QUESTION 6 All of following can be considered differences between commerical banks and contractual savings institutions except: O Portfolio diversification O Need for liquidity O Impact on money supply O Profitablity goal
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- A bank that seeks to increase its risk-adjusted capital ratio has a number of options at its disposal including: Issue new equity, such as through a rights issue to existing shareholders, an equity offering on the open market, or by placing a bloc of shares with an outside investor. Increase retained earnings by reducing the share of its profit it pays out in dividends. Reduce its risk-weighted assets by replacing riskier loans with safer ones or with government securities. Chose 1 option from below:Only I is correct. Only II is correct. I and II are correct. Only III is correct. I, II and III are correct. Thanks!QUESTION 7 First National Bank has assets that are more rate-sensitive than its liabilities. As interest rates rise, then we should expect the bank profits to: A. Remain unchanged B. Fall C. RiseCh. 14. Which one of the following is NOT an implication of market efficiency for corporate finance? Group of answer choices Managers can reap many benefits by paying attention to market prices Firms cannot successfully time issues of debt and equity Managers cannot profitably speculate in foreign currencies and other instruments Firms can successfully time issues of debt and equity Managers cannot fool the market through creative accounting
- CH6 # 1 The ABC Company has a stable dividend policy ($2 per share per year). It also has a policy of not raising new capital from the market. The policy is to invest the available funds after payment of the dividends (excess cash is invested in marketable securities). What does this imply about the use of the present value method of making investment decisions?27.Which of the following statements are true?Statement I. Money markets are used to facilitate the transfer of short-term funds from individuals, corporations, or governments with excess funds to those with deficient funds. Even investors who focus on long-term securities tend to hold some money market securities because this enables them to maintain liquidity. Statement II. Financial institutions manage their liquidity by participating in money markets. They may issue money market securities when they experience cash shortages and need to boost liquidity. They can also sell holdings of money market securities to obtain cash.Statement III. The value of a money market security represents the future value of the present cash flows generated by that security. Since money market securities represent debt, their expected cash flows are typically known.Statement IV. The pricing of money market securities changes in response to a shift in the required rate of return by investors. The…True or false 1.The free cash flow to equity will always be higher than the net income of the firm, because depreciation is added back. 2.Susan is expecting the economy to worsen over the next few years, perhaps falling into a recession. Investing in the construction industry should be part of Susan’s strategy. 3. Preference shares combine the fixed income features of bonds with the same price appreciation potential as ordinary shares. 4. Identify any one behavioural bias in each of the following statements: a) Mary writes the following letter to an investment columnist: “I invested quite a bit of money (R26 000) in Intel stock. Of course, like most technological stocks, it has been struggling, and on paper I am in trouble. Do you think it will ever reach the R80 that I paid for it? I really hate to cash it in for such a big loss and I don’t trust it enough to buy it at the low price (R8) it is now trading for. I feel like the company shows promise, but I am certainly not astute in…
- Question 24 Which of the following is an advantage of debt over equity A It's generally cheaper B Repayments are generally flexible C Assets can be given as security on debt D The bank can help in the day to day running of the businessQUESTION 15 What happens to the monetary base when the Fed buys Treasury bonds? A. Bank reserves do not change B. Bank reserves decline C. Bank reserves increase41) Balancing the advantages and disadvantages of using debt and equity when determining a firm’s optimal capital structure is referred to as: Question 41 options: Tax theory Trade off theory Signaling theory Pecking order theory1
- 37. Statement 1: Everything else equal, an effective annual rate will be greater than the bond equivalent yield on the same security.Statement 2: Money markets exist to help reduce the opportunity cost of holding cash balances. a. Both statements are true b. Statement 1 is true; Statement 2 is false c. Statement 1 is false; statement 2 is true d. Both statements are falseQuestion 22 Which of the following is generally a long term source of finance? A Corporate Bonds B Debt factoring C Trade Credit D OverdraftQ1) Choose the Right answer from the options provided for the following questions: 1. ____________: Setting of the money supply by policymakers in the central bank. a. Controllinginterest ratesb. Monetary policy c. Federal Reserve d. Currency 2. A _________ person prefers investing in stocks which returns are uncertain. a. Risk-averse b. Risk-manager c. Risk-lover d. None of the above 3. A low rate of interest can________investments? a. discourage b. decrease c. encourage d. None of the above 4. Which one is a tool of the Federal Reserve? a. Banking for banks b. Controlling inflation c. Banking for the government d. Selective credit controls 5. _________is a promise by a bank to lend the cardholder money with which to make purchases. a. Debit Card b. Money exchange c. E-Money d. None of the above