FINC 341 SI Session 7_ Interest Rates & Markets_Institutions
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Texas A&M University *
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341
Subject
Economics
Date
Apr 3, 2024
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FINC 341-Fall 2022, Professor Guyton
Session Times/Locations
SI Leader: Rebecca Kong (
rebecca.kong@tamu.edu
)
Sunday: 8:00 – 9:00 pm (Zoom)
Website:
https://sites.google.com/tamu.edu/finc-341/rebecca-kong
Monday: 7:00 – 8:00 pm WCBA 103
Zoom Meeting ID:
973 825 3792 |
Password:
SI
Thursday: 8:00 – 9:00 pm WCBA 104
Date: 02/05/2023
Please sign into the QR Code for attendance!
FINC 341 Session #7:
Financial Statements, Interest Rates, & Markets
Warm Up
i
Please use the draw graphs to prove your answer for the following:
A. Which stock markets are market-weighted?
a.
Which stock markets work well or move together?
B. With your small group, draw out two YTM curves, one abnormal and one
normal curve and label the following categories on the x-axis: short-term
(<1-yr), intermediate term, and long-term.
a.
How will inflation change? And why (MRP)? How will the economy
react?
Main Activity
ii
Hall Incorporated is currently using 30% debt and 70% equity for its capital
structure.
What would happen if this firm used more leverage (debt) and less
equity capital? (The total dollar value of the capital does not change.)
a.
ROA would increase a little, and ROE would decrease.
b.
ROA would decrease a little, and ROE would increase.
c.
ROA would stay exactly the same, and ROE would decrease.
d.
Both ROA and ROE would decrease.
e.
Both ROA and ROE would increase.
iii
Which of the following is most FALSE?
a.
The Dow Jones Industrial Average (“the Dow”) began with just 10 stocks
but currently has 30 stocks of leading companies.
b.
The NASDAQ Composite Index is generally regarded as an economic
indicator of the high-tech industry and is market-value weighted.
c.
The S&P 500 Index is widely regarded as the standard for measuring
large-cap U.S. stock market performance. It is not market-value weighted.
d.
An efficient market is a market in which prices are close to intrinsic values
and stocks seem to be in equilibrium.
e.
Exchange Traded Funds (ETFs) buy a portfolio of stocks of a certain type
(category), and then sell ETF shares of the mixture of the stocks
combined.
iv
Which of the following is most FALSE?
a. Proponents of high-frequency trading (HFT) firms argue that HFT firms generate
liquidity in the market.
b. Critics of HFT firms argue that HFT creates instability in the market.
c. Robo-advisors utilize algorithmic technology to create relatively low-cost optimal
investment portfolios for investors.
d. When several large firms join together to finance a large project, this is known as
crowdfunding.
e. A derivative is any security who value is derived from the price of some other
“underlying” asset.
v
Suppose a firm has the following taxable income shown below. How much loss
would be allowed to be carried forward past 2022?
Year
Taxable Income
2018
$20,000
2019
$15,000
2020
$10,000
2021
($30,000)
2022
$16,000
a.
$8,000 of loss
b.
$14,000 of loss
c.
$4,000 of loss
d.
$0 of loss
e.
None of the above
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