Question

please give me the correct answer

Which of the following statement is incorrect?

1. Most traditional mutual funds allow investors to redeem their share of the fund only at the close of business.

2. Investment banks underwrite security offerings, advise corporations regarding the design and pricing of new securities, buy these securities from the issuing corporation, and resell them to investors.

3. When a firm sells goods and services to public first time and the Federal Reserve issues IPOs for the firm, but an investment bank helps with the IPO to overprice the issues.

4. Most of the answers are correct.

5. The foreign trade balance describes the level of imports relative to exports.

Which of the following statement is incorrect?

1. Most of the answers are correct.

2. The average rate of return required by investors is called the weighted average cost of capital (WACC).

3. A partnership exists whenever two or more persons or entities associate to conduct a noncorporate business for profit.

4. Derivatives are securities whose values depend on the values of some other traded assets.

5. Public markets are where transactions are worked out directly between two parties and these transactions are called private placements.

Which of the following statement is correct?

1. Corporate bonds are riskier than U.S. government debt and the riskiness depends on strength of issuer.

2. Like typical mutual funds, which can have thousands of investors, hedge funds have many small investors and a relatively large number of low-net-worth individuals.

3. U.S. Treasury notes and bonds are issued by the largest U.S. corporations.

4. All the answers are incorrect.

5. The prime rate is the rate that U.K. banks report for loans made to other U.K. banks.

Which of the following statement is correct?

1. If the Federal Reserve Board purchases Treasury securities held by banks, then the increased demand causes Treasury securities’ prices to go up.

2. Some securities are created from packages of other real assets, a process called simulation.

3. All the answers are incorrect.

4. Most traditional mutual funds allow investors to buy and sell their shares during normal trading hours as opposed to ETFs which can be bought and sold after markets are closed.

5. The larger the federal deficit, other things held constant, the lower the level of interest rates.

Which of the following statement is correct?

1. All the answers are incorrect.

2. Capital markets are the markets for debt securities with maturities of less than a year.

3. Investment banks take premiums, invest these funds in stocks, bonds, real estate, and mortgages, and then make payments to beneficiaries.

4. Because these investors are supposed to be sophisticated, hedge funds are much less regulated than mutual funds.

5. The common stocks of a corporation is about a set of rules drawn up by the founders of the corporation and guides corporate managers to follow.

Which of the following statement is incorrect?

1. If the Fed wishes to slow down the economy and reduce inflation, the Fed sells Treasury securities to banks, which reduces banking reserves and causes an increase in short-term interest rates but a decrease in long-term inflationary pressures.

2. Money markets are the markets for corporate stocks and debt maturing more than a year in the future.

3. general partners potentially can lose all of their personal assets in the event of bankruptcy because each general partner is liable for the business’s debts.

4. One of the properties of cash flows that determine a company’s value is about the risk of the cash flows—safer cash flows are worth more than uncertain cash flows.

5. Most of the answers are correct.

Which of the following statement is correct?

1. All the answers are incorrect.

2. The intrinsic value of a firm is obtained using the expected sales and the cost of goods when all relevant information is incorporated.

3. The Federal Deposit Insurance Corporation (FDIC), which is backed by the U.S. government, insures up to $250,000 per depositor.

4. The fundamental value of a firm is obtained using the expected cash reserves and past dividends when all relevant information is incorporated.

5. Investment banks are cooperative associations whose members have a common bond, such as being employees of the same firm or living in the same geographic area.

Which of the following statement is incorrect?

1. If debt matures in more than a year, it is called a capital market security.

2. Commercial banks help companies raise capital through underwriting activities.

3. Some securities are created from packages of other financial assets, a process called securitization.

4. Most of the answers are correct.

5. One of the advantages of a corporation is that it is easy transfers of ownership interests.

Answer 1

please give me the correct answer

Which of the following statement is incorrect?

1. Most traditional mutual funds allow investors to redeem their share of the fund only at the close of business.

Correct.

Technically yes but the redemption request can be given anytime.

Investors can redeem their share of fund anytime but the Net Asset Value of the fund differs. For example 1: if the redeem request is given during the market working hours (say 11 am on Wednesday) then the next day’s (Thursday) NAV is applicable for redemption. 2. If the request is given during non working hours (Saturday or after 4 pm of Tuesday) then the next working day’s (Tuesday or Wednesday) closing NAV is applicable.

2. Investment banks underwrite security offerings, advise corporations regarding the design and pricing of new securities, buy these securities from the issuing corporation, and resell them to investors.

Incorrect.

Investment banks underwrite security offerings, advice corporations regarding the design and pricing of new securities. But they don’t buy and resell them. They market these securities on behalf of Corporation and act as a platform to bridge the corporation and the investors.

3. When a firm sells goods and services to public first time and the Federal Reserve issues IPOs for the firm, but an investment bank helps with the IPO to overprice the issues.

Incorrect.

Federal Reserve never issue IPO of a firm because their primary responsibility is take care of monetary, financial aspects of the US. An investment bank can advice and act as a platform for the company to come up with the IPO and help them get better price through branding and marketing activities from the investor for the company.

4. Most of the answers are correct.

5. The foreign trade balance describes the level of imports relative to exports.

Correct.

Foreign Trade balance or Balance of Trade is the factor that express the ratio of import versus exports.

Which of the following statement is incorrect?

1. Most of the answers are correct.

2. The average rate of return required by investors is called the weighted average cost of capital (WACC).

Incorrect.

Average rate of return is the average of the rate of return of the past n or few years while WACC is the weighted average cost of capital employed.

Average rate of return is the rate of return of the share holders fund (debt is not part of it) while WACC is the weighted average cost of share of holder fund, debt and preference shares.

3. A partnership exists whenever two or more persons or entities associate to conduct a noncorporate business for profit.

Correct.

Provided, entities are not legally different from the owners.

4. Derivatives are securities whose values depend on the values of some other traded assets.

Correct.

A derivative as the name implies derives its value from a underlying asset which could be a share, security or a commodity.

5. Public markets are where transactions are worked out directly between two parties and these transactions are called private placements.

Incorrect.

Public market is one which free to trade, a wilful seller can sell to anyone and wilful buyer can buy from anyone. There is not limitation in who has to buy or sell and transactions are in open and known to everyone. Market takes care of the details of price based on the market momentum not directly worked out by the parties involved. Buyer and seller cannot be dictated in an open and free market.

Which of the following statement is correct?

1. Corporate bonds are riskier than U.S. government debt and the riskiness depends on strength of issuer.

Correct.

US government debt is soverign debt backed by government while corporate bonds are backed by the corporations. Hence corporate bonds are risker and riskiness depends on the financial strength of the issuing corporation.

2. Like typical mutual funds, which can have thousands of investors, hedge funds have many small investors and a relatively large number of low-net-worth individuals.

Incorrect.

In general, Small number of High Networth Individuals invest in hedge funds unlike in mutual where many small investors invest.

3. U.S. Treasury notes and bonds are issued by the largest U.S. corporations.

Incorrect.

US Treasury notes are issued by US Federal Reserve.

4. All the answers are incorrect.

5. The prime rate is the rate that U.K. banks report for loans made to other U.K. banks.

Incorrect.

It is rate at which the banks lend to their customers with good credit score.

Which of the following statement is correct?

1. If the Federal Reserve Board purchases Treasury securities held by banks, then the increased demand causes Treasury securities’ prices to go up.

Correct.

Whenever there is buyer, the price of securities tend go up at least marginally.

2. Some securities are created from packages of other real assets, a process called simulation.

Incorrect.

Above process is called securitization while simulation is recreating an event using software.

3. All the answers are incorrect.

4. Most traditional mutual funds allow investors to buy and sell their shares during normal trading hours as opposed to ETFs which can be bought and sold after markets are closed.

Incorrect.

ETFs can be bought and sold anytime while the mutual funds can be bought and sold only after the market working hours.

5. The larger the federal deficit, other things held constant, the lower the level of interest rates.

Incorrect.

Larger the deficit, then there has to be more government borrowing increasing the supply of treasury bills hence lower the price and hence higher the interest rate.

Which of the following statement is correct?

1. All the answers are incorrect.

2. Capital markets are the markets for debt securities with maturities of less than a year.

Incorrect.

Capital markets are for long term money say more than a year while money market is for short term money say less than a year.

3. Investment banks take premiums, invest these funds in stocks, bonds, real estate, and mortgages, and then make payments to beneficiaries.

Incorrect.

Investment banks do it for a fee which approved by the regulatory authority but not for a premium which is to do with insurance companies.

4. Because these investors are supposed to be sophisticated, hedge funds are much less regulated than mutual funds.

Correct.

Since the investors are much for financially educated and aware the product it is comparatively less regulated than a mutual fund.

5. The common stocks of a corporation is about a set of rules drawn up by the founders of the corporation and guides corporate managers to follow.

Correct.

It represents the share holders with voting rights and hence they are empowered to frame policies.

Which of the following statement is incorrect?

1. If the Fed wishes to slow down the economy and reduce inflation, the Fed sells Treasury securities to banks, which reduces banking reserves and causes an increase in short-term interest rates but a decrease in long-term inflationary pressures.

Correct.

Once if the banks are devoid of money they stop lending to corporations which in turn results in less jobs and causes reduction in the purchasing power of the people. So inflation comes down.

2. Money markets are the markets for corporate stocks and debt maturing more than a year in the future.

Incorrect.

Money market is for overnight money and short term borrowing less than a year.

3. general partners potentially can lose all of their personal assets in the event of bankruptcy because each general partner is liable for the business’s debts.

Correct.

General partners have unlimited liability to the corporation.

4. One of the properties of cash flows that determine a company’s value is about the risk of the cash flows—safer cash flows are worth more than uncertain cash flows.

Correct.

Certainty in cash flow means cash in account which is more valuable than fund receivables where there is uncertainty in receipt of cash.

5. Most of the answers are correct.

Which of the following statement is correct?

1. All the answers are incorrect.

2. The intrinsic value of a firm is obtained using the expected sales and the cost of goods when all relevant information is incorporated.

Incorrect.

Intrinsic value also includes the real estate, hard and soft infrastructure owned by the company, goodwill, stock, etc, It includes all tangible and intangible items.

3. The Federal Deposit Insurance Corporation (FDIC), which is backed by the U.S. government, insures up to $250,000 per depositor.

Correct.

This is a norm. This amount is for per person per bank too.

4. The fundamental value of a firm is obtained using the expected cash reserves and past dividends when all relevant information is incorporated.

Incorrect.

Fundamental value can be calculated using cash flow and expected growth rate.

5. Investment banks are cooperative associations whose members have a common bond, such as being employees of the same firm or living in the same geographic area.

Incorrect.

Investment banks are operate in different geographies and they are competing organizations.

Which of the following statement is incorrect?

1. If debt matures in more than a year, it is called a capital market security.

Correct.

Debt with more than one year maturity are part of capital market and hence the name capital market security.

2. Commercial banks help companies raise capital through underwriting activities.

Incorrect.

Commercial banks lend for commercial or business activities. They don’t involve in underwriting. There lies this thin line of difference between these two.

3. Some securities are created from packages of other financial assets, a process called securitization.

Correct.

Securitization is the process of combining assets and breaking it into smaller securities for selling it to many investors.

4. Most of the answers are correct.

5. One of the advantages of a corporation is that it is easy transfers of ownership interests.

Correct.

Since the shares of corporations are wide held they can be transferred easily and cannot dictate who can own the corporation.