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Exam 17: Financial Markets

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Question 1

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Trevor and Lynda bought a home in 20013 for $185,000 with a 20% down payment. Their mortgage payments were only applied to interest on the mortgage balance. If they have to sell their home in 2016 for $148,000, what would be the value of their equity?

A) 0
B) $37,000
C) $11,100
D) $29,600

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Question 2

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Since stock prices will shift in response to unpredictable future news, these prices will tend to follow what mathematicians call _________________.

A) a random walk with a trend
B) momentum trading
C) long-term fundamental value
D) unpredictable changes in expectations

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Question 3

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A checking account typically pays __________________, but gives easy access to your money, either by writing a check or by using ______________.

Briefly explain why it is considered to be extremely difficult for financial professionals to choose only stocks for their client's investment portfolios whose price will rise in the future.

Briefly contrast a private company and a public company.

Last year Stealth Bank received $60 million in interest payments from borrowers. $20 million in loans were written off as uncollectible. It paid out $22 million in interest to its depositors and collected $35 million for various fees it charged. Administration costs were $15 million and taxes were $3 million. What was the value of Stealth Bank's accounting profits?

Discuss venture capital firms. Include a description of what venture capital firms do, how they gather money, what added benefits, if any, they provide, and how investors receive returns on their investments.

In the United States, venture capital firms invested __________ in 2009.

Levi and Beverly paid 20% down on a house valued at $165,000 in 1994. They upgraded the house entirely in 2003, when they refinanced their mortgage for $165,000. If they sell the house in 2018 for $190,000, what would be the value of their equity in the home?

A ________ is a direct payment from a firm to its shareholders.

Which of the following belongs in the range of financial investment options available to U.S. households?

Which of the following will provide an investor with a legally valid claim of partial ownership of a firm?

Which of the following would legally qualify you to be registered as a shareholder of Microsoft Corporation?

XYZ Corporation plans to open a manufacturing plant in China, but the company has not retained any of its yearly profits for this purpose. How will XYZ Corporation likely raise the money to finance its offshore expansion?

If a $1,000 five-year bond that was issued at an interest rate of 7% is offered for sale one year before it matures, and the current interest is 5%, how much should an investor be willing to pay for it?

Why do business firms need financial capital?

A bond is a form of ___________ through which a corporation agrees to repay the amount that was borrowed together with ___________ over a period of time in the future.

During the recent U.S. recession, some large automakers required bailouts from the federal government to avoid being forced into bankruptcy by their _________________ .

Identify the most common original source of money used to start up most small businesses. What is an alternative source of funding that involves a network of angel investors who all reside in the same City?

The _________ of an investment is determined by how easy it is to sell an asset at any given time.