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_Exam__Answers - FIN 353 Final Student: _ 1. If interest...

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FIN 353 Final Student: ___________________________________________________________________________ 1. If interest rates in Japan decrease relative to the US, what happens to the exchange rate in the US against the Japanese currency? A. Depreciates B. Appreciates C. Unknown Table 1 Stock Shares Price_t Price_t+1 A 1,000,000 60 65 B 10,000,000 20 40 C 30,000,000 18 20 2. Based on Table 1 the three securities comprise an index. Calculate the market value weighted index for time period t+1? A. 100 B. 120 C. 140 D. 160 3. STRIPS are subject to _________ risk but are free of _________ risk. A. default; underwriting B. interest-rate; purchasing power risk C. default; interest-rate D. interest-rate; re-investment risk 4. If foreign prices increase what happens to the US currency? A. Depreciates. B. Appreciates. C. Nothing. 5. What is the purpose of the money markets? A. To borrow in order to invest in long-term projects. B. To make speculative investments. C. To warehouse extra cash. D. All of the above. E. B and C
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6. According to Table 2, if there is a deposit outflow of $2 and the reserve requirement is 4%, does this bank have enough reserves? If so, how much excess reserves are available? If not, what is the short fall of reserves? A. Yes; 0.12 B. Yes; 2.12 C. No; 2.12 D. No; 0.12 7. Junk Bonds A. Are issues by corporate with low credit ratings. B. Are issued only by the largest and most creditworthy corporations, as they are unsecured. C. Are issued by government agencies. D. All of the above. E. A and B. 8. If you pay $980 for a 91-day T-bill. It is worth $1,000 at maturity. What is the investment yield? A. 7.9% B. 8.1% C. 8.2% D. 8.4% 9. You purchase a corporate bond. What is the investment risk that you avoid? A. Default risk. B. Reinvestment risk. C. Purchasing power risk. D. Interest rate risk. E. None of the above. Table 3 Bidder Bid Amount Price 1 $500 million $0.9900 2 $550 million $0.9960 3 $1.5 billion $0.9925 4 $1 billion $0.9919 5 $950 million $0.9950 10. Use Table 3. The Treasury auctions off 2 billion dollars worth of Treasury bills. The Treasury receives 500 million non-competitive bids. What is the prevailing price in the auction? A. $0.9900 B. $0.9960 C. $0.9925 D. $0.9919 E. $0.9950
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11. Lauren has a margin account and deposits $50,000. Assuming the margin requirement is 30% and Gentry Shoe Co. is selling at $25 how many whole shares can Lauren purchase using the maximum allowable margin? A. 7,126 B. 6,666 C. 2,857 D. 3,658 12. The EPS for High Tech consulting is $2. The mean P/E for the industry is 15. The book value per share for High Tech is $5. The mean P/BV is 8. Estimate High Tech's price using the comparable approach. A. $30 B. $35 C. $40 D. $45 Table 4 Issue Coupon Maturity YTM 1 7% 10 years 7.00% 2 7% 15 years 7.00% 3 6% 10 years 7.00% 4 6% 9 years 7.00% 13. Using Table 4 which issue has the greatest interest rate risk?
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_Exam__Answers - FIN 353 Final Student: _ 1. If interest...

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