Financial Instruments Quiz FINAL 3

In periodic auction, the orders are executed based on price priority with the first priority belonging to…

• ATO/ATC

• Buying orders with higher price, selling orders with lower price are executed

• Buying and selling orders having price equal to the listed price can be partly or fully executed depend on each case

• All of the above

Trading unit is

• The standardized number of units in which a financial instrument trades

• Smallest price unit

• Both a and b

• None a nor b

Principle of price auction in descending order of priority is

• Price priority, Customer priority, Time priority, Quantity priority

• Time priority, Price priority, Customer priority, Quantity priority

• Price priority, Time priority, Customer priority, Quantity priority

• Price priority, Time priority, Quantity priority, Customer priority

… is an order to buy or sell a security at the opening/closing price.

• limit order

• market order

• stop order

• ATO; ATC

Which of the following assumptions does the constant-growth discount model require?

• dividends grow at a constant rate

• the dividend growth rate continues indefinitely

• dividends grow at a variable rate

• the dividend growth rate stops after a period

Which of the following statements is true?

• a bondholder repays principal when the bond matures

• generally speaking, bonds are riskier than common stocks

• low inflation is expected to have a negative effect on bond prices

• bonds are usually less liquid than stocks

Which type of risk below is classified as systematic risk?

• reinvestment risk

• management and corporate governance risk

• business risk

• liquidity risk

Which type of risk below is classified as non-systematic risk?

• inflation risk

• legal risks

• reinvestment risk

• default risk

Your bank is considering investing in a stock that has an expected yield of 10%. The T-bill interest rate is 8%, the average interest rate of the stock market is 12%, the stock under consideration has risk equal to 70% of the average market risk. What should investors do?

• invest because required rate is lower than real interest rate

• do not invest because real interest rate is lower than required rate

• do not invest because real interest rate is higher than required rate

• unspecified and no advice

Your bank is considering investing in a stock that has an expected yield of 9%. The T-bill interest rate is 6%, the average interest rate of the stock market is 10%, the stock under consideration has a beta of 0.6. What should investors do?

• invest because required rate is lower than real interest rate

• do not invest because real interest rate is lower than required rate

• do not invest because real interest rate is higher than required rate

• unspecified and no advice