintain continuous trading |
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Definition
Which of the following is/are true about specialists?
-Investment banks generally cannot be specialists
-Specialists are used by the NASDAQ system
-Market and limit orders are transacted at specialist posts, but the specialist's "own account" orders are executed elsewhere
-Specialists help maintain continuous trading |
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Term
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Definition
| When all the directors up for election are voted on at the same time the procedure is called ______ |
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Term
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Definition
| A stock has a P/E ratio of 95. If earning don't grow the investor must wait how long to recover their investment? |
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Term
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Definition
| In terms of volume of trading and market value of firms traded the ______ is the largest US stock market. In terms of number of firms traded the _____ is the largest in the US |
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Term
| highest bid and lowest ask |
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Definition
| On the NASDAQ system, the inside quotes are the ...... |
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Term
-Improving the stocks price
-Generating increased publicity for the firm
-providing easier access to primary market capital |
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Definition
| NYSE listing has traditionally benefited a firm by.... |
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Term
-NYSE Composit
-S&P 500
-NASDAQ Composite |
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Definition
Which of the following indices are value-weighted?
-NYSE Composit
-S&P 500
-NASDAQ Composite
-Dow Jones Industrial Average |
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Term
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Definition
| The largest single type of holder of common stock ($) is ______ |
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Term
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Definition
| If no information (publicly available or not) can be consistently used to predict stock price changes then the market is..... |
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Term
-Weak form efficient
-Semi-strong form efficient |
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Definition
Suppose that over the last ten to fifteen years significantly large numbers of investors have been able to earn abnormal returns from using the firm's publicly available financial information to forecast growth in earning and dividends. This would be evidence that the markets are not...
-weak form efficient
-semi-strong form efficient
-strong form efficient |
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Term
-Weak form efficient
-Semi-strong form efficient |
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Definition
Suppose that over the last ten to fifteen years significantly large numbers of investors have been able to earn abnormal returns from using the firm's publicly available financial information to forecast growth in earning and dividends. This would be evidence that the markets are not...
-weak form efficient
-semi-strong form efficient
-strong form efficient |
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Term
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Definition
| In a ______ offering the firm preregisters with SEC any securities it wishes to sell over the next two years. |
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Term
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Definition
| The stamp on a prospectus accompanying a new issue that indicates that issue has not yet been approved for sale by the SEC is called the _______ |
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Term
-Trading for their own account
-Ensuring public limit orders are executed
-Facilitating processing public market orders |
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Definition
| The NYSE specialists are charged with... |
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Term
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Definition
| The age group that holds the most stock is the _____ group. |
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Term
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Definition
| The electronic based market for less actively traded US securities is the .... |
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Term
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Definition
| Computerized markets that automatically match buyers and sellers orders and are used primarily by institutions traders are called _____ |
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Term
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Definition
| The process of allocating shares in an IPO to certain customers in exchange for additional business or other perks is called _____ |
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Term
-Stock prices drop bc equity risk premiums rise
-current stock prices may be overly optimistic about future growth
-slower growth than expected
-expectations change more rapidly than actual economic growth rates. |
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Definition
| Why might a stock price decline not indicate an upcoming recession? |
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Term
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Definition
| past price and trading info is contained in today's stock and is of no value to an investor |
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Term
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Definition
| an investor cannot use any public available info to predict tomorrow's price change |
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Term
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Definition
| public and inside info is of no value in predicting tomorrow's price change |
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Term
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Definition
T/F
Credit derivatives generally provide a means for lenders to hedge against an increase in a borrower's default risk on a loan. |
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Term
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Definition
T/F
forward contracts are marked to market daily |
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Term
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Definition
T/F
Futures or option exchange members who take positions on contracts for only a few moments are called scalpers |
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Term
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Definition
T/F
The seller of a T-bond futures contract priced at 101-16 at the time of the sale agrees to deliver $100,000 face value Treasury bonds in exchange for receiving $101,500 at contract maturity |
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Term
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Definition
T/F
A negotiated non-standardized agreement between a buyer and seller (with no third party involvement) to exchange an asset for cash at some future date, with the price set today is called a forward agreement |
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Term
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Definition
T/F
Marking to market of futures contracts is the process of realizing gains and losses each day as the futures contract changes in price |
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Term
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Definition
T/F
European style options are options that are traded on the Eurex exchange |
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Term
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Definition
T/F
In a futures contract if funds in the margin account fall below the maintenance margin requirement, a margin call is issued. |
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Term
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Definition
T/F
You would expect the price quote for a put option to be at least $10 if the put had an exercise price of $40 and the underlying stock was selling for $50 |
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Term
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Definition
T/F
A clearinghouse backs the buyer's and seller's positions in a forward contract |
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Term
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Definition
T/F
American options can only be exercised at maturity |
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Term
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Definition
T/F
If you think that interest rates are likely to rise substantially over the next several years you might sell a T-bond futures contract or buy an interest rate cap to take advantage of your expectations |
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Term
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Definition
T/F
Writing a put option results in a potentially limited gain and a potentially unlimited loss |
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Term
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Definition
T/F
The buyer of a put option on stock benefits if the underlying stock price rises |
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Term
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Definition
T/F
An in the money American call option increases in value as expiration approaches, but an out of the money American call option decreased in value as expiration approaches. |
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Term
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Definition
| Of the following, the most recent derivative security innovations are _____ |
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Term
| Periodically pay a fixed rate of interest and receive a floating rate of interest |
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Definition
| By convention, a swap buyer on an interest rate swap agrees to..... |
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Term
-stock price
-stock price volatility
-interest rates |
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Definition
An increase in which of the following would increase the price of a call option on common stock, ceteris paribus?
-stock price
-stock price volatility
-interest rates
-exercise price |
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Term
| futures contracts require an initial margin requirement be paid |
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Definition
Which of the following is true?
-forward contracts have no default risk
-futures contracts require an initial margin requirement be paid
-forward contracts are marked to market daily
-forward contract buyers and sellers do no know who the counterparty is
-futures contracts are only traded OTC |
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Term
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Definition
| A professional futures trader who specializes in buying or selling futures contracts for multiple days or weeks is called a ______ |
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Term
| a short position in a futures contract |
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Definition
| You have agreed to deliver the underlying commodity in 90 days. Today the underlying commodity prices rises and you get a margin call. You must ...... |
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Term
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Definition
| A contract that gives the holder the right to sell a security at a preset price only immediately before contract expiration is a(n) |
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Term
-Stock price volatility
-Exercise price |
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Definition
A higher level of which of the following variables would make a put option on common stock more valuable, ceteris paribus?
-Stock price
-stock price volatility
-interest rates
exercise price |
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Term
| the stock price would stay at or below $18 |
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Definition
| A speculator may write a call option on stock with an exercise price of $15 and earn a $3 premium if they thought.... |
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Term
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Definition
| You have taken an option position and if prices drop you could go bankrupt, but if prices rise you might get a small gain. You have.... |
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Term
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Definition
| You have taken an option position and if prices drop you could lose a fixed small amount of money, but if prices rise you gain rises with it, you have.... |
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Term
-buying a call
-writing a put |
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Definition
In a bull market which option positions make money?
-buying a call
-writing a call
-buying a put
-writing a put |
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Term
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Definition
| The higher the exercise price, the ____ the value of a put and the ___ the value of a call |
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Term
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Definition
| Measured by the amount outstanding, the larger type of derivative market in the world is the _____ |
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Term
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Definition
| A stock has a spot price of $35. Its May options are about to expire. One of its puts is worth $5 and one of its calls is worth $5. The exercise price of the put must be ____ and the exercise price of the call must be ____ |
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Term
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Definition
| An agreement between two parties to exchange specified periodic cash flows in the future based on some underlying instrument or price is a/an... |
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Term
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Definition
| New futures contracts must be approved by.... |
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Term
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Definition
| A(n) _____ is a succession of forward contracts on interest rates between two parties. |
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Term
-Buying a t-bond futures contract
-buying options on a t-bond futures contract
-enter into a swap agreement to pay a variable rate and receive a fixed rate |
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Definition
| A bank with short term floating rate assets funded by long term fixed rate liabilities could hedge risk by.... |
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Term
|
Definition
| The swap market's primary direct government regulator is (the) |
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Term
-buy a cap
-buy an interest rate swap |
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Definition
A bank with long term fixed rate assets funded with short term rate sensitive liabilities could do which of the following to limit their interest rate risk?
-Buy a cap
-buy an interest rate swap
-buy a floor
-sell an interest rate swap |
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Term
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Definition
| An interest rate floor is designed to protect an institution from.... |
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Term
| buying a cap and writing a floor |
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Definition
| an interest rate collar is..... |
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Term
-enter into a plain vanilla swap to pay variable and receive fixed
-buy an interest rate floor |
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Definition
| My bank has a larger number of adjustable rate mortgage loans outstanding. To stabilize our interest rate income on these loans the bank could.... |
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Term
|
Definition
| A contract where the buyers agrees to pay a specified interest rate on a loan where the loan will be originated at some future time is called a/an.... |
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Term
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Definition
| Two competing fully electronic derivatives markets in the US are.... |
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Term
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Definition
T/F
The merger of banks with assets of $1billion or more in total assets is called a megamerger |
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Term
|
Definition
T/F
Business loans have dropped in importance since 1990 as measured by the proportion of these loans on the bank balance sheet |
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Term
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Definition
T/F
Loans comprise the single largest asset category for a bank |
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Term
|
Definition
t/f
the major risk faced by commercial baks today is credit risk |
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Term
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Definition
T/F
banks are more highly leveraged than most non-financial firms |
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Term
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Definition
T/F
Revenue economies of scale are cost reductions that occur as banks add related product lines |
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Term
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Definition
T/F
Non transaction deposits at banks include NOW accounts and demand deposits |
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Term
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Definition
T/F
The majority of banks are nationally chartered and insured by the FDIC |
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Term
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Definition
T/F
Since 1980 the number of banks in the US has been increasing dramatically due to deregulation of the industry |
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Term
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Definition
T/F
If average costs to produce a given product are lower for larger firms, cost economies of scope exist. |
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Term
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Definition
| the proportion of industry assets controlled by small banks has increased over the last 10 years |
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Term
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Definition
T/F
Commercial letters of credit are off balance sheet items that are used to back issues of commercial paper by corporate borrowers |
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Term
|
Definition
T/F
The risks of issuing standby letters of credit cover are not as predictable and may be potentially more severe than the risks of commercial letters of credit |
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Term
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Definition
| major liabilities for banks include |
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Term
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Definition
| A decline in the average cost of producing bank services as the size of the bank expands is called..... |
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Term
|
Definition
| a decrease in unit costs after a merger due to join use of inputs in producing multiple products is an example of.... |
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Term
|
Definition
| Revenue or cost reduction resulting in gains from mergers that are not due to scale or scope economies are called _____ |
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Term
|
Definition
| Banks with total assets under ____ are normally called community banks. |
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Term
-Large
-operates in a major financial center
-rely on non-deposit sources of funds |
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Definition
| A money center bank is a bank that is.... |
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Term
| More off balance sheet activities |
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Definition
| In comparison to small banks, larger banks typically have.... |
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Term
|
Definition
| in terms of profitability, a well run bank usually has an RoA of ...... |
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Term
|
Definition
| A card that has a chip implanted in the card that allows the customer to store and spend money for various transactions is called a .... |
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Term
|
Definition
| As a percentage of the typical bank's balance sheet, over the last 50 years ____ have risen and ____ have fallen |
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Term
Office of Comptroller of Currency
Federal Deposit Insurance Corporation
Federal Reserve System |
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Definition
| Key federal regulators of the banking industry include: |
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Term
| Office of comptroller of the currency |
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Definition
| Nationally chartered banks receive chartering and merger approval from the ..... |
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Term
|
Definition
| state chartered banks ____ be members of the FRS, and nationally chartered banks ____ be members of the FRS |
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Term
|
Definition
| the largest single category of loans on the typical banks balance sheet in 2004 was.... |
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Term
|
Definition
| Deposit sources of funds at commercial banks in 2004 comprised almost ____ of liabilities and equity. |
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Term
|
Definition
| From 1951 to the present the fastest growing asset on the balance sheet for the US commercial banks has been..... |
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Term
|
Definition
| the provision of banking services to other banks, such as check clearing, foreign exchange trading, etc. are examples of.... |
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Term
|
Definition
| economies of scale imply that the average cost curve is ____ with respect to the bank size |
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Term
|
Definition
| recently the largest off balance sheet activity by banks has been in.... |
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Term
| off balance sheet liability |
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Definition
| a contingent item that may eventually be placed on the right hand side of the balance sheet or expensed on the income statement is a/an.... |
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Term
|
Definition
| the time interval between the deposit of a check and when the funds become available for depositor use is called..... |
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Term
|
Definition
| after bank A merged with Bank B, costs per unit actually rose rather than falling as predicted. THis is an example of.... |
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Term
|
Definition
| one of the reasons for strong bank profitability in 2004 was the low.... |
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Term
| controlled disbursement account |
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Definition
| a technology based cash management account feature that allows almost all payments that will be made in a given day to be known in the morning is called a .... |
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Term
|
Definition
| of the top 20 global banks as measured by asset size, ____ are US banks |
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Term
|
Definition
| which of the following is the primary regulator of bank holding company activities? |
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Term
-banks have more diversified asset portfolios
-baks obtain funds from more different types of sources
-the average size bank is larger than other depository institutions |
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Definition
| Banks differ from other types of depository institutions in that: |
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Term
| low fixed costs involved in international expansion |
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Definition
| Advantages of going global for US banks include all but which of the following? |
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