Test 2 Flashcards
A type of absentee ballot that allows a rep to vote on behalf of the stockholder is called a proxy
True
The way stockholders control a large firm is by electing a board of directors.
True
Stock splits change the divisor in a price weighted index but do not result in any net change in the divisor of a value weighted index.
True
A long term investor in a high marginal tax bracket will normally prefer a dollar of capital gain to a dollar of dividend yield.
True
At year end a firm has assets of $100 and debts due of $120. In this situation the stockholders must pay an additional $20 out of their own pocket.
False
A subprime mortgage is a mortgage made to borrower who has poor credit.
True
GNMA offers timing and principle insurance to investors in mortgages.
False
The largest category of mortgages by dollar volume is commercial mortgages.
False
Adjustable-rate mortgages can increase default risk.
True
Forward contracts are marked to market daily.
False
American options can only be exercised at maturity.
False
Currency swaps can be used to hedge currency risk
True
Mortgage payments are ___ on a 15 year fixed rate mortgage than on a 30 year fixed rate Mortgage, and ___ is paid on a 15 year mortgage than on a 30 year mortgage, ceteris paribus.
a. Lower; less interest
b. Lower; less principal
c. Higher; less interest
d. Higher; more principal
e. Higher; more interest
C) Higher; less interest
14) The schedule showing how monthly mortgage payments are split into principle and interest is a (an):
a. Securitization schedule
b. Balloon payment schedule
c. Graduated payment schedule
d. Amortization schedule
e. Growing equity schedule
D) Amortization Schedule
15) Which one of the following types or mortgages is likely to become more popular as the average age of the U.S. population increases?
a. GEM
b. GPM
c. SAM
d. PLA
e. RAM
E) RAM