Futures markets allow
investors to manage risk.

Futures markets can be
used to hedge against changing commodity prices.

Interest rate futures
can be used to hedge against the risk of rising interest rates.

All of the statements
above are true.

All of the following are
recognized as an important influences in the development of the banking
crisis of 2008 and the resulting credit crisis EXCEPT:

Too many subprime
loans were repackaged and sold as securities.

The IMF bailed out
Freddie Mac and Fannie Mae.

Real estate prices
collapsed.

Consumers, especially
homeowners, took on too much debt.

the collapse of Asian
currencies in Thailand, Indonesia, Malaysia and Korea.

Russia’s default on
its sovereign debt.

Japan’s seven years of
economic stagnation.

a and b are true.

Britain, France,
Germany, Spain, Italy and 6 other European countries.

The establishment of a
new European Central Bank to coordinate monetary policy for the Euro-zone
countries.

A new currency called
the Euro, which will be put into circulation in all EMU countries no later
than 2009.

All of these.

During the next ten years, the
major threat to the dominance of the U.S. money and capital markets will come
from

The Euro-zone
countries comprising the European Monetary Union and a single currency.

The huge Chinese
economy and its billion plus people.

Japan’s prolonged
recession and banking crisis.

Russia’s difficulty in
transforming its economy into a capitalistic one.

preferred stocks
require a dividend.

bond interest rates
change with the economy while stock dividends remain constant.

the after-tax cost of debt
is less than the cost of preferred stock.

none of these.

balance the company’s
debt structure with more short-term debt and less long-term debt.

rely more on internal
sources of funds rather than external sources.

try to lock in
long-term financing at low cost.

accept more risk.

businesses.

financial
institutions.

households.

government.

9

MC Qu. 92 Security markets are efficient when each of …

Security markets are
efficient when each of the following exist except

past price data is
positively correlated to future prices.

prices reflect all
public information.

all information both
public and private is immediately reflected in stock prices.

none of these

original issues of
securities.

protecting customers
of bankrupt securities firms.

secondary trading of
securities.

national securities
market.

require that all
securities sold in more than one state be registered with the SEC.

set guidelines for
insiders who trade in the securities of their own firm.

require a prospectus
for all new issues of securities which contains all information appearing in
the registration statement.

hold corporate
officers liable for losses for those who were misled by false information in
the prospectus.

original issues of
securities.

a central market
system.

regulation of
organized exchanges.

protecting customers
of bankrupt securities firms.