The Role of Global Capital Markets

The Role of Global Capital Markets Answer. In this post you will get Quiz & Assignment Answer Of The Role of Global Capital Markets

 

The Role of Global Capital Markets

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Week 1 Graded Quiz

1.
Question 1
What is a secondary equity market?

1 point

  • A market where companies sell their shares directly to speculators
  • A market where investors can buy and sell shares after they have been issued
  • A market where investors can only sell their shares to the company
  • A long-term debt market

2.
Question 2
What is the main purpose of the prospectus?

1 point

  • To provide minutes of the last board meeting
  • To indicate the financial position and financial health of the organization
  • To reveal key customers and historical sales contracts
  • To explain who the shareholders are

3.
Question 3
Kellogg’s is a constituent of which stock index?

1 point

  • ASX200
  • FTSE100
  • S&P500
  • NASDAQ

4.
Question 4
Which of the following is a key difference between debt and equity?

1 point

  • Equity must be paid back periodically
  • Holders of debt instruments do not care about the financial health of the company
  • Life span of debt and equity securities
  • Equity has a finite life

5.
Question 5
Which of the following is NOT a characteristic of the foreign exchange market?

1 point

  • Provides financing to corporations
  • Over-the-Counter wholesale market
  • Only a small number of accredited dealers provide currency prices
  • Corporations access the market through brokers

6.
Question 6
Which of the following best describes the exchange rates in the foreign exchange market?

1 point

  • Value is determined by retail investors
  • The rate at which corporations can borrow against another currency
  • A relative price
  • An absolute price

7.
Question 7
Is it possible for commodities to have multiple prices?

1 point

  • Yes, it is possible
  • Yes, but only during a market crisis
  • No, that means there is no market
  • No, there can only be one price

8.
Question 8
What does a commodity price index best signal?

1 point

  • Changing stock prices of telecommunication companies
  • Changing political risk in commodity producing countries
  • Changing weather conditions in commodity consuming countries
  • Changing business activity and thereby global economic conditions

9.
Question 9
What do arbitrageurs do in derivatives markets?

1 point

  • Take short term derivative positions with a high level of risk
  • Take derivative positions that expose them to only low levels of risk
  • Take positions based on a misalignment of derivatives prices without incurring any risk
  • Take positions in derivatives based on the need to eliminate future price risk

10.
Question 10
Physical exchanges are rapidly being replaced by automated trading platforms. Is this true or false?

1 point

  • False
  • True

 

Week 2 Graded Quiz

1.
Question 1
What is a key characteristic of international corporate bonds?

1 point

They are denominated in USD

They are only issued by US corporations with multinational operations

They are denominated in a non-USD currency

They are issued by US Corporations

2.
Question 2
Why do we require stock exchanges?

1 point

We don’t require stock exchanges because market participants will find a way to buy and sell

They aggregate the demand for stocks but not the supply of stocks

They broadcast relevant information regarding the financial performance and outlook of listed companies

In order to obtain private and public information on corporations

3.
Question 3
Which of the following would NOT have a significant effect on exchange rates?

1 point

A sharp increase in tourism

An operational decision of a small exporting company

Relative inflation

Foreign direct investment

4.
Question 4
Which of the following is true about an efficient market?

1 point

Asset price expectations are biased forecasts of future prices

Prices do not reflect market fundamentals (earnings, etc.)

Asset price expectations are unbiased forecasts of future prices

Prices only reflect some of the market fundamentals (earnings, etc.)

5.
Question 5
The definition of the EMH is hard to validate in practice.

1 point

False

True

6.
Question 6
Which of the following is a key advantage of spreading investments over multiple investment opportunities?

1 point

Reduces the required risk premium

Empire building reasons

Guarantees a higher overall return

Makes stock portfolios look attractive

7.
Question 7
What tends to happen to the overall risk of a portfolio when you add different stocks to it?

1 point

Diversifiable risk only decreases if the assets returns move in opposite directions

Diversifiable risk is increased

Diversifiable risk is decreased

Diversifiable risk is unaffected

8.
Question 8
Banks are only involved in lending and deposit taking activities.

1 point

True

False

9.
Question 9
Who is the most active corporate debt issuer?

1 point

Retail investors

Corporate executives

Financial institutions

Stock brokers

10.
Question 10
The government’s only role as a market participant is to regulate financial markets.

1 point

False

True

 

 

Week 3 Graded Quiz

 

1.
Question 1
In a crash, market wide selling is endemic. Which of the following is not a result of a market wide crash?

1 point

Price signals become unreliable – and no longer reflect intrinsic value

Liquidity disappears

Corporations raise new equity capital cheaply

Markets become one-sided

2.
Question 2
In the absence of a crash, markets can still ‘fail.’ Which of the following is NOT an example of ‘market failure’?

1 point

Individuals with non-public information trade securities to profit from the expected price change once the information becomes public

Individuals purposefully seek to manipulate prices within the market for private gain

Individuals trade on a security after a bad earnings report from the last quarter, the stock price fall by 15% as it is recognized the old fundamentals were not correct

Trading platform cannot cope with large inflows of buy orders

3.
Question 3
Which of the following statements provides the most accurate definition of corporate liquidity?

1 point

How quickly a firm can buy/sell the goodwill it has on its balance sheet

It refers purely to equity market issuances, in how quickly a firm can raise/retire equity capital.

It refers purely to bond market issuances, in how quickly a firm can raise/settle debt.

How quickly a firm can engage generally in financial transactions to cover a mismatch in asset-liability or settle a debt

4.
Question 4
On a balance sheet for a corporation, assets and liabilities are grouped into liquid (current) and non-liquid (non-current) groups, which of the following is the definition used to determine whether a class is considered ‘current’

1 point

Expected to be settled/received within 5 years

Expected to be settled/received within a week

Expected to be settled/received within a year

Can be settled/received within the same day

5.
Question 5
Which of the following pieces of information would be classified as material non-public information?

I. Unpublished sales figures from the preview weeks which are not in line with analyst expectations

II. Unpublished minutes from the last board meeting on strategic discussions

III. Unpublished minutes from the last junior manager meeting on employee relations policy

IV. Published information from the last remuneration committee showing the CEO had been granted a large pay-rise

1 point

I & II

II & III

I & III

II & IV

6.
Question 6
Managers are always prohibited from trading their own company stock.

1 point

True

False

7.
Question 7
At the annual general meeting (AGM), which of the following reports are typically NOT presented:

1 point

Director’s report

Quarterly statement of results

Auditor’s appointment and remuneration

Annual financial report

8.
Question 8
The two strikes policy, designed to better hold directors to account, is applicable for which decisions in Australia?

1 point

Any proposed resolution shareholders may put forth

Membership of the Board of Directors Audit Committee

Executive remuneration

None, this is an American piece of legislation

9.
Question 9
There seems to be a case of ‘disappearing quality’ across listed firms. The number of AAA corporations has now decreased to just 4 compared to a high of 60 back in the 1970s. Which of the following factors is NOT suggested to be a driver of this change?

1 point

Greater volatility in macro and market wide factors driving a higher risk environment

Rating agencies would prefer to have the possibility to upgrade a company, and thus they are hesitant to give out the top rating as it leaves no upside

Increased gearing (debt) levels across firms

Many more companies are considered ‘growth’ companies (higher risk!)

10.
Question 10
The typical ‘B’ rated company will face an approximate time to default of still roughly 4x longer than a typical CCC/C rated corporation, despite being only one rating step apart.

1 point

True

False

 

 

Week 4 Graded Quiz

1.
Question 1
Globalization of markets has improved ease of investment in markets around the world to foreign borrowers/investors.

1 point

True

False

2.
Question 2
An R2 value of 0.75 on a regression of the return on the NASDAQ to the NYSE implies what (With the NYSE and NASDAQ on the x and y axis, respectively):

1 point

75% of the returns on the NASDAQ can be explained by the returns on the NYSE

A 1% movement in the returns on the NYSE will correspond to a 0.75% movement of returns on the NASDAQ

A 1% movement in the returns on the NASDAQ will correspond to a 0.75% movement of returns on the NYSE

75% of the returns on the NASDAQ move in the exact opposite direction as the returns on the NYSE

3.
Question 3
Systematic (undiversifiable) risk factors are likely to be related to macro-economic specific factors such as the unique customer profile of a firm.

1 point

False

True

4.
Question 4
With globalization of markets, a cross-listed firm (eg: BHP listed in Australia and the UK) will have two stock prices which move together perfectly with no price differential once markets become efficient.

1 point

False

True

5.
Question 5
Market globalization has attracted a fair amount of criticism. Which of the following outcomes is NOT a result of the globalization of markets?

1 point

Increased income inequality between countries with and without developed markets

Increased challenges of “following the money” for regulators and corporate owners

Increased challenges in screening and monitoring credit risk effectively from a cross-border firm

Increased challenges in managing firm specific risk as sub-optimal investments are more likely to be funded on international markets

6.
Question 6
The Global Financial Crisis (GFC) started with problems in the residential housing market. Which of the following factors were not an important factor that led to the housing market ballooning from the late 1990s into the 2000s?

1 point

Mortgages were often re-sold as part of packaged Mortgage-Backed-Securities

Large volumes of mortgages with loan-to-value ratios often in excess of 100%

Large supply of housing coming onto the market

Very low market wide interest rates

7.
Question 7
The US mortgage crisis managed to nearly bankrupt Iceland and spread contagion risk throughout the European Union. This was due largely to European nations facing similar economic fundamentals as in the U.S. and thus suffering simultaneously from the same underlying issues.

1 point

True

False

8.
Question 8
During the GFC the yield spread on corporate bonds (eg: BBB 3yr spread) did what?

1 point

Became extremely volatile, increasing on some days and then falling the next day with great uncertainty

No change, as corporate and government bonds were both equally affected, keeping the spread constant

Increase

Decrease

9.
Question 9
Which of the following novel financial operations operate within the world of traditional financial markets?

1 point

Microfinance loan initiatives to the traditionally ‘unbanked’ population

HFT / Algorithmic trading firms

Shadow banking (non-bank financial intermediaries) providing similar services to commercial banks

Crowd-funding OTC platforms for specific project funding (as a substitute for equity or debt financing)

10.
Question 10
With so many new sources and types of financing becoming available, concern has been raised that this increase of sources may in fact decrease liquidity.

1 point

True

False

 

Course Final Exam

 

1.
Question 1
Which of the following is not a condition to list on the public equity market?

1 point

Liquidity

Size

Ownership

International operations

2.
Question 2
What is a stock index?

1 point

Summarizes the aggregate stock market movement

A derivative asset on the equity traded on the stock market

Represents the movements of a particular stock on the stock market

A specific measure for liquidity on the stock market

3.
Question 3
What is the maximum maturity for a money market instrument?

1 point

2 years

6 months

1 year

3 months

4.
Question 4
What is a key characteristic of a coupon yielding bond when first issued?

1 point

Maturity is usually within one year

The face value of the loan never get paid

At issue, bonds are also known as money market instruments

Regular series of interest payments

5.
Question 5
If USD/AUD = 1.31, what is AUD/USD equal to?

1 point

0.13

0.76

1

1.31

6.
Question 6
If USD/AUD increases, which of the following is true about the AUD?

1 point

The AUD is fixed in value

No change in value

Increases in value

Decreases in value

7.
Question 7
Which of the following is NOT a traditional commodity trading center?

1 point

Hong Kong

London

New York

Chicago

8.
Question 8
Which of the following statements is definitely not true about commodity markets?

1 point

They are perfectly transparent

Wholesale market

Long-term contracts disadvantage small buyers/sellers

Oligopoly

9.
Question 9
Which of the following is NOT a derivative?

1 point

Shares

Swaps

Futures

Forwards

10.
Question 10
Which of the following has contributed towards the enormous growth in global capital financial markets?

1 point

Advancements in technology

Increasing regulation

The Global Financial Crisis

New floor trading platforms

11.
Question 11
What is the key difference between indirect finance and direct finance?

1 point

Direct finance requires intermediation by a financial institution

Direct finance is always faster than indirect finance

Indirect finance requires intermediation by a financial institution

There is no difference.

12.
Question 12
Which of the following statements is true?

1 point

The majority of global corporate bonds are issued in USD

The majority of global corporate bonds are issued in non-USD currencies

The value of bonds issued in USD is equal to the value of bonds issued in non-USD currencies

None of the above is true

13.
Question 13
Which of the following best describes an efficient market?

1 point

Company announcements are almost instantaneously reflected in their share price

Company announcements are reflected in the share price after a few months

Company announcements are not reflected in the share price

Company announcements are reflected in the share price after a few days

14.
Question 14
Which of the following is least likely to affect demand/supply on global capital markets?

1 point

Expected return on the traded assets

The marketing strategy of a company

Regulatory and political risks

Interest rates and inflation

15.
Question 15
What is the optimal outcome of financial markets?

1 point

Higher economic growth but not higher wealth

Companies receive public exposure

Efficient allocation of capital

Higher wealth but not higher economic growth

16.
Question 16
The market price never diverges from the fundamentals.

1 point

True

False

17.
Question 17
What type of investor would invest in risky startup companies and innovative businesses?

1 point

No one would invest as these businesses are sole proprietorships

Shareholder Activists

Retail investors with a basic financial knowledge

Venture Capitalists

18.
Question 18
Which of the following is a risk measure?

1 point

Realized return

Expected return

Standard deviation

Cash flow

19.
Question 19
Which of the following is considered a contractual savings fund?

1 point

Finance companies

Investment banks

Mutual funds

Pension funds

20.
Question 20
Who is not a market regulator?

1 point

Commodity Futures Trading Commission (CFTC)

Securities and Exchange Commission (SEC)

Investment banks

Federal reserve system

21.
Question 21
When markets crash, liquidity disappears. This is a result of depressed markets facing excess demand for securities when no investors want to sell

1 point

False

True

22.
Question 22
Which of the following is not an indicator of a market functioning efficiently?

1 point

Integrity

Transparency

Low volatility

Fairness

23.
Question 23
Which of the following statements provides the most accurate definition of investor liquidity?

1 point

How quickly an investor can sell off large asset volumes and still achieve a fair value

It refers purely to equity markets, in how quickly an individual can trade on the stock market at fair value.

It refers purely to bond markets, in how quickly an individual can raise or settle debt.

None of these are correct definitions

24.
Question 24
Which of the following terms (components of liquidity) is used to describe the differences in large to small transaction costs (such as a bid-ask spreads)

1 point

Breadth

Resiliency

Depth

Tightness

25.
Question 25
Which type of insider trading applies to the following event?

As an advisor for a firm you learn of non-public material information. At dinner that night you discuss your work with a family member. The next day, that family member trades the company’s stock based on the information you disclosed.

1 point

Classical Insider Trading

Misappropriation

Arms-length insider trading

None – this is not a form of insider trading as it was not conducted by the individual with access to non-public material information

26.
Question 26
Cross trading (trading in a market and taking both buy and sell side) is considered a form of what?

1 point

Market manipulation

Arms-length insider trading

Insider trading

Misappropriation

27.
Question 27
At an annual general meeting (AGM), shareholders must be given reasonable opportunity to ask questions to the company. Sometimes these questions can be put forth in the way of a written (proposed) resolution to be voted upon. To pass a resolution requires what proportion of the vote?

1 point

26% (>25%)

51% (>50%)

76% (>75%)

100% (must be a unanimous decision)

28.
Question 28
It is often said that investors can always decide to ‘vote with their feet’, what is this phrase referring to?

1 point

Making the trip to the company headquarters to directly challenge executives in person to make your grievances known

Purchase more shares to increase your voting power and have more influence over decisions

Making the trip to general meetings and voting, rather than letting proxy voters take the votes on their behalf (eg: the chairman)

Simply sell your shares and walk away

29.
Question 29
The rating agency will only take into account financial risk factors (eg: Accounting risk, cash flow adequacy, capital structure, liquidity, etc) when determining a rating for a company’s debt issue.

1 point

False

Ture

30.
Question 30
Excluding occasional disturbances during market and business cycle crashes (eg: The GFC), empirically almost every default occurs with firms that currently have a speculative rating and next to zero for firms with an investment grade rating.

1 point

False

True

31.
Question 31
Which of the following statements is NOT a recognized problem of globalization of markets?

1 point

Even though markets are often interconnected, the distinct ‘local’ market regulation leads to an absence of consistent global regulation causing potential market stress

Companies now have the ability to engage in far riskier behavior through the ability to cross-list and engage in cross-border M&A, causing more risk to investors

Our understanding of how markets are interconnected is not perfect, making it difficult for us to understand possible contagion (risk spillover) issues

We are often bad at forecasting market failure events, and in the case of market globalization these failures may reverberate across many markets, compounding the effects

32.
Question 32
The β-estimate in the following regression:

R(Kellogg’s) = β R(S&P500) + ε

is best defined by which of the following statements.

1 point

The β-estimate is a measure of the risk in the returns on a Kellogg’s share that can be explained by its exposure to the systematic risk of the market

The β-estimate is a measure of the unsystematic, firm specific risk

The β-estimate is an estimate of the market risk premium

The β-estimate is a measure of the risk in the returns on a Kellogg’s share affected by Kellogg’s specific value drivers

33.
Question 33
For a firm in natural resources (eg: an iron ore miner) and a firm in technology (eg: a software designer), which of the following factors are most likely to be considered systematic risk factors affecting both firms?

1 point

Interest rates that affect the cost of lending

Similar inputs to operations

Similar outputs of operations

Similar consumers of output

34.
Question 34
It is often said that a benefit of globalization of financial markets is to allow investors better risk diversification. This positive outcome is achieved through spillover of market effects, causing individual markets to be inherently diversified even when an investor continues to invest in just one market.

1 point

True

False

35.
Question 35
Which of the following events are NOT likely to be undermining efficient global markets?

1 point

A (potentially rational) building company equity asset bubble

Irrational investor over-confidence in multinationals’ equity

Cross-border trading in response to unexpected exchange rate changes

Irrational investor loss-aversion in globally operating mining equity

36.
Question 36
Following the onset of the Global Financial Crisis, bond yield risk premiums collapsed as bond markets became one-sided and liquidity disappeared.

1 point

True

False

37.
Question 37
With an extreme “flight to quality” in investor preferences during the GFC (i.e., a preference for cash and low risk bonds) the impact on bond yield spreads was much larger than at any other time in the last 100 years of modern financial history – culminating in the powerful financial crisis of 2008/09.

1 point

True

False

38.
Question 38
Which of the following is NOT an example of the ongoing impact of the GFC?

1 point

Diminished funding opportunities for start-ups

Increased bond issuance by corporations compared to pre-GFC levels

Increased regulatory constraints and regulatory cost

Diluted share ownership landscape compared to pre-GFC

39.
Question 39
Which of the following statements best defines what is meant by a financial institution being ‘too big to fail’:

1 point

A bank has reached a size in regards to the amount of liabilities on its books that is large enough to weather any market turmoil with a very small chance of falling into financial distress

A bank has reached a size that if it were to fail, would cause systemic economy-wide problems

A bank has reached a size in regards to the amount of assets on its books that is large enough to weather any market turmoil with a very small chance of falling into financial distress

A bank has reached a size that if it were to fail, would allow many other banks to assume that bank’s market share

40.
Question 40
High Frequency Trading and Algorithmic Trading are both redefining financial market transactions and regulation is struggling to keep up. Despite this regulatory lag, the introduction of this ‘disruptive technology’ is considered very positive for the efficiency of financial markets as it links markets and increases their global accessibility.

1 point

False

True

 

 

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