Devry Fin 351 Final Exam

Devry FIN 351 Final Exam

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Question

Page 1

Question 1.1.(TCO 1) Which of the following investments would theoretically always carry the highest risk premium? (Points : 4)

A U.S. treasury bill

Common stock

Preferred stock

Corporate bond

Question 2.2.(TCO 1) From the investment banker's point of view, the major reason syndicates are formed in the distribution of large issues is for the purpose of (Points : 4)

improving the liquidity of the issue.

improving geographic distribution.

reducing the underwriter's risk.

improving brand recognition.

Question 3.3.(TCO 1) A _____ requires full payment for the purchase of securities, whereas a _____ allows the investor to borrow a portion of the purchase price from the brokerage firm. (Points : 4)

money market account; cash account

cash account; charge account

cash account; margin account

type 5 account; type 2 account

Question 4.4.(TCO 2) The composite index of leading indicators, made up of 10 leading indicators, has historically (Points : 4)

not always preceded changes in the business cycle.

given roughly the same notice at peaks as at troughs.

varied widely in its timing of notice at peaks and troughs.

More than one of the above

Question 5.5.(TCO 2) Why would an investor want to use the rotational investing method? (Points : 4)

It allows the investor to rotate out of losing stocks.

The investor is attempting to profit from movements in the economic cycle.

It is an easy method of employing dollar-cost averaging.

It assures the investor of owning the proper mix of stocks and bonds.

Question 6.6.(TCO 2) If the equity risk premium (ERP) expands, Kewill(Points : 4)

increase by beta times the equity risk premium.

not be affected.

go down.

decrease by beta times...