Question

2. The total trading taken place in a given stock for a day across all exchanges is referred to as:

            A) block trading
B) composite trading
C) total trades
D) margin trading

3) Each of the following are required for a corporation to pay a cash dividend except for:

        

1. sufficient retained earnings
2.    a vote by managers
3.    declaration by the board of directors
4. sufficient cash to pay the dividend

            .

4) The risk of consumers losing purchasing power due to an increase in inflation is called:

1. reinvestment risk
   B) unsystematic risk
   C) purchasing power risk
   D) market risk

          

5) Which type of stock has voting rights?

           A) preferred stock

            B) restricted stock

            C) common stock

            D) none of the above

6. A bond that can be converted into the issuing firm’s common stock at the option of the investor is called a:

            A) straight bond

            B) government bond

            C) convertible bond

            D) municipal bond

7. If on Monday 1 U.S. dollar could be exchanged for 130 Euros, then on Wednesday 1 U.S. dollar can be exchanged for 110 Euros, which is true:

            A) the Euro has appreciated

            B) the U.S. dollar has appreciated

           

Part 3. Time Value (25 points)

Please compute the following future values:

1) The future value of $18,000 invested for 20 years at 12% interest =

2) The future value of $75,000 invested for 10 years at 8% interest =

3) The future value of $50,000 invested for 15 years at 14% interest =

Please compute the following present values:

1. The present value of $10,000 to be received in 15 years if discounting at 12% =

2. The present value of $80,000 to be received in 18 years if discounting at 3% =

3. The present value of $240,000 to be received in 14 years if discounting at 4% =

Part 4. Fill In The Blank (3 points each)

1. The right to purchase shares of a new issue of stock that is being issued by a firm you are already invested in is called the _________________________right.

2. The portion of deposits that bankers must not lend but instead must keep on hand as a

      “cushion” is called:

             __________________________________________

3. The people elected by the shareholders to hire and oversee a corporate management team are referred to as the:

       _____________________________________________________
.

4. The process by which interest is paid on interest that was previously earned is called:

     ________________________________________________________

5) The risk associated with a government defaulting on its debt obligations is called:

___________________________________________

Part 5. Essay (19 points)

Explain whether an investor would be better off being an investor in a corporation’s common stock or in the firm’s bonds in the event the firm faces bankruptcy and liquidation through a “fire sale” auction.

Answer 1

Answers-

Q 1)

Option C is correct. Total trades is the total trades of a stock across all exchanges

Option A is incorrect. Block trading involes purchase or sale of large number odf securites that is privately negotiated before transaction takes place.
Option B is incorrect as Composite trading is accumulation of equities or securities that is used to measure a statistcal method to gauge performance of the overall market.
Option D is incorrect. The margin trading is done by borrowing funds from a broker to carry trade in a asset or a security.

Q 3)

The correct Option is B. A vote by managers.
The approval of managers or vote of managers is not required for paying cash dvidend.
All other Options are requirements for cash dividend.
The requirement for a corporation to pay a cash dividend should have all the following - sufficient retained earnings, sufficient cash to pay dividends and declaration of dividends by board of directors

Q 4)

The correct Option is C. Purchasing power risk.
The purchasing power risk is decrease in purchasing power due to increase in inflation rate.

Option A is incorrect as reinvestment risk refers to the investor who is no able reinvest the cash flows at a rate compared to the present rate of return.
Option B is incorrect as unsystematic risk is diversifiable risk that is company specific.
Option D is incorrect. market risk is the systematic risk and related to macro eonomy like GDP and cannot be diversified.  

Q 5)

The correct Option is C. Common stock.

Common stock has voting rights.
Option A preffered stock do not have voting stocks.
Option B restricted stock may or maynot have voting rights.

Note - Kindly put other questions in separate posts