polling questions ch 9-12 Flashcards
Why would the Federal Reserve Buy Mortgage Securities at the Beginning of the COVID Crisis?
The Fed wanted to address market dislocation to ensure the continuing flow of credit to households
True or False: Banks are the largest originators of home mortgages
False
What was the approximate level of 30-year mortgage rate on September 30, 2022?
7.0%
Why do Fannie and Freddie Exist?
To provide liquidity to the mortgage markets
What were the total bank losses in the 4th quarter of 2008?
$32.1 billion
What was the initial amount authorized by Congress for the Troubled Asset Relief Program (TARP)?
$700 billion
Financial institutions that hold fixed-rate mortgages in their asset portfolios are exposed to ____ risk because they commonly use funds obtained from short-term customer deposits to make long-term mortgage loans.
interest rate
From the perspective of default/credit risk, which financial instrument has the most risk?
common equity
Why were IPOs hot in 2021?
Strong equity markets enticed sellers to obtain excellent value for their companies
Why Are There Lock-Up Provisions for the Original Investors / Owners?
Prevents downward pressure on the stock that could occur if the original owners sold their shares
What is a SPAC?
A “shell” company designed to take companies public without going through the traditional IPO process.
A stock issuance by a specific firm that already has stock outstanding is referred to as a(n)
secondary stock offering
_____ are acquisitions that require substantial amounts of borrowed funds.
LBO
It is controversial when a Chief Executive is also Chair of the Board because…
it may be considered a conflict of interest in the Board’s role of providing corporate oversight
What will the Fed do at its November Meeting?
raise rates by 75bps
With an excess of deposits at banks and higher interest rates what aspect of bank earnings has improved significantly
net interest income
Which of the following is NOT a firm-specific factor impacting the value of stocks?
market view of interest rates
What risks did my company and I have if I was to conduct insider trading?
fines, reputational risk, and jail time for individuals
For Equity Valuation, Fundamental Analysis relies on trends in the stock price
false
Holding all other things equal, an increase in the corporate tax rate should have the following impact on stock prices:
decrease
The objective of risk management is to:
balance risk vs reward
true or false: The equity price will be higher for a company with more stable earnings?
true
true or false: The equity price will be more stable for a company with volatile earnings?
false
How will a stock price react when many investors are initiating a short position?
The stock price should move lower as there is a “sale” in the market
How will a stock price react when investors have to cover a short position?
the price should move higher
Initial margin requirements, which represent the minimum proportion of the equity investment that must be covered with cash, currently require ____% of the initial investment to be covered with cash.
50%
What is the impact of using borrowed funds (Leverage) on investment returns?
It magnifies returns on both gains and losses
What is Regulation FD?
requires that when firms disclose material information, they must do it publicly.
What is Insider Trading?
Trading on material non-public information
