edit Reduced Exam 3 Suggested Question Set

Debt Securities - These securities are in the form of debt or borrowings which have to be repaid by the issuer to the holder of the securities. The issuers of debt securities have to pay interest in the form of coupons at a rate of interest.  Debt securities are a means of diversification and provide a predictable income stream to the holders. You mention "coupons" in you debt instrument discussion. Can you tell us more about these coupons? How do they work, where do we find them? Are they registered?

Match the following money market securities with their issuers.       Securities   Issuers  a. Treasury bills                      1. depository institutions b. negotiable CDs                   2. U.S. government c. commercial paper               3. banks  d. banker’s acceptances         4. business firms and institutions

Commercial paper markets are trading   a. Municipal bonds   b. Private company bonds   c. Federal Reserve bonds   d. Treasury bonds For a commercial bank, to calculate its profitability we may look at   a. Equity Ratio   b. Return on assets   c. Return on investment   d. US Treasury bond holdings

1. Statement 1: Financial securities are instruments that can be transferred or sold easily throughestablished financial markets.Statement 2: Financial securities uses physical certificates that sellers (holders) need to seek theapproval and signature of the issuer to be transferred to the buyer.Statement 3: Financial securities are tradeable through established market or over-the counter.Statement 4: Financial securities hold monetary value or face value that is equivalent to their sellingprice.Statement 5: Financial securities are fungible that can be converted into assets or cash.a.All statements are true b.Statements 1, 2 and 3 are true c.Statements 2, 3 and 4 are trued.Statements 3, 4 and 5 are true e.Statements 1, 3 and 5 are true f. Statements 2, 4 and 5 are true 2. Statement 1: Debt securities represent ownership in a firm that would entitle the holders certaindividends and claims in a firm.Statement 2: Equity securities are loans made by the issuing firm that would entitle the…

B. Sovereign debt (issued bonds) are typically considered as proxies for risk free. Discuss the reasons why sovereign debt may not be risk free. Why might credit ratings agencies give different credit ratings to sovereign debt issued by the same country, depending on coupons denominated in domestic or foreign currency.

Which of the following are money market securities?I. Jumbo CDsII. Short-term municipal debtIII. U.S. Treasury billsIV. Commercial paper   A.  I and IV only   B.  II and III only   C.  I, II, and IV only   D.  II, III, and IV only   E.  I, II, III, and IV

Which one of the following is not a money market securities. Choose correct option and explain and also explain incorrect options and also explain summary A•Treasury bills B•National savings certificate C•Certificate of deposit D•Commercial paper

National governments issue debt securities known as sovereign bonds, which can be denominated in either local currency or global reserve currencies, like the U.S. dollar or euro. For this discussion question, first define what these bonds are.  Why are these issued?  Then discuss the issues that can arise when investors invest in these types of bonds.  What are the advantages and disadvantages of these bonds?  Are there unique issues that can arise only with this type of bond?  Would you invest in sovereign bonds?

National governments issue debt securities known as sovereign bonds, which can be denominated in either local currency or global reserve currencies, like the U.S. dollar or euro. (source (Links to an external site.)Links to an external site.). For this discussion question, first define what these bonds are.  Why are these issued?  Then discuss the issues that can arise when investors invest in these types of bonds.  What are the advantages and disadvantages of these bonds?  Are there unique issues that can arise only with this type of bond?  Would you invest in sovereign bonds?

8. According to the Loanable funds' theory, how are interest rates determined?9. Compare and contrast three different money market securities in terms of issuer, return, risk and tradability/liquidity.10. Explain the role of non-depository financial institutions within the financial sector? Discuss the core functions of any three of these institutions.

Which statement is FALSE regarding bonds?Select one:The pay back their face value within their maturity.They can be traded on secondary markets. Entitles its holder for cash inflows.When issued they increase the equity of the firm.

A.Discuss three factors that affect net interest income.B.What are the objectives of the Basel III liquidity standards?C.Discuss any five principles of bank liquidity risk management.D.What are the major advantages of financial derivatives for managing interest rate risk compared to the traditional gap and duration gap techniques?E.Why is the marginal cost of funds critical in loan pricing?

Which of the following is not a main core function of the financial system?a. Provide a payments system for the exchange of goods and services.b. Provide mechanisms to separate funds for smaller-scale investmentc. Provide the channels to transfer funds and economic resources across industriesd. Provide ways to manage uncertainty and mitigate risk According to the market segmentation theory of the term structure,a. the interest rate for bonds of one maturity is determined by the supply and demand for bonds of that maturity.b. bonds of one maturity are not substitutes for bonds of other maturities; therefore, interest rates on bonds of different maturities do not move together over time.c. investors' strong preference for short-term relative to long-term bonds explains why yield curves typically slope downward.d. only A and B of the above. Costs associated with the correspondent bank process include:a. Interestb. Currency conversion spreadc. Reputation costsd. Payroll costs

If bonds payable are not callable, the issuing corporation a.can exchange them for common stock b.can repurchase them in the open market c.is more likely to repurchase them if the interest rates increase d.must get special permission from the SEC to repurchase them