Download Quiz on Financial Markets and Institutions - Prof. Donna Dudney and more Quizzes Finance in PDF only on Docsity! Quiz 1: Asset allocation refers to the __________. Answer: Allocation of the investment portfolio across broad asset classes You decide to purchase an equal number of shares of stocks of firms to create a portfolio. If you wished to construct an index to track your portfolio performance your best match for your portfolio would be to construct a/an Answer: Price weighted index Both the NYSE and Nasdaq have lost market share to ECNs in recent years. Part of Nasdaq's response to the growth of ECNs has been to I) purchase Instinet, a major ECN II) enable automatic trade execution through its new Market Center III) switch from stock ownership to mutual ownership Answer: I and II only You sold short 300 shares of common stock at $30 per share. The initial margin is 50%. You must put up __________. Answer: $4,500 Which one of the following provides the best example of securitization? Answer: Mortgage pass-through security _____ is a mechanism to mitigate potential agency problems Answer: Tying income of managers to success of the firm The AMEX I) Lists smaller, younger firms than the NYSE II) Was a leader in developing ETFs III) Trades some securities that are listed on the NYSE Answer: I, II and III An investor puts up $5,000 but borrows an equal amount of money from their broker to double the amount invested to $10,000. The broker charges 7% on the loan. The stock was originally purchased at $25 per share and in one year the investor sells the stock for $28. The investor's rate of return was _____. Answer: 17% The __________ was established to protect investors from losses if their brokerage firms fail. Answer: SIPC __________ portfolio management calls for holding diversified portfolios without spending effort or resources attempting to improve investment performance through security analysis. Answer: Passive A benchmark market value index is comprised of three stocks. Yesterday the three stocks were priced at $12, $20, and $60. The number of outstanding shares for each is 600,000 shares, 500,000 shares, and 200,000 shares, respectively. If the stock prices changed to $16, $18, and $62 today respectively, what is the one day rate of return on the index? Answer: 6.16% ______ voting of common stock gives minority shareholders the most representation on the board of directors. Answer: Cumulative Under firm commitment underwriting the ______ assumes the full risk that the shares cannot be sold to the public at the stipulated offering price. Answer: Underwriter Financial markets allow for all but which one of the following? Answer: Allow most participants to routinely earn high returns with low risk The price quotations of treasury bonds in the Wall Street Journal show a bid price of 102:12 and an ask price of 102:14. If you sold the bond you expect to receive __________. Answer: $1,023.75
