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1) What would happen to the standard of living in the United States if people lost faith in our financial markets? Why?
2) How does a profitable capital market help reduce the prices of goods and services?
3) The SEC attempts to protect investors who purchase newly issued securities by requiring issuers to provide relevant financial information to potential investors. The SEC does not provide an opinion on the actual value of the securities.
Therefore, a reckless investor could pay too much for some shares and consequently lose a lot. Do you think the SEC should, as part of each new offering of stocks or bonds, give investors an opinion on the appropriate value of the securities being offered? Explain
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- The SEC attempts to protect investors who are purchasing newly issued securities by making sure that the information put out by a company and its investment banks is correct and is not misleading. However, the SEC does not providean opinion about the real value of the securities; hence, an investor might paytoo much for some new stock and consequently lose heavily. Do you think theSEC should, as a part of every new stock or bond offering, render an opinion toinvestors on the proper value of the securities being offered? Explain.1)How does a profitable capital market help reduce the prices of goods and services? 2) The SEC attempts to protect investors who purchase newly issued securities by requiring issuers to provide relevant financial information to potential investors. The SEC does not provide an opinion on the actual value of the securities.Therefore, a reckless investor could pay too much for some shares and consequently lose a lot. Do you think the SEC should, as part of every new offering of stocks or bonds, give investors an opinion on the appropriate value of the securities being offered? Explain.What is a financial market? What is the role of a financial market? 3-2 What would happen to the standard of living in the United States if people lost faith in our financial markets? Why? 3-3 How does a cost-efficient capital market help to reduce the prices of goods and services? 3-4 The SEC attempts to protect investors who are purchasing newly issued securities by requiring issuers to provide relevant financial information to prospective investors. The SEC does not provide an opinion about the real value of the securities. Hence, an unwise investor might pay too much for some stocks and consequently lose heavily. Do you think the SEC should, as a part of every new stock or bond offering, render an opinion to investors on the proper value of the securities being offered? Explain.
- 2) The SEC attempts to protect investors who purchase newly issued securities by requiring issuers to provide relevant financial information to potential investors. The SEC does not provide an opinion on the actual value of the securities.Therefore, a reckless investor could pay too much for some shares and consequently lose a lot. Do you think the SEC should, as part of every new offering of stocks or bonds, give investors an opinion on the appropriate value of the securities being offered? Explain.What comment or conclusion can be made about this? Large amounts of national debt can lead to higher interest rates and lower stock prices. Stocks are a reflection of investor confidence. If those investors lose confidence in where those companies operate then their stock price will take a hit.The fallout from the financial crisis of 2008 included an overheated real estate market, fueled by home purchase incentives, poor lending practices, and securitization through high-risk, mortgage-backed securities, which led to a near collapse of global capital markets. As a consequence, many have argued that if the financial institutions had been required to report their loans (and loan-backed investments) at fair value instead of cost, large losses would have been reported earlier. This would have signaled regulators to the problems in the mortgage markets and therefore minimized the losses to U.S. taxpayers. Instructions Explain how reported accounting numbers might affect an individual’s perceptions and actions. Cite two examples.
- a. What are the risks and rewards of investing in the stock market as compared to the bond market?b. “Because corporations do not actually raise any funds in secondary markets, they are less important to the economy than primary markets.” Comment.You are concerned about one of the assets in your diversified portfolio. You just have an uneasy feeling about the CFO of that particular firm. You do believe however that the firm makes a good product and that it is appropriately priced by the market. Should you be concerned about the effect on your portfolio if the CFO embezzles a portion of the firm's cash? Discuss based on diversification of assets in a portfolio. Further assume your friend is trying to decide to purchase stock from that same company. She does not hold a diversified portfolio like you do. Based on the relationship between risk and return, will you be willing to pay a higher price for the stock than her? ExplainWith a decline in the number of publicly traded companies and the growth of other investment vehicles such as private equities, hedge funds, junk bonds, etc., some people claim that the investment world is becoming more and more unfair towards smaller investors since most of the alternative investment vehicles are only available to institutions or high-net-worth individuals. Do you agree or disagree with this claim?
- What are some of the risks an investor would face when investing in a stock? In addition to the business risk coming from the type of business environment that your company operates in, what additional risk would be of concern to an investor? The company might be mismanaged and do poorly or go out of business. The company's stock market return might be wildly unpredictable as the operating performance might be unstable. The company's competitors might do a better job and take market share away? The list goes on and on... What risks would you face if you bought 100 shares of Tesla?Which one of the following is NOT an implication of market efficiency for corporate finance? Group of answer choices Firms cannot successfully time issues of debt and equity Firms can successfully time issues of debt and equity Managers cannot fool the market through creative accounting Managers cannot profitably speculate in foreign currencies and other instruments Managers can reap many benefits by paying attention to market prices Which one of the following is not a characteristic of Modigliani-Miller Propositions with corporate taxes? Group of answer choices individuals and corporations borrow at the same rate There are no transaction or bankruptcy costs Corporations are taxed at the rate TC on earnings after interest There are no taxes The cost of equity rises with leverage because the risk to equity rises with leverage _______ specifies an action that the company agrees to take or a condition the company must abide by. Group of answer choices milking the property…Most nonfinancial firms would never hold as much of their assets in safe liquid securities as banks do. Why do banks maintain such a high percentage of investment in securities?
