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FIN 342 Exam 1 Questions With Actual Responses 2024|2025
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FIN 342 Exam 1 Questions With Actual Responses 2024|2025
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FIN 342 Exam 1 Questions With ActualResponses 2024|2025
Markets and institutions are primary channels through which capital is allocated in our
society CORRECT ANSWERS What is the purpose of studying financial markets and
institutions?
Investment and financial CORRECT ANSWERS ? decisions require managers and
individual investors to understand the flow of funds throughout the economy
operation and structure CORRECT ANSWERS Managers and individuals must
understand the ? of domestic and international financial markets
financial markets CORRECT ANSWERS structures through which funds flow
1) primary vs. secondary
2) money vs. capital CORRECT ANSWERS What are the distinctions between financial
markets?
primary markets CORRECT ANSWERS markets in which users of funds raise funds
through new issues of financial instruments, such as stocks and bonds
initial public offerings CORRECT ANSWERS issues of equity by firms initially going
public
secondary equity offerings CORRECT ANSWERS additional stock
secondary markets CORRECT ANSWERS markets that trade financial instruments
once they are issued
liquidity CORRECT ANSWERS What is the purpose of secondary markets?
late 2007: pressure in housing
spring 2008: loan failures / defaults
summer 2008: oil $120 / gas $5.00
housing crisis increases CORRECT ANSWERS What happened in the Great
Recession?
money markets CORRECT ANSWERS trade debt securities or instruments with
maturities of one year or less
over the counter CORRECT ANSWERS Most US money markets are ? markets
, capital markets CORRECT ANSWERS trade debt and equity instruments with
maturities of more than one year
wider price fluctuations CORRECT ANSWERS Capital markets have ? than money
market instruments
foreign exchange risk CORRECT ANSWERS sensitivity of the value of cash flows on
foreign investments to changes in the foreign currencies price in terms of dollars
the exchange rate CORRECT ANSWERS US dollars received on a foreign investment
depends on ? between the US dollar and the foreign currency when the nondollar
cashflow is converted into US dollars
derivative security CORRECT ANSWERS generally involves agreement between two
parties to exchange a standard quantity of an asset or cash flow at a predetermined
price and at a specified future date
risk mitigation CORRECT ANSWERS Derivative securities are used for:
counter party risk CORRECT ANSWERS Derivative securities contain a significant
amount of:
financial institutions CORRECT ANSWERS perform the essential function of channeling
funds from those with surplus funds to those with shortages of funds
growth CORRECT ANSWERS Derivative securities had tremendous ? between 1992-
2013
Volcker Rule CORRECT ANSWERS Derivative securities had a large drop from 2013-
2019, due largely to the 2014 implementation of the:
regulatory agencies (monitoring agencies) CORRECT ANSWERS Financial institutions
are subject to regulations imposed by:
financial institution CORRECT ANSWERS perform the essential function of channeling
funds from those with surplus funds to those with shortages of funds
1) monitoring costs
2) liquidity costs
3) price risk CORRECT ANSWERS In a world without financial institutions, the level of
funds flowing between suppliers and users would likely be quite low due to the following
reasons:
1) commercial bank
2) thrifts
3) insurance companies
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