Soln RSM_230_Mid_Term_ F09[1] (2)

Soln RSM_230_Mid_Term_ F09[1] (2) - Rotman School of...

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Rotman School of Management University of Toronto RSM 230 – Mid Term Exam October, 2009 SOLUTIONS INSTRUCTIONS: You have 90 minutes for this exam. Complete your Scantron and use it to answer Part A of the exam. Answer Part B directly on this exam in the space provided. All cell phones and portable electronic devices must be turned off. This is a closed book exam. No formula sheet is allowed. Non-programmable calculators are permitted. Please remain in your seats during the last 15 minutes of the exam period so you do not disturb others. PLEASE SUPPLY THE FOLLOWING INFORMATION: Student #__________________ Student Name___________________ Circle your Instructor’s Name: Booth Huggins Stapleton For Professor Booth’s sections indicate your class time: Wednesday 8:00-10:00 Wednesday 10:00-12:00 Wednesday 4:00-6:00 This exam paper has 9 pages including the cover page. 1
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PART A – Multiple choice questions. (75% of total grade) Please answer in pencil on the Scantron provided. All questions have equal weight (75% weight). 1. The major financial assets of the household sector are (B) a) Deposits and pensions b) Pensions, insurance and shares c) Houses and shares d) Land, houses and consumer durables e) None of the above 2. The following are all problems of non-market intermediation except: (E) a) Contracting costs, b) Liquidity c) Search costs d) Enforcement of claims e) All of the above (they are all problems) 3. The current Bank and Prime interest rates are: (D) a) 2.25% and 0.25% b) 0.25% and 3.25% c) 0.75% and 0.50% d) 0.50% and 2.25% e) None of those combinations 4. Which of the following statements describing a prospectus is not true?(C) a) It must contain full, true, and plain disclosure of information. b) It is required before shares can be traded in the capital market c) It is required to be filed with the Canadian Securities Commission (CSC) before trading can start d) Ontario prospectus filings can be retrieved on sedar.com e) It is designed to ensure that material facts are available in the capital market. 5. All of the following describe different types of investment funds available for purchase by individual investors except: (C) a) Closed end funds b) Open end or mutual funds c) Pension funds d) Exchange traded funds e) All of the above 2
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6. Asset transformation occurs except when the following happens: (B) a) Insurance companies issue life insurance policies b) Securities dealers set up discount brokerage accounts c) Banks create money through chequing account liabilities d) Pension funds establish defined benefit pension plans e) All of the above 7. Which of the following statements about assymetric information is incorrect (E) a) It involves an issuer knowing more about the true value of the securities than the purchaser b) It is one example of the market for lemons c) It is illustrated by the fraud perpetrated by Bernie Madoff d) It is one justification for securities legislation e) All are correct 8. If the yield to maturity is greater than the coupon rate the bond must be: (C)
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Soln RSM_230_Mid_Term_ F09[1] (2) - Rotman School of...

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