Exam 1

Question 1

Money Markets vs. Capital Markets

Answer 1

Money Markets

• short-term
• high liquid

Capital Markets

• long-term
• debt securites

Question 2

What is an example of the largest Capital Market?

Answer 2

New York Stock Exchange NYSE

Question 3

2 stock exchanges that have a physical location?

Answer 3

New York Stock Exchange (NYSE)

American Stock Exchange (AMEX)

Question 4

NASDAQ

Answer 4

• no physical location
• National Association of Securities Dealers Automated Quotation
• is a network of computers

Question 5

When did the AMEX and the NASDAQ merge and split?

Answer 5

merged in 1998

split in 2005

Question 6

Expectations Theory

Answer 6

• if inflation is expected to rise, then Yield curve goes up

- if inflation is expected to go down, then Yield Curve goes down

Question 7

Maturity Risk Theory

Answer 7

Says as the maturity date increases there is an upward push on the yield curve due to the risk

Question 8

Technological advances in computers and telecommunications, along with the globalization of banking and commerce has led to what?

Answer 8

• Deregulation

- increased competition through the world

Question 9

How does large amounts of capital moving around the world is response to changes in interest rates/exchange rates affect local economies?

Answer 9

It disrupts them

Question 10

NOWC

Answer 10

-Net Operating Working Capital

CA - ( AIP + Accurals)

Question 11

NOPAT

Answer 11

Net Operating Profit after tax

EBIT(1-T)

Question 12

Black Knight

Answer 12

• buys majority of IPO of company
• company just coming to market
• tries to gain control of company

Question 13

White Knight

Answer 13

• Company that buys another company

- to prevent hostile takeover from third-party(bad) company

Question 14

If U.S. interest rates are High, what will foreign people do? What will it do to the purchasing power of the U.S. dollar?

Answer 14

• Foreign people will invest in U.S.

- Purchasing power goes up

Question 15

If inflation increases, what will this do to the interest rate?

Answer 15

Interest rate will increase

Question 16

Who is responsible for a firm’s strategic decisions?

Answer 16

Chairmen of the Board

Question 17

Who is responsible for a firm’s actual operations, such as buying/selling a firm’s products?

Answer 17

Chief Operations Officer (COO)f

Question 18

What is the Compensation Committee?

Answer 18

• sets compensation packages for senior officers

- made up 3 non-employee people

Question 19

When can Mutual Funds be traded during the day? When can ETFs be traded?

Answer 19

Mutual Funds
-only traded at end of day
ETFs
-can be traded like a stock

Question 20

Financial Intermediaries

Answer 20

• create new products for investors

- credit unions, JP Morgan, Fidelity, Commercial banks

Question 21

Which is more regulated, Hedgefunds or Mutual Funds?

Answer 21

Mutual Funds

Question 22

How many seats does the NYSE have?
Dimensions of window?
Dimensions of skylight?

Answer 22

1366 seats
96 by 50ft WINDOW
30 by 30 SKYLIGHT

Question 23

Date NYSE was created?

Answer 23

May 17, 1792

Question 24

How did people first meet up to trade stocks with NYSE?

Answer 24

Around a Buttonwood/Sicklemore tree

Question 25

AMEX merged with ___ in 2008. However, they did not integrate until into ___ until ___

Answer 25

Merged with Euronext in 2008 Integrated into NYSE in 2009

Question 26

Year that NASDAQ was created

Answer 26

1971

Question 27

If EVA is positive, what does that mean about the ROE

Answer 27

ROE exceeds the Cost of Equity

Question 28

Who built the NYSE window and in what year?

Answer 28

George Post 1903

Question 29

Efficient Markets Hypothesis

Answer 29

- says stocks are always in equilibrium | - impossible for investor to consistently beat the market

Question 30

EVA

Answer 30

- economic value added - used to determine managerial compensation - good correlation of stock price - good measure to shareholder value

Question 31

Europe's dollar has increased from $1.09 to $1.24. | How does this affect the U.S.

Answer 31

Means U.S. is not buying as much stuff from Europe

Question 32

___ who works for Goldman Sachs, went on CNBC and asked how computer stocks were valued

Answer 32

Abby Joseph Cohen

Question 33

What is the average PE of the S and P500

Answer 33

15.5

Question 34

What was the date of NASDAQ's peak? What was it's value?

Answer 34

3/10/2000 | 5100

Question 35

NASDAQ hit a peak of 5100 and then went down to ___

Answer 35

1200

Question 36

The Federal deficit was ___ in 2006 and ___ in 2018.

Answer 36

762Billion in 2006 | 800 Billion in 2018

Question 37

Since the economic crisis of 2008, how many quantitative easing programs has the government conducted? When did the last on end

Answer 37

3 programs | October 2014

Question 38

NASDAQ acquired the ___ and 25% of the ___

Answer 38

Philadelphia Stock Exchange 25% of London Stock exchange

Question 39

How many stocks does the Dow Jones Industrial average

Answer 39

30

Question 40

Dow Jones and the S and P500 hit all time highs in ___

Answer 40

Spring of 2016