Exam 1 - Review

Question 1

Empirical probability

Answer 1

of an event is the ratio of the number of outcomes in which a specified event occurs to the total number of trials
- Empirical probability uses the number of occurrences of an outcome within a sample set as a basis for determining the probability of that outcome. The number of times “event X” happens out of 100 trials will be the probability of event X happening. An empirical probability is closely related to the relative frequency of an event.

Question 2

Sharpe ratio

Answer 2

Risk Premium / standard deviation

Question 3

What is expected

Answer 3

Excepted rate of return

Question 4

What’s another name for risk premium

Answer 4

Excess return

Question 5

Spilt investment

Answer 5

Funds between safe and risky assets

Question 6

Finance

Answer 6

Creation of value : via investing in assets

Question 7

Is household

Surplus or deficit

Answer 7

Surplus spending units

Question 8

Is firms

Surplus or deficit

Answer 8

Deficit spending units

Question 9

What does the 3 things markets must be?

Answer 9

Efficient
Trust
Competitive

Question 10

What is the flow of funds

Answer 10

Circle of households and firms

Question 11

Remember this crisis (teacher said so)

Answer 11

Mortgage crisis

Question 12

Dodd frank reform act

Answer 12

• Increased transparency

Question 13

Volcker Rule

Answer 13

• Limited banks’ ability to trade

for their own accounts.

Question 14

Bankers acceptance

Answer 14

• Posted dated check

- Guarantee by commercial bank

Question 15

Eurodollars

Answer 15

• It’s time deposit

- Dollar Denominated time deposit in foreign countries

Question 16

How much N for discount (price)

Answer 16

360

Question 17

2 way for quoting price

Answer 17

1. Discount

2. Bey

Question 18

Euro bond and foreign bond difference

Answer 18

• Eurobond: foreign currency-denominated bonds issued by the foreign companies.
  
  • Most Popular: Most popular Eurobonds: Euro dollar bonds & Euro
    yen bonds
• Domestic currency-denominated bonds
  issued by the foreign companies..
  - Yankee, Samurai, Arirang, Bulldog bonds

Question 19

Common stock

Answer 19

• Residual claim
  • In the event of bankruptcy, what will stockholders receive?
  – Limited Liability
  
  • What is the maximum loss on a stock purchase?
• Preemptive rights
  – Voting rights

Question 20

Preferred stock

Answer 20

• Fixed dividends: limited gains, non-voting
  – Priority over common
  – Tax treatment
  • Preferred & common dividends are not tax
  deductible to the issuing firm
  • Corporate tax exclusion on 70% dividends earned

Question 21

3 type of index calculation

Answer 21

Price weighted index
Market value weighted index
Equally weighted index

Question 22

What type of portfolio is price weighted index

What type of weighted scheme

Answer 22

Dow jones

Use same number of share for stock

Question 23

Firms invest in what?

Answer 23

real assetse

Question 24

Households invest in?

Answer 24

financial assets

Question 25

What are the two types of real assets

Answer 25

real assets

- debt equity

Question 26

What are the 2 types of financial assets
Assets
Liability

Answer 26

Assets
- durable good
-financial assets 
Liability
- Mortgage Consumer Credit
- Net worth

Question 27

Examples of Financial Intermediaries

Answer 27

Commercial, banks, insurance

Question 28

What’s risk premium formula

Answer 28

(Rx - Rf)

Question 29

Spiders

TEST QUESTION

Answer 29

S & P 500

Question 30

Diamonds

TEST QUESTION

Answer 30

Down Jones Inc

Question 31

Cubes

TEST QUESTION

Answer 31

NASDAQ

Question 32

Who issues money market instruments

Treasury Bills

Answer 32

Federal Government

Question 33

Who issues money market instruments

b) Certificates of Deposit

Answer 33

Commercial Banks

Question 34

Who issues money market instruments

c) Commercial Paper

Answer 34

Corporations - only high level company

Question 35

Who issues money market instruments

d) Bankers’ Acceptances

Answer 35

Post dated Check - guarantee by commercial bank

Question 36

Who issues money market instruments

Eurodollars

Answer 36

Foreign countries

Question 37

Who issues money market instruments

f) Repurchase Agreement (Repos)

Answer 37

collateralize short-term debt

Question 38

Who issues money market instruments

g) Broker’s Calls

Answer 38

margin loan

Question 39

Who issues money market instruments

h) Federal Funds

Answer 39

loan for reserve requirement