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Solved Final Exam - Financial Markets and Institutions | FINA 4400, Exams of Financial Market

Material Type: Exam; Professor: Ren; Class: Financial Markets and Institutions; Subject: Finance; University: University of North Texas; Term: Unknown 1989;

Typology: Exams

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Name ____________________________________
FINANCIAL MARKETS AND INSTITUTIONS
FINA 4400
Final Exam
INSTRUCTIONS: Put your name on both your test and the scantron. Only the answers on the
scantron will be graded for Section I. When you have completed your test, turn in both the test
and scantron and sign out on the sheet provided in the front of the classroom.
Multiple choice. Answer all 37 questions on the provided scantron. Each question is worth
2.7027027 points. (100 total points)
1. Which of the following are money market instruments?
A. Negotiable CDs
B. Common stock
C. T-bonds
D. 4 year maturity corporate bond
E. A, B and C are money market instruments
2. The preliminary version of a security offer that is circulated to potential buyers before SEC
approval (registration) is obtained is called a
A. Final prospectus
B. Shelf registration statement
C. Due diligence draft
D. Waiting period offer
E. Red herring prospectus
3. Of the following, the most recent derivative security innovations are
A. Foreign currency futures
B. Interest rate futures
C. Stock index futures
D. Stock options
E. Credit derivatives
4. Which of the following bond types pays interest that is exempt from Federal taxation?
A. municipal bonds
B. corporate bonds
C. Treasury bonds
D. convertible bonds
E. both A and C
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Name ____________________________________ FINANCIAL MARKETS AND INSTITUTIONS FINA 4400 Final Exam INSTRUCTIONS: Put your name on both your test and the scantron. Only the answers on the scantron will be graded for Section I. When you have completed your test, turn in both the test and scantron and sign out on the sheet provided in the front of the classroom. Multiple choice. Answer all 37 questions on the provided scantron. Each question is worth 2.7027027 points. (100 total points)

  1. Which of the following are money market instruments? A. Negotiable CDs B. Common stock C. T-bonds D. 4 year maturity corporate bond E. A, B and C are money market instruments
  2. The preliminary version of a security offer that is circulated to potential buyers before SEC approval (registration) is obtained is called a A. Final prospectus B. Shelf registration statement C. Due diligence draft D. Waiting period offer E. Red herring prospectus
  3. Of the following, the most recent derivative security innovations are A. Foreign currency futures B. Interest rate futures C. Stock index futures D. Stock options E. Credit derivatives
  4. Which of the following bond types pays interest that is exempt from Federal taxation? A. municipal bonds B. corporate bonds C. Treasury bonds D. convertible bonds E. both A and C
  1. Which of the following statements about mortgage markets is/are true? I. Mortgage companies service more mortgages than they originate. II. Servicing fees typically range from 2% to 4%. III. Most mortgage sales are with recourse. IV. The government is involved in the residential mortgage markets. A. I, III and IV only B. II, III and IV only C. I, II and IV only D. II and III only E. I and IV only
  2. A 10 year annual payment corporate bond has a market price of $1050. It pays annual interest of $100 and its required rate of return is 9%. By how much is the bond mispriced? A. $0. B. Overpriced by $14. C. Underpriced by $14. D. Overpriced by $9. E. Underpriced by $9.
  3. The relationship between maturity and yield to maturity is called the __________________. A. loan covenant B. term structure C. bond indenture D. Fisher effect E. DRP structure
  4. You purchase a $255,000 house and you pay 20% down. You obtain a fixed rate mortgage where the annual interest rate is 5.85% and there are 360 monthly payments. What is the monthly payment? A. $1,215. B. $1,203. C. $1,194. D. $1,367. E. $1,504.
  5. You have agreed to deliver the underlying commodity on a futures contract in 90 days. Today the underlying commodity price rises and you get a margin call. You must have A. A long position in a futures contract B. A short position in a futures contract C. Sold a forward contract D. Purchased a forward contract E. Purchased a call option on a futures contract
  1. Today Stock A is worth $20 and has 1000 shares outstanding. Stock B costs $30 and has 500 shares outstanding. Stock C is priced at $50 per share and has 1200 shares outstanding. If tomorrow Stock A is priced at $22, Stock B at $35 and Stock C is worth $48 what would the value weighted index amount equal? (The index has a base period value of 100) A. 35. B. 105. C. 108. D. 101. E. 102.
  2. Investment A pays 8% simple interest for 10 years. Investment B pays 7.75% compound interest for 10 years. Both require an initial $10,000 investment. The future value of A minus the future value of B is equal to _____ (to the nearest penny). A. $2,500. B. -$2,500. C. $1,643. D. $3,094. E. -$3,094.
  3. A U.S. bank converted $1 million to Swiss francs to make a Swiss franc loan to a valued corporate customer when the exchange rate was 1.2 francs per dollar. The borrower agreed to repay the principle plus 5% interest in 1 year. The borrower repaid Swiss francs at loan maturity and when the loan was repaid the exchange rate was 1.3 francs per dollar. What was the bank's dollar rate of return? A. 26.00% B. -2.69% C. 7.14% D. -3.08% E. 5.00%
  4. A ___________ placed against mortgaged property ensures that the property cannot be sold (except by the lender) until the mortgage is paid off. A. Collateral B. Lien C. Writ of habeas corpus D. Down payment E. Writ of certiorari
  5. The required rate of return on a bond is A. the interest rate that equates the current market price of the bond with the present value of all future cash flows received. B. equivalent to the current yield for non par bonds. C. less than the Err for discount bonds and greater than the Err for premium bonds. D. inversely related to a bond's risk and coupon. E. none of the above
  1. An investor is committed to purchasing 100 shares of World Port Management stock in six months. She is worried the stock price will rise significantly over the next six months. The stock is at $45 and she buys a 6 month call with a strike of $50 for $250. At expiration the stock is at $54. What is the net economic gain or loss on the entire stock/option portfolio? A. -$ B. -$ C. -$ D. $ E. $
  2. A 15 payment annual annuity has its first payment in 9 years. If the payment amount is $1400 and the interest rate is 7%, what is the most you should be willing to pay today for this investment? A. $5,825. B. $12,751. C. $6,416. D. $7,421. E. $6,935.
  3. A U.S. bank borrowed dollars, converted them to euros and invested in euro denominated CDs to take advantage of interest rate differentials. To cover the currency risk the investor should A. Sell dollars forward B. Sell euros forward C. Buy euros forward D. Sell euros spot E. None of the above
  4. You buy a principal STRIP maturing in 5 years. The price quote per hundred of par for the strip is 75.75%. Using semiannual compounding what is the promised yield to maturity on the STRIP? A. 5.632% B. 5.712% C. 2.816% D. 2.945% E. 4.566%
  5. Rates on federal funds and repurchase agreements are stated A. On a bond equivalent basis with a 360 day year B. On a bond equivalent basis with a 365 day year C. As a discount yield with a 360 day year D. As an EAR E. As a discount yield with a 365 day year
  1. An investor is in the 28% federal tax bracket, pays an 9% state tax rate and 4% in local income taxes. For this investor a municipal bond paying 6% interest is equivalent to a corporate bond paying _____ interest A. 11.79% B. 10.17% C. 9.08% D. 9.68% E. 8.47%
  2. A Japanese investor can earn a 1% annual interest rate in Japan or about 3.5% per year in the U.S. If the spot exchange rate is 101 yen to the dollar at what one year forward rate would an investor be indifferent between the U.S. and Japanese investments? A. 100. B. 98. C. 101. D. 97. E. 103.
  3. On September 1, 2008 an investor purchases a $10,000 par T-Bond that matures in 12 years. The coupon rate is 6% and the investor buys the bond 70 days after the last coupon payment ( days before the next). The ask yield is 7%. The dirty price of the bond is: A. $9,295. B. $9,300. C. $9,313. D. $9,321. E. $9,333.
  4. Suppose that $10 million face value commercial paper with a 270 day maturity is selling for $9.55 million. What is the BEY on the paper? A. 4.71% B. 6.42% C. 6.37% D. 6.28% E. 4.50%
  5. An increase in which of the following would increase the price of a call option on common stock, ceteris paribus? I. Stock price II. Stock price volatility III. Interest rates IV. Exercise price A. II only B. II and IV only C. I, II and III only D. I, III and IV only E. I, II, III and IV
  1. You buy a stock for $34 per share and sell it for $36 after you collect a $1.00 per share dividend. Your pre-tax capital gain yield is _____ and your pre-tax dividend yield is _____. A. 2.94%; 2.78% B. 8.82%; 0.00% C. 5.88%; 2.94% D. 5.56%; 2.78% E. 4.65%; 3.17%
  2. Secondary markets help support primary markets because secondary markets I. offer primary market purchasers liquidity for their holdings II. update the price or value of the primary market claims III. reduce the cost of trading the primary market claims A. I only B. II only C. I and II only D. II and III only E. I, II and III
  3. Which of the following is the major monetary policy making body of the U.S. Federal Reserve System? A. FOMC B. OCC C. FRB bank presidents D. U.S. Congress E. Group of Eight Fin.