Question 1

___________are claims that are not satisfied until those of the creditors holding certain (senior)  debts have been fully satisfied.

Accepted Answer

A)   Convertible debentures
B)   Collateral trust bonds
C)   Mortgage bonds
D)   Subordinated debenturesE) All of the above
F) B) and D)

Question 2

___________arise from a short-term credit arrangement used by businesses to finance transactionsinvolving firms in foreign countries or firms with unknown credit capacities.

Accepted Answer

A)   Money market mutual funds
B)   Eurodollar deposits
C)   Negotiable certificates of deposit
D)   Banker's acceptancesE) C) and D)
F) A) and B)

Question 3

An instrument that give their holders the right to purchase a certain number of shares of the firm'scommon stock at a specified price over a certain period of time is called

Accepted Answer

A)   a call feature.
B)   a conversion feature.
C)   a stock purchase warrant.
D)   none of the above.E) All of the above
F) A) and B)

Question 4

The risk of an investment in a Eurodollar deposit is partially due to

Accepted Answer

A)   the fact that the majority of these deposits are not in the form of Canadian dollars.
B)   the fact that these instruments only pay interest at maturity.
C)   the presence of some foreign exchange risk.
D)   the fact that the center of the Eurodollar market is in London.E) B) and C)
F) C) and D)

Question 5

The over-the-counter market is

Accepted Answer

A)   a place where securities are bought and sold.
B)   the New York Stock Exchange.
C)   an intangible market for unlisted securities.
D)   an organized stock exchange.E) A) and C)
F) None of the above

Question 6

Firms that require funds from external sources can obtain them from

Accepted Answer

A)   financial institutions.
B)   private placement.
C)   financial markets.
D)   all of the above.E) B) and C)
F) B) and D)

Question 7

The purpose of the restrictive debt covenant that prohibits the sale of accounts receivable is to

Accepted Answer

A)   ensure that a cash shortage does not cause an inability to meet current obligations.
B)   assure the lender that the borrowed funds are put to the use for which they were intended.
C)   prevent liquidation of assets through large salary increases of key employees.
D)   limit the amount of fixed-payment obligations.E) C) and D)
F) A) and B)

Question 8

Which of the following is NOT a financial institution?

Accepted Answer

A)   a newspaper publisher
B)   an insurance company
C)   a commercial bank
D)   a pension fundE) B) and C)
F) A) and D)

Question 9

A debt instrument indicating that a corporation has borrowed a certain amount of money and promises to repay it in the future under clearly defined terms is called a

Accepted Answer

A)   bond indenture.
B)   corporate bond.
C)   treasury bond.
D)   discount bond.E) A) and C)
F) A) and B)

Question 10

By definition, the money market involves the buying and selling of

Accepted Answer

A)   stocks and bonds.
B)   funds that mature in more than one year.
C)   short-term funds.
D)   flows of funds.E) A) and C)
F) B) and C)

Question 11

Trading is carried out on the floor of the Toronto Stock Exchange by

Accepted Answer

A)   a telecommunications network.
B)   investment bankers.
C)   the auction process.
D)   the negotiation process.E) A) and D)
F) C) and D)

Question 12

A violation of preferred stock restrictive covenants usually permits preferred shareholders to

Accepted Answer

A)   force the retirement of the preferred stock at or above its par value.
B)   force the company to repurchase the shares at a stated amount below par.
C)   force the company into bankruptcy.
D)   sell their shares.E) A) and C)
F) A) and B)

Question 13

All of the following features may be characteristic of preferred stock EXCEPT

Accepted Answer

A)   callable.
B)   no maturity date.
C)   convertible.
D)   tax-deductible dividends.E) All of the above
F) C) and D)

Question 14

Trading is carried out in the Over-the-Counter (OTC)  Exchange by

Accepted Answer

A)   the auction process.
B)   the competitive bid process and the negotiation process.
C)   an investment banker.
D)   the competitive bid process.E) B) and D)
F) A) and C)

Question 15

Which of the following is true of a Eurodollar deposit?

Accepted Answer

A)   Eurodollar deposits tend to provide higher yields above nearly all other marketable securities with similar maturities due to the absence of an active secondary market.
B)   Eurodollar deposits tend to provide yields above nearly all other marketable securities with similar maturities due to the higher risk.
C)   Eurodollar deposits tend to provide yields below nearly all other marketable securities with similar maturities due to their low risk.
D)   Eurodollar deposits are nonnegotiable and pay interest only at maturity, hence the yield is higher than on other marketable securities with similar maturities.E) A) and B)
F) A) and C)

Question 16

Another name for a bond that does not make periodic coupon payments is a

Accepted Answer

A)   subordinated debenture.
B)   zero coupon bond.
C)   junk bond.
D)   floating rate bond.E) A) and B)
F) B) and C)

Question 17

___________allow the holder to purchase a certain number of shares of the firm's common stock at a specified price over a certain period of time and are occasionally part of a debt agreement.

Accepted Answer

A)   Stock-purchase warrants
B)   Debentures
C)   Puts and calls
D)   RightsE) A) and C)
F) None of the above

Question 18

The nongovernment issues typically have slightly higher yields than government issues withsimilar maturities due to the slightly _ ___________associated with them.

Accepted Answer

A)   higher profitability
B)   lower risk
C)   higher risk
D)   stronger secondary marketE) B) and D)
F) A) and D)

Question 19

A___________ is a complex and lengthy legal document stating the conditions under which a bond has been issued.

Accepted Answer

A)   warrant
B)   bond indenture
C)   bond debenture
D)   sinking fundE) None of the above
F) A) and B)

Question 20

The principal nongovernment marketable securities are all of the following EXCEPT

Accepted Answer

A)   negotiable certificates of deposit.
B)   money market mutual funds.
C)   Eurodollar deposits.
D)   agency issues.E) A) and D)
F) None of the above

Exam 5: Financial Markets, Institutions, and Securities

Another name for a bond that does not make periodic coupon payments is a

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Firms that require funds from external sources can obtain them from

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The nongovernment issues typically have slightly higher yields than government issues withsimilar maturities due to the slightly _ ___________associated with them.

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The risk of an investment in a Eurodollar deposit is partially due to

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A___________ is a complex and lengthy legal document stating the conditions under which a bond has been issued.

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The over-the-counter market is

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Which of the following is NOT a financial institution?

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A violation of preferred stock restrictive covenants usually permits preferred shareholders to

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By definition, the money market involves the buying and selling of

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___________allow the holder to purchase a certain number of shares of the firm's common stock at a specified price over a certain period of time and are occasionally part of a debt agreement.

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All of the following features may be characteristic of preferred stock EXCEPT

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Which of the following is true of a Eurodollar deposit?

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___________are claims that are not satisfied until those of the creditors holding certain (senior) debts have been fully satisfied.

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The principal nongovernment marketable securities are all of the following EXCEPT

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Trading is carried out on the floor of the Toronto Stock Exchange by

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The purpose of the restrictive debt covenant that prohibits the sale of accounts receivable is to

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Trading is carried out in the Over-the-Counter (OTC) Exchange by

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___________arise from a short-term credit arrangement used by businesses to finance transactionsinvolving firms in foreign countries or firms with unknown credit capacities.

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A debt instrument indicating that a corporation has borrowed a certain amount of money and promises to repay it in the future under clearly defined terms is called a

Correct AnswerverifiedShow Answer

An instrument that give their holders the right to purchase a certain number of shares of the firm'scommon stock at a specified price over a certain period of time is called

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