AFM 121 FINAL EXAM NEWEST ACTUAL

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AFM 121 FINAL EXAM NEWEST ACTUAL

EXAM 200 QUESTIONS AND CORRECT

DETAILED ANSWERS (VERIFIED ANSWERS )

|ALREADY GRADED A+

what is a convertible bond - ANSWER- bond that can be converted into the shares of the issuer

• types of government bonds - ANSWER- 1) t-bills

2) marketable bonds

• types of corporate bonds - ANSWER- 1) mortgage bonds

2) collateral trust

3) equipment trust

do corporations issue secured debt? - ANSWER- no 1 / 4

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what do corporations issue for short-term borrowing - ANSWER- commercial paper

what are strip bonds - ANSWER- bonds that are split into interest and principal componenets

do common shares provide dividends - ANSWER- no

are preferred shares fixed income - ANSWER- yes

what does a 2 for 1 stock split mean - ANSWER- the share price of the stock is halved

if a bank had 4 shares x $2 and they decided to split their stocks

• for 1, what would that look like - ANSWER- they would have
• shares for $1

do companies have to pay dividends - ANSWER- no

if a bank's share price is $5.50 at closing before an ex.dividend date, and they have declared dividends of $0.50, what is their share price at opening? - ANSWER- $5.50 - $0.50 = $5 2 / 4

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what are stock dividends? - ANSWER- when a company decides to issue a stock rather than a dividend

how to calculate how many additional shares you will receive - ANSWER- #shares x dividend/share price

What's a DRIP - ANSWER- dividend reinvestment plans

when the investor decides to receive a stock rather than a dividend, what is is called? - ANSWER- DRIP

how to price a preferred share - ANSWER- dividend received/rate

how to calculate dividend yield - ANSWER- dividend per share/stock price

how is a stock index calculated? - ANSWER- they are value weighted.

what does value weighted mean? - ANSWER- stocks are weighed according to their equity value 3 / 4

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how is an average calculated (stocks) - ANSWER- the same way you'd calculate any other average

what does a long position mean - ANSWER- you own the security

what does a short position mean - ANSWER- you sell the security

what is a cash account - ANSWER- security is purchased out of pocket

what is a margin account - ANSWER- firm lends money to buy securities and they charge interest

what is a short sale - ANSWER- when an investor sells securities they do not own

market order - ANSWER- executed immediately at the best available price

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