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FINANCIAL MARKETS AND INSTITUTIONS

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Question;[1]. The annual rate of return on any given stock;can be found as the stock's dividend for the year plus the change in the;stock's price during the year, divided by its beginning-of-year price.;a. True;b. False;(2-6) Stock market returns F H;[ii]. The annual rate of return on any given stock;can be found as the stock's dividend for the year plus the change in the;stock's price during the year, divided by its beginning-of-year price. If you obtain such data on a large portfolio;of stocks, like those in the S&P 500, find the rate of return on each;stock, and then average those returns, this would give you an idea of stock;market returns for the year in question.;a. True;b. False;(2-6) Stock market returns F H;[iii]. Each stock's rate of return in a given year;consists of a dividend yield (which might be zero) plus a capital gains yield;(which could be positive, negative, or zero).;Such returns are calculated for all the stocks in the S&P 500. A weighted average of those returns, using;each stock's total market value, is then calculated, and that average return is;often used as an indicator of the "return on the market.;a. True;b. False;(2-6) Stock market returns F H;[iv]. Each stock's rate of return in a given year;consists of a dividend yield (which might be zero) plus a capital gains yield;(which could be positive, negative, or zero).;Such returns are calculated for all the stocks in the S&P 500. A simple average of those returns (which;gives equal weight to each company in the S&P 500) is then calculated. That average is called "the return on;the S&P Index," and it is often used as an indicator of the;return on the market.;a. True;b. False;Multiple Choice: Conceptual;(2-1) Capital allocation F;H;[v]. You recently sold 100 shares of Microsoft stock to your brother;at a family reunion. At the reunion your;brother gave you a check for the;stock and you gave your brother the stock certificates. Which of the following best describes this;transaction?;a. This is an example of a direct transfer of;capital.;b. This is an example of a primary market;transaction.;c. This is an example of an exchange of physical;assets.;d. This is an example of a money market;transaction.;e. This is an example of a derivative market;transaction.;(2-2) Financial markets F;H;[vi]. Which of the following statements is CORRECT?;a. The NYSE does not exist as a physical;location. Rather it represents a loose;collection of dealers who trade stock electronically.;b. An example of a primary market transaction would be your uncle transferring 100;shares of Walmart stock to you as a birthday gift.;c. Capital market instruments include both long-term debt and common stocks.;d. If your uncle in New York sold 100 shares of;Microsoft through his broker to an investor in Los Angeles, this would be a;primary market transaction.;e. While the two frequently;perform similar functions, investment banks generally specialize in lending;money, whereas commercial banks generally help companies raise large blocks of;capital from investors.;(2-2) Financial markets F;H;[vii]. Which of the following is a primary market transaction?;a. You sell 200 shares of IBM stock on the NYSE through your broker.;b. You buy 200 shares of IBM stock from your brother.;The trade is not made through a broker--you just give him cash and he;gives you the stock.;c. IBM issues 2,000,000 shares of new stock and sells them to the public through an;investment banker.;d. One financial institution;buys 200,000 shares of IBM stock from another institution. An investment banker arranges the;transaction.;e. IBM sells 2,000,000 shares of treasury stock to its employees when they exercise;options that were granted in prior years.;(2-2) Capital market instruments F;H;[viii]. Which of the following is an example of a capital market instrument?;a. Commercial paper.;b. Preferred stock.;c. U.S. Treasury;bills.;d. Banker's acceptances.;e. Money market mutual funds.

 

Paper#55050 | Written in 18-Jul-2015

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