AFM 121 MIDTERM EXAM NEWEST

• P a g e

AFM 121 MIDTERM EXAM NEWEST

100 QUESTIONS AND CORRECT

DETAILED ANSWERS ( ANSWERS )

What is one area of banking regulation that likely reduced the negative impact of the 2007 - 2009 financial crises in Canada? - ANSWER- Rules relating to capital adequacy

Today, you invested $100 in a GIC that pays an EAR of 3%.What is the value of investment in 14 years? - ANSWER-

$151.26

Which of the following is not a way that a stock exchange makes money? - ANSWER- Fees from companies making capital structure changes

What is the rate of return on a one-year, zero coupon bond that is purchases for $92, and has a face value of $100? - ANSWER- 8.70%

• / 3

• P a g e

Interlisted securities refer to securities that: - ANSWER- Trade

on more than stock exchange

The % coupon rate is typically less than % YTM on a bond - ANSWER- False

Which of the following is not a reasonable rationale for which a company would sell shares to the public? - ANSWER- Pay dividends

IIROC is an example of? - ANSWER- An SRO

If the current price of a bond (PV) is less than the face value

(FV), the bond is said to be trading at a: - ANSWER- Discount

Insider trading that is illegal involves? - ANSWER- Buying or selling shares on the basis of material information that is not publicly available

When investment dealers market a new security for an issuer on a best efforts basis they are acting as a what in the market? - ANSWER- Agents, primary

• / 3

• P a g e

An investor owns $1000 convertible debenture that she purchased for $850. It is convertible into 25 common shares at $40 per share. The common shares are no trading at $38 per share. She converts the debenture and sells the shares eat market price. Which of the following is true? - ANSWER- She realizes a profit of $100

Once a straight (fixedd rate/non-callable) bond is issues which components never change? - ANSWER- All of the above (face value, coupon rate, terms to maturity, maturity date)

What SRO settles or clears trades between buyers and sellers of securities? - ANSWER- Canadian Depository for Securities (CDS)

Which of the following will have the highest effective annual rate? - ANSWER- APR = 8% compounded daily

Which of the following can a government not issue? - ANSWER- Equity

Which of the following are deemed to be insiders within a public company in Canada? - ANSWER- All of the other options (owner of greater than 1-% of outstanding shares, senior officer (CEO/CFO), member of the board of directors)

• / 3