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
Offered By ”The University of Melbourne”
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
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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
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3.
Question 3
Kellogg’s is a constituent of which stock index?
1 point
- ASX200
- FTSE100
- S&P500
- NASDAQ
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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.)
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5.
Question 5
The definition of the EMH is hard to validate in practice.
1 point
False
True
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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
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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
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8.
Question 8
Banks are only involved in lending and deposit taking activities.
1 point
True
False
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9.
Question 9
Who is the most active corporate debt issuer?
1 point
Retail investors
Corporate executives
Financial institutions
Stock brokers
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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
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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
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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
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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
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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
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6.
Question 6
Managers are always prohibited from trading their own company stock.
1 point
True
False
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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
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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
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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!)
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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
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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
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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
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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
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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
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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
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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
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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
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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)
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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
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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
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3.
Question 3
What is the maximum maturity for a money market instrument?
1 point
2 years
6 months
1 year
3 months
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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
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5.
Question 5
If USD/AUD = 1.31, what is AUD/USD equal to?
1 point
0.13
0.76
1
1.31
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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
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7.
Question 7
Which of the following is NOT a traditional commodity trading center?
1 point
Hong Kong
London
New York
Chicago
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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
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9.
Question 9
Which of the following is NOT a derivative?
1 point
Shares
Swaps
Futures
Forwards
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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
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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.
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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
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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
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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
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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
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16.
Question 16
The market price never diverges from the fundamentals.
1 point
True
False
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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
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18.
Question 18
Which of the following is a risk measure?
1 point
Realized return
Expected return
Standard deviation
Cash flow
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19.
Question 19
Which of the following is considered a contractual savings fund?
1 point
Finance companies
Investment banks
Mutual funds
Pension funds
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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
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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
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22.
Question 22
Which of the following is not an indicator of a market functioning efficiently?
1 point
Integrity
Transparency
Low volatility
Fairness
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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
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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
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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
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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
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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)
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
Peer-graded Assignment: The Role of Global Capital Markets – This contributes 20% towards your final grade
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