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31 Jan 2019

Most corporate bonds are

A. held by institutional investors.

B. sold through Standard & Poor's, Moody's or Fitch

C. considered risky investments

D. regulated by the US Securities Exchange

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1 Feb 2019

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Related questions

1. Which of the following statements about the OTC market istrue?

A. An OTC market is an organized exchange where there is acentral trading location.

B.

OTC security transactions are made on the floor of an exchangeby traders.

C.

Securities that are not listed on an organized exchange arebought and sold on the OTC market.

D.

Securities that are listed on an organized exchange are boughtand sold in the OTC market.

2. Which of the following theories states that security pricesreflect all information, whether public or private?

A. Weak-form efficiency.

B.

Semistrong-form efficiency.

C.

Nominal-form efficiency.

D.

Strong-form efficiency.

3. Which of the following is a primary investment vehicle forthe funds in which life insurance companies must invest?

A.Both equity securities and long-term corporate bonds.

B.

CDs.

C.

Equity securities.

D.

Long-term corporate bonds.

4. Large firms are most likely to use money markets for thefollowing reason:

A. To make long term investments.

B.

To buy commercial paper at lower interest rates than it couldsell through a bank.

C.

To finance long term investments.

D.

To adjust their liquidity position.

5. Which of the following is true of the New York StockExchange?

A. It is an organized exchange.

B.

It has no central trading location.

C.

It is an over-the-counter exchange.

D.

It can be used by all U.S citizens.

6. Which of the following is true of an efficient market?

A. Market prices of securities of companies in the same industryare all same.

B.

Market prices adjust quickly to new information as it becomesavailable.

C. All information contained in past prices of a security isreflected in its current price but that there is both public andprivate information that is not.

D.

Securities have no systematic risk.

About the book of Jeff Madura Financial markets and institutions 8th edition.

This problem requires an understanding of how economic conditions influence interest rates and prices (Chapters 6, 7, 8 and 9).
As a financial planning professional, one of his tasks is to prescribe the allocation of funds available between securities market money, bonds and mortgages. Your philosophy
Is to assume positions in securities that will benefit most from their predicted changes in economic conditions. As a result of a recent event in Japan, you expect Japanese investors to reduce their investments in US Treasury securities over the next month and will switch most of their funds to Japanese securities. You expect that this diversion of funds will persist for at least several years. He believes that this single event will have a significant effect on economic factors in the United States, such as interest rates, exchange rates and economic growth during the next month. Because US securities prices are affected by these economic factors, you must determine how to revise your prescribed allocation of funds between securities.
Questions:
1) How will US interest rates be directly affected by the event (if all other factors remain the same)?

Contemplating an Initial Public Offering

Recall that if the economy continues to be strong, Carson Company may need to increase its production capacity by about 50 percent over the next few years to satisfy demand. It would need financing to expand and accommodate the increase in production. Recall that the yield curve is currently upward sloping. Also recall that Carson is concerned about a possible slowing of the economy because of potential Fed actions to reduce inflation. It is also considering issuing stock or bonds to raise funds in the next year.

a. If Carson issued stock now, it would have the flexibility to obtain more debt and would also be able to reduce its cost of financing with debt. Why?

b. Why would an IPO result in heightened concerns in financial markets about Carson Company’s potential agency problems?

c. Explain why institutional investors, such as mutual funds and pension funds, that invest in stock for longterm periods (at least a year or two) might prefer to invest in IPOs rather than to purchase other stocks that have been publicly traded for several years.

d. Given that institutional investors such as insurance companies, pension funds, and mutual funds are the major investors in IPOs, explain the flow of funds that results from an IPO. That is, what is the original source of the money that is channeled through the institutional investors and provided to the firm going public?

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