金融场与金融机构基础-Fabozzi-Chapter13
金融学第12章金融学(第二版兹维博迪罗伯特C默顿等著)
资本预算
定义：企业的管理者为获取长期存在的资 产，同时为了培训运营所有这些资产的人 员所作出的一项规划。
资本预算过程中的基本分析单位是投资项 目。
资本预算过程包括：鉴定新投资项目的构 思，对其进行评估，决定哪些可以实施， 然后贯彻执行。
融资
企业可以发行一系列广泛的金融工具和索 取权来筹集资金。
❖ 金融中介被定义为主要业务是提供金融服务 和金融产品的企业。
❖ 如：银行投资公司，保险公司
❖ 金融产品：支票账户，商品贷款，抵押，共 同基金以及各种保险合同。
2.2资金流动
通过金融体系从拥有资金盈余的主体流向存在 赤字的主体。
金融市场
盈余单位
赤字单位
金融中介
2.3从功能出发的视觉
❖ 2.3.1 功能1：跨期转移资源 ❖ 金融体系提供了跨期转移资源，跨国界转移
❖ 如:你需要10万美元开办一家企业，但你没有钱，那 么你就是一个资金赤字单位。你需要说服一位投资 者（资金盈余单位）提供7万美元换取公司75%的 利润份额，同时你说服一家银行（金融中介）贷3 万元给你。于是，风险就从你那里转移到了投资者 和银行身上。
2.3.3 功能3 ：清算支付和结算支付
❖ 金融体系提供清算支付和结算支付的方式为商品， 服务，资产的交换提供便利。
收购如何起到市场性管束的作用？
无论管理混乱的根源是管理者不称职还是管理者 对不同目标的追求，收购机制都可以将其矫正。 这个作用就像市场对经济的资源配置的作用是一 样的。
(完整word版)Fabozzi_金融市场与金融机构基础课后答案12
C H A P T E R12R I S K/R E T U R N A N D A S S E T P R I C I N G M O D E L S PORTFOLIO THEORYPortfolio theory proceeds from the axiom that investors seek to maximize returns given some risk level they are willing to accept. Portfolios that maximize the expected return from an investment subject to a given level of risk are said to be efficient. From among efficient portfolios, the one which risk-averse investors prefer, is said to be an optimal portfolio. To construct an efficient portfolio, it is necessary to understand what is meant by expected return and risk.Investment ReturnThe return on an investment portfolio during a given interval of time is equal to the change in value of the portfolio plus any distributions received from the assets in the portfolio. These returns are expressed as a fraction of the initial portfolio value.R = (V1– V0 + D) / V0where V1 = portfolio value at the end of intervalV0 = portfolio value at the beginning of intervalD = cash distribution during intervalFor purposes of comparison, returns are expressed per unit of time, usually a year. If several years of units are included in the time horizon, then the return can be computed by averaging the return over the several unit intervals. There are three averaging methods in use: (1) the arithmetic average return (simple average of total return divided by number of time units), (2) time-weighted rate of return (also referred to as the geometric average), (3) dollar weighted return. One measure of risk is the extent to which future portfolio values are likely to diverge from the expected value.Portfolio RiskPortfolio risk can be measured in terms of the dispersion of returns about the expected value or mean return. The variance of return is a weighted sum of the squared deviations from the expected return. The standard deviation is the square root of the variance.Expected Portfolio ReturnA particularly useful way to quantify the uncertainty about the portfolio return is to specify the probability associated with each of the possible future returns and calculate the expected value of the portfolio return. The expected value is the weighted average of the possible outcomes, where the weights are the relative chances of occurrence. The expected return on the portfolio isexpressed as:E(R) = P1 R1 + P2 R2 + . . . + P N R NProbability distributions can take various shapes. For a symmetrical distribution, the dispersion of returns on one side of the expected return is the same as the dispersion on the other side of the expected return. The risk of a portfolio is measured by the variance and standard deviation of returns.DiversificationDiversification results from combining securities whose returns are less than perfectly correlated in order to reduce portfolio risk. It smoothes out the variation of returns and reduces the variability. Much of the total risk is diversifiable. But not all risks can be eliminated via diversification. Unsystematic risk (that which relates uniquely to the security or issuing firm) can be substantially reduced with a large, well-diversified portfolio. Still some risks remain which affect all firms to some degree (e.g. business cycles and interest rate changes). This is the market or systematic risk.Mathematically, a security’s return is compos ed of: R =βrm + e where, beta is a market sensitivity index, indicating how sensitive the security return is to changes in the market level. The unsystematic return is independent of the market return and is represented by the epsilon e. The systematic risk of a security is equal to β times the standard deviation of the market return. The unsystematic risk equals the standard deviation of the residual return factor. Portfolio systematic risk is equal to the portfolio beta factor times the risk of the market index. The portfolio beta factor is simply the average of the individual security betas, weighted by the proportion of each security in the portfolio.The Risk of Individual SecuritiesThe systematic risk of an individual security is that portion of its total risk that cannot be eliminated by combining it with other securities in a well diversified portfolio. Thus, we have: Security Return = Systematic Return + Unsystematic ReturnThe security return may be expressed as:R = β R M + ε where ε is unsystematic returnThe security return model is usually written in such a way that the average value of the unsystematic return is zero. This is accomplished by adding a factor alphaαto the model to represent the average value of the unsystematic returns over time.R = α + β R M + ε where ε is unsystematic returnThis model for security returns is referred to as the market model.Estimating BetaBeta can be estimated by regressing returns of a security on the returns of a market portfolio. Since historical data are employed the beta computed will vary with the time period used, number of observations, and market index employed. Thus a question may be raised about the stability of beta over time.THE CAPITAL ASSET PRICING MODELThe capital asset pricing model (CAPM) asserts that the expected return on a portfolio should exceed the risk-less rate of return by an amount that is proportional to the portfolio beta. The relationship between expected return and risk should be linear.Underlying AssumptionsThe model contains several critical assumptions: (1) investors are risk-averse; (2) investors have common time horizon; (3) investors have homogeneous expectations; (4) perfect markets exist, with no transactions costs and borrowing rates are equal to lending rates.Tests of the CAPMOne major difficulty in testing the CAPM is that the model is stated in terms of investor expectations and not in terms of required returns. Yet a number of tests have been tried, the results suggesting that there is indeed a linear risk/return relationship. More noted is Roll’s critique which states while the CAPM is testable in principle, no correct test of the theory has yet been presented. There is only one potentially testable hypothesis, namely that the true market portfolio is mean-variance efficient. Because the true market portfolio must contain all worldwide assets, the value of most of which cannot be observed, the hypothesis is in all probability untestable.THE MULTIFACTOR CAPMThe CAPM assumes the only risk is uncertainty about future market prices. But Robert Merton suggests that there exist extra-market sources of risk of concern to investors as well, such as future income, inflation, future investment opportunities. These risks affect ability to consume goods and to invest in securities in the future. Thus Merton has developed a “multifactor CAPM” to incorporate these extra-market risks in the model. In essence a security’s return has a Beta sensitivity to several factors. What these precise factors are and how many, however, has not been established. Thus this model is even harder to test than the straight CAPM.ARBITRAGE PRICING THEORY MODELDeveloped by Stephen Ross, the arbitrage pricing model (APT) assumes that there are several factors that determine the rate of return on a security, not just one as in the case of the CAPM. Rather, a security’s return is linearly related to “H” factors, but what they are is not specified. It is like the multifactor CAPM but distinguished from it in that it does not require a market index or standard deviation of returns.Empirical EvidenceEmpirical work suggests the following four plausible factors:1. unanticipated changes in industrial production;2. unanticipated changes in the spread between the yield on low grade and high grade bonds;3. unanticipated changes in interest rates and the shape of the yield curve;4. unanticipated changes in inflation.ATTACKS ON THE THEORYPortfolio theory is a normative theory. It describes how investors should behave. However, a number of positive theories have challenged portfolio theory by showing disparities between how investors should behave and how they actually behave.Asset Return Distribution and Risk MeasuresThere is empirical evidence to suggest that the probability distribution of returns is not normal, but is skewed. This means that between periods when the market exhibits relatively modest changes in returns, there will be periods when there are changes that are much higher (i.e., crashes and bubbles) than the normal distribution predicts.Assault by the Behavioral Finance Theory CampBehavioral finance looks at how psychology affects investor decisions and the implications not only for portfolio theory but also asset pricing theory and market efficiency. There are three themes in the behavioral finance literature: (1) investors err in making investment decisions because they rely on rules of thumb, (2) investors are influenced by form as well as substance in making investment decisions, (3) prices in the financial market are affected by errors and decision frames.The first theme involves heuristics, a term meaning a rule of thumb strategy to follow in order to shorten the time it takes to make a decision. There are circumstances where heuristics can workfairly well. But it can also lead to cognitive biases, or heuristic-driven biases.The second theme involves the concept of framing, meaning the way in which a situation or choice is presented to an investor can drive results. For example, investors often fail to treat the value of their stock portfolio at market value. Instead, they have a “mental account” where they continue to market the value of each stock in their portfolio at the purchase price despite the change in the market value.The third them of behavioral finance involves how errors caused by heuristics and framing dependence affect the pricing of assets.ANSWERS TO QUESTIONS FOR CHAPTER 12(Questions are in bold print followed by answers.)1. A friend has asked you to help him figure out a statement he received from his broker. It seems that, at the start of last year, your friend paid $900 for a bond, and sold it at the end of the year for $890. During the year, he received a single coupon payment of $110. The statement claims that his return (not including commissions and taxes) is 11.11% for the year. Is this claim correct?Returns can be measured by taking all the cash flows (interest payments and capital gains) and dividing by the cost of the security. The formula is:R=(I+P1-P0)/P0=$110+$890-$900/$900=11.11%,so the statement is correct.2. Suppose the probability distribution for the one-period return of some asset is as follows:Return Probability0.20 0.100.15 0.200.10 0.300.03 0.25-0.06 0.15a. W hat is this asset’s expected one-period return?b. What is this asset’s variance and standard deviation for the one-period return?a.The expected return for the asset is:(0.20) (0.10) + (0.15) (0.20) + (0.10) (0.30) + (0.03) (0.25) + (-0.06) (0.15) = 7.85%b.The asset’s return variance is:(0.10) [0.20-0.0785]2+(0.20) [0.15-0.0785]2+(0.30) [0.10-0.0785]2+(0.25) [0.03-0.0785]2+(0.15) [(-0.06) -0.0785] 2=0.006102.The square root of the variance is the standard deviation. Hence, the standard deviation is 0.07812.3. “A portfolio’s expected return and variance of return are simply the weighted average of the expected return and variance of the individual assets.” Do you agree with this statement?This statement is only partially correct. A portfolio’s expe cted return is a weighted average of the expected return of the assets comprising the portfolio. But the portfolio variance is not because it also depends on the correlation (covariance) of the asset returns.4. In the January 25, 1991, issue of The Value Line Investment Survey, you note the following:Company Beta (β)IBM 0.95Bally Manufacturing 1.40Cigna Corporation 1.00British Telecom 0.60a.How do you interpret these betas?b.Is it reasonable to assume that the expected return on British Telecom is less thanthat on IBM shares?c.“Given that Cigna Corporation has a β of 1.00, one can mimic the performance ofthe stock market as a whole by buying only these shares.” Do you agree with thisstatement?a.These figures represent the systematic risk of these stocks; how the stock’s return shouldmove relative to a market index return.b.According to the CAPM, the higher the beta, the greater the expected return. So, accordingtot he reported values for beta, the expected return for British Telecom is less than for IBM.c.This statement is not true. Investing in only these shares will still expose the investor to muchunsystematic risk, which can only be diversified away by investing in a portfolio of different securities.5. Assume the following:Expected market return = 15%Risk-free rate = 5.7%If a security’s beta is 1.3, what is its expected return according to the CAPM?The expected return is:.07+1.3 (.15-.07) =.174=17.4%, (assume risk free rate =7%).6. Professor Harry Markowitz, corecipient of the 1990 Nobel Prize in Economics, wrote the following:A portfolio with sixty different railway securities, for example, wouldnot be as well diversified as the same size portfolio with some railroad,some public utility, mining, various sorts of manufacturing, etc.Why is this true?This is true because railway securities are likely to be highly correlated with each other, whereas a well-diversified portfolio of issues from different industries leads to elimination of unsystematic risk.7. Following is an excerpt from an article, “Risk and Reward,” in The Economist of October 20, 1990:Next question: is the CAPM supported by the facts? That iscontroversial, to put it mildly. It is a tribute to Mr. Sharpe [cowinnerof the 1990 Nobel Prize in Economics] that his work, which dates fromthe early 1960s, is still argued over so heatedly. Attention has latelyturned away from beta to more complicated ways of carving up risk.But the significance of CAPM for financial economics would be hardto exaggerate.a.Summarize Roll’s argument on the problems inherent in empirically verifying theCAPM.b.What are some of the other “more complicated ways of carving up risk”?a.Roll argues that while the CAPM is testable in principle, no correct test of the theory has yetbeen presented. He also argues that there is practically no possibility that a correct test will be done because there is only one potentially testable hypothesis associated with the CAPM, namely that the true market portfolio is mean-variance efficient. Since this portfolio must contain all worldwide assets, the value of most of which cannot be observed, the hypothesis is probably untestable.b.CAPM assumes investors are only concerned with one risk -- the future prices of their assets.Merton asserts that there are other investor concerns, such as the ability to consume goods and services in the future. He has tried to incorporate more than one risk factor in his model.8.a.What are the difficulties in practice of applying the arbitrage pricing theory model?b.Does Roll’s criticism also apply to this pricing model?c.“In the CAPM investors should be compensated for accepting systematic risk: forthe APT model, investors are rewarded for accepting both systematic risk andunsystematic risk.” Do you agree with this statement?a.The difficulty lies in identifying the systematic factors.b.Roll’s criticism does not apply to the APT model because that model does not rely on a truemarket index.c.This statement is true for the CAPM, but not for the APT model. The latter also asserts thatinvestors should be compensated only for accepting systematic risk. But unlike the CAPM, there is more than one systematic risk.9.a.What does it mean that a return distribution has a fat tail?b.What is the implication if a return distribution is assumed to be normallydistributed but is in fact a fat-tailed distribution?a.Probability distributions are not normal, but are instead skewed. The tails of the distributionare more likely than predicted by a normal probability distribution.b.The implication is that between periods when the market exhibits relatively modest changesin returns, there will be periods when there are changes that are much higher (i.e., crashes and bubbles) than the normal distribution predicts.10. How does the behavioral finance approach differ from the standard finance theory approach?Standard financial theory assumes investors are rational utility maximizers. Behavioral finance theory challenges this assumption. It argues that investors are systematically subject to cognitive biases and errors. They make decisions based on mental shortcuts, called heuristics, and these shortcuts are not necessarily consistent with rational wealth maximizing behavior as predicted by the standard finance theory.。
金融市场讲义1-12(1)
金融市场讲义1、参考书：Anthony M. Santomero& Dacid F. Babbel《金融市场、工具与结构》东北财经大学出版社（着眼于提供一个对金融市场的职能、定价和制度性结构的透析，略去宏观经济学工具的同时，给出了不同金融工具的定价方法，以及市场中运做的工具与机构间的差别）2、Peter S.Mishkin《货币与资本市场》机械工业出版社（货币与资本市场课程，热中于对机构和金融工具的描述）3、Frederic S Mishkin《货币金融学》中国人民大学出版社（货币和银行业课程，从货币在社会的作用入手，到金融市场的宏观经济学意义。
对金融工具并不注重，也不对金融市场与机构的结构进行任何细节的分析。
）第一部分金融体系的结构与作用第一章概论基本概念：金融工具：标明交易双方权利、义务关系的书面凭证。
包括股票、债券和存单等。
金融机构：根据借贷双方的要求创造和交易金融工具的机构。
指从社会聚集资金,然后投资于各种股票,债券货币市场工具,银行存款等金融资产或发放贷款的机构.金融市场:指经济生活中用来进行资本和信贷资金交易的场所,即金融工具进行交易的场所和机构.一、金融体系的作用金融体系对现代经济的作用：1、为交易提供了支付手段交换的两方面：实物的过程与金融的过程，伴随交换的发展，金融的形式日益复杂。
有实际资产和金融资产的划分。
对金融资产的划分。
对金融资产的购买称之为金融投资----因为放弃了当前消费（产出）而获得的对经济其他部分的未来消费（产出）的书面所有权。
2、储蓄－投资的转化金融体系为储蓄－投资的转化提供了一个桥梁的作用金融体系在整个经济中储蓄－投资到转化的过程金融体系与个人、企业的活动密切相关金融体系为整个经济的盈余提供渠道并通过企业投资使资金增值。
二、储蓄、投资与金融市场储蓄在经济学上是一种延迟的消费是为了未来的不确定性而进行的储蓄储蓄取决与消费者的投资决策投资是指获得新生的生产设备、建筑和库存，即实际资产的购买投资决策取决于预期收益储蓄、投资与金融市场的联系：储蓄和投资在本质上与金融无关。
金融市场与金融机构中文答案
金融市场与金融机构中文答案【篇一：fabozzi_金融市场与金融机构基础课后答案】the u.s. federal reserveand the creation of moneycentral banks and their purposethe primary role of a central bank is to maintain the stability of the currency and money supply for a country or a group of countries. the role of central banks can be categorized as: (1) risk assessment, (2) risk reduction, (3) oversight of payment systems, (4) crisis management.one of the major ways a central bank accomplishes its goals is through monetary policy. for this reason, central banks are sometimes called monetary authority. in implementing monetary policy, central banks, acting as a reserve bank, require private banks to maintain and deposit the required reserves with the central bank. in times of financial crisis, central banks perform the role of lender of last resort for the banking system. countries throughout the world may have central banks. additionally, the european central bank is responsible for implementing monetary policy for the member countries of the european union.in implementing monetary and economic policies, the united states is a member of an informal network of nations. this group started in 1976 as the group of 6, or g6: us, france, germany, uk, italy, and japan. thereafter, canada joined to for the g7. in 1998, russia joined to form the g8.the central bank of the united states: the federal reserve systemthe federal reserve system consists of 12 banking districts covering the entire country. created in 1913, the federal reserve is the government agency responsible for the management of the us monetary and banking systems. it is independent of the political branches of government. the fed is managed by a seven-member board of governors, who are appointed by the president and approved by congress.the fed’s tools for monetary management have been made more difficult by financial innovations. the public’s increasing acceptance of money market mutual funds has funneled alarge amount of money into what are essentially interest-bearing checking accounts. securitization permits commercial banks to change what once were illiquid consumer loans of several varieties into securities. selling these securities gives the banks a source of funding that is outside the fed’s influence.instrument of monetary policy: how the fed influences the supply of moneythe fed has three instruments at its disposal to affect the level of reserves.under our fractional reserve banking system have to maintain specified fractional amounts of reserves against their deposits. the fed can raise or lower these required reserve ratios, thereby permitting banks to decrease or increase their lending and investment portfolios. a bank’s total reserves equal its required reserves plus any excess reserves.the fed’s most powerful instrument is its authority to conduct open market operation. it buys and sells in open debt markets government securities for its own accounts. the fed prefers to use treasury bills because it can make its substantial transactions without seriously disrupting the prices or yields of bills.the federal open market committee, or fomc, is the unit that decides on the general issues of changing the rate of growth in the money supply, by open market sales or purchases of securities. the implementation of policy through open market operations is the responsibility of the trading desk of the federal reserve bank of new york.the fed often employs variants of simple open market purchases and sales, these are called the repurchase agreement (or repo) and the reverse repo. in a repo, the fed buys a particular amount of securities from a seller that agrees to repurchase the same number of securities for a higher price at some future time. in a reverse repo, the fed sells securities and makes a commitment to buy them back at a higher price later.a bank borrowing from the fed is said to use the discount window. the discount rate is the rate charged to banks borrowing directly from the fed. raising the rate is designed todiscourage such borrowing, while lowering should have the opposite effect.different kinds of moneymoney is that item which serves as a numeraire. in a basic sense money can be defined as anything that serves as a unit of account and medium of exchange. we measure prices in dollars and exchange dollars for goods. hence coins, currency, and any items readily exchanged into dollars (checking deposits or now accounts) constitute our money supply.money and monetary aggregatesmonetary aggregates measure the amount of money available to the economy at any time. the monetary base is defined as currency in circulation (coins and federal reserve notes) and reserves in the banking system. the instruments that serve as a medium of exchange can be narrowly defined as m1, which is currency and demand deposits. m2 is m1 plus time and savings accounts, and money market mutual funds. finally, m3 is m2 plus short-term treasury liabilities. while all three aggregates are watched and monitored, m1 is the most common form of the money supply, with its trait as being the most liquid. the ratio of the money supply to the economy’s income is known as the velocity of money.the money multipier: the expansion of the money supplythe money multiplier effect arises from the fact that a small change in reserves can produce a large change in the money supply. through our fractional reserve system, a small increase will allow an individual bank, to lend out the greater part of these additional funds. these loans subsequently become deposits in other banks allowing them to expand proportionately. so, while one bank can expand its loans (or deposits) by an amount 1% of reserves required, all banks in the system can do likewise. thus, in a simple format total change in deposits can be stated as change in reserves divided by the reserve requirement, which is also the formula for perpetuity. for example, if the change in the level of reserves is $100 and the reserve requirement is 20%, the change in total deposits will be $500 for a multiplier of 5. of course, major assumptions are that banks will fully loan out their excess reserves and that depositors will not withdraw any of these extra reserves.the impact of interest rates on the money supplyhigh rates of interest may make keeping excess reserves costly, since unused funds represent loans not made and interest not earned. high rates of interest will also affect the public’s demand for hol ding cash. if deposits pay competitive interest rates, customers will be more willing to hold such bank liabilities and less cash. therefore, a higher rate of interest can actually spur growth of the money supply. more likely, however, it will deter borrowing and slow monetary growth.the money supply process in an open economyin the modern era, almost every country has an open economy. foreign commercial and central banks hold dollar accounts in the united states. their purchases and sales of these deposits can affect exchange rates of the dollar against their own currency. the fed has responsibility for maintaining stability in exchange rates. a purchase of foreign exchange with dollars depreciates the dollar’s value, but it also adds dollars to the accounts of foreign banks in this country, thus adding to the u.s. monetary base. most central banks of large economies own or stand ready to own a large amount of each of the world’s major currencies, which are considered international reserves. sales of foreign exchange transactions have monetary base implication and hence consequences for the domestic money supply, emphasis is given to coordinating monetarypolicies among developed nations.answers to questions for chapter 4(questions are in bold print followed by answers.)1. what is the role of a central bank?the role of a central bank has several functions: risk assessment, risk reduction, oversight of payment systems, and crisis management. it can do this through monetary policies, and through the implementation of regulations.2. why is it argued that a central bank should be independent of the government?central banks should be independent of the short-term political interests and political influences generally in setting economic policies.3. identify each participant and its role in the process bywhich the money supply changes and monetary policy is implemented.the fed determines monetary policy and seeks to implement it through changes in reserves. it is up to the nation’s banking system to act on changes in reserves thereby affecting deposits, which constitute the greater part of the m1 definitionof the money supply.4. describe the structure of the board of governors of the federal reserve system.the board of governors of the federal reserve system consistsof 7 members who are appointed to staggered 14-year terms.the board reviews discount operations and sets legal reserve requirements. in addition, all 7 members of the board serve on the federal open market committee (fomc), which determinesthe direction and magnitude of open-market operations. such operations constitute the key instrument for implementing monetary policy.5.a. explain what is meant by the statement “the united stateshas a fractional reserve banking system.”b. how are these items related: total reserves, required reserves, and excess reserves?a. a fractional reserve system requires that a fraction orpercent of a bank’s reserve be placed either in currency invault or with the federal reserve system.b. total reserves are the amounts that banks hold in cash or at the fed. required reserves are amounts required by the fed to meet some specific or legal reserve ratio to deposits. excess reserves are bank reserves in currency and at the fed whichare in excess of legal requirements. since these amounts arenon-interest bearing, banks are often willing to lend these surplus funds to deficit banks at the fed funds rate.【篇二：金融市场与金融机构基础(第9章) 英文版答案】ter 9(questions are in bold print followed by answers.)1. your broker is recommending that you purchase u.s. government bonds. here is the explanation: listen, in thesetimes of uncertainty, with many companies going bankrupt, itmakes sense to play it safe and purchase long-term government bonds. they are issued by the u.s. government, so they are risk free. how would you respond to the broker?u.s. government bonds may be free of default risk, but they are not free from interest rate risk, which may cause the bond price to decline, resulting in a capital loss should the holder of bond sell it before maturity. even then there is the inflation premium risk, which means that the principal may have less purchasing power at maturity than it does today.2. you just inherited 30,000 shares of a company you have never heard of, abd corporation. you call your broker to find out if you have finally struck it rich. afterseveral minutes, she comes back on the telephone and says: “i don’t have a clue about these shares. it’s too bad they are not traded in a financial market. that would make life a lot easier for you. ”what does she mean by this?if the shares are traded on the market, and if the market is efficient, the current price would denote the value of the stock. without market price information, share value would have to be approximated through other time-consuming and less reliable methods.3. suppose you own a bond that pays $75 yearly in coupon interest and that is likely to be called in two years (because the firm has already announced that it will redeem the issue early). the call price will be $1,050.what is the price of your bond now, in the market, if the appropriate discount rate for this asset is 9%?po = $75 (pvifa) 2.09 + $1050 (pvif) 2.09= $75 x 1.7591 + $1050 x .8417 = $1015.724. your broker has advised you to buy shares of hungry boy fast foods, which has paid a dividend of $1.00 per year for 10 years and will (according to the broker) continue to do so for many years. the broker believes that the stock, which now has a price of $12, will be worth $25 per share in five years. you have good reason to think that the discount rate for this firm’s stock is 22% per year, because that rate compensates the buyer for all pertinent risks. is the stock’s present price a good approximation of its true financial value?po = $1 (pvifa) 5.22 + $25 x (pvif) 5.22 = .3715 = $12.15the price is right, in fact the stock is slightly undervalued.5. you have been considering a zero-coupon bond, which pays no interest but will pay a principal of $1,000 at the end of five years. the price of the bond is now $712.99, and its required rate of return is 7.0%. this morning’s news contained a surprising development. the government announced that the rate of inflation appears to be 5.5% instead of the 4% that most people had been expecting. (suppose most people had thought the real rate of interest was 3%.) what would be the price of the bond, once the market began to absorb this new information about inflation?the nominal required rate of return is (real rate plus inflation) ir + if or currently 3% plus 4% = 7%. if if becomes 5.5% then the new required rate of return becomes 8.5%. the price of the bond would then be $1000/(1.085)5 or $665.05.6. state the difference in basis points between each of the following:a. 5.5% and 6.5%b. 7% and 9%c. 6.4% and 7.8%d. 9.1% and 11.9%a. 100 basis pointsb. 200 basis pointsc. 140 basis pointsd. 280 basis points7.a. does a rise of 100 basis points in the discount rate change the price of a 20-year bond as much as it changes the price of a four-year bond, assuming that both bonds have the same coupon rate and offer the same yield?b. does a rise of 100 basis points in the discount rate change the price of a 4% coupon bond as much as it changes the price of a 10% coupon bond, assuming that both bonds have the same maturity and offer the same yield?c. does a rise of 100 basis points in the discount rate change the price of a 10-year bond to the same extent if the discount rate is 4% as it does if the discount rate is 12%?a. the price of the 20-year bond will fall more than that of the 4-year bond because there are more years for the new discount to apply to the cash flows of the 20-year bond.b. the price of the low coupon bond will change more due to the low amount of cash flows that can be reinvested at the higher rate.c. a change from the 4% base will lead to a larger change in price.8.during the early 1980s, interest rates for many long-term bonds were above 14%. in the early 1990s, rates on similar bonds were far lower. what do you think this dramatic decline in market interest rates means for the price volatility of bonds in response to a change in interest rates?since the direction of the interest rate change is downward, price volatility should increase.9.a. what is the cash flow of a 6% coupon bond that pays interest annually, matures in seven years, and has a principal of $1,000?b. assuming a discount rate of 8%, what is the price of this bond?c. assuming a discount rate of 8.5%, what is the price of this bond?d. assuming a discount rate of 7.5%, what is the price of this bond?e. what is the duration of this bond, assuming that the price is the one you calculated in part (b)?f. if the yield changes by 100 basis points, from 8% to 7%, by how much would you approximate the percentage price change to be using your estimate of duration in part (e)?g. what is the actual percentage price change if the yield changes by 100 basis points?a. $60 a year interest for 7 years plus $1000 principal in year 7 for a total of $1420 in cash flow.b. 5.2064 x $60 + .583 x $1000 = $895.38c. 5.119 x $60 + .565 x $1000 = $872.14d. 5.297 x $60 + .603 x $1000 = $920.82e. =$48.68/8.95=5.44$895.38 (0.85-.075)f. applying the formula-d (change in yield) = -5.44 (.01) or a price increase of 5.42%.g. price at 8% =$895.88, at 7% = $946.06, so actual percentage change is ($946.06 - $895.88)/$895.88=5.6%.10. why is it important to be able to estimate the duration of a bond or bond portfolio?to answer this question, we must understand that duration is related to percentage price change.a simple formula can be used to calculate the approximate duration of a bond or bond portfolio. all we are interested in is the percent price change of a bond when interest rates change by a small amount. to control interest rate risk, it is thus necessary to be able to measure it. duration provides that measure.11. explain why you agree or disagree with the following statement: “determining the duration of a financial asset is a simple process.”disagree. determining the duration of a financial asset is not simple process. because for most assets, the cash flow can change when interest rates change. therefore, if a change in the cash flow is not considered, duration calculations can be misleading.12. explain why the effective duration is a more appropriate measure of a complexfinancial instrument’s price sensitiv ity to interest rate changes than is modified duration.modified duration is derived with the assumption that cash flows do not change as interest rates change. effective duration is calculated with the assumption of changing cash flows. for complex finan cial instruments’ price sensitivity to interest rate changes could be very large. hence, the importance of effective duration becomes significant.【篇三：米什金《金融市场与金融机构》课后习题及其答案】class=txt>345。
Fabozzi_金融市场与金融机构基础课后答案12
C H A P T E R12R I S K/R E T U R N A N D A S S E T P R I C I N G M O D E L S PORTFOLIO THEORYPortfolio theory proceeds from the axiom that investors seek to maximize returns given some risk level they are willing to accept. Portfolios that maximize the expected return from an investment subject to a given level of risk are said to be efficient. From among efficient portfolios, the one which risk-averse investors prefer, is said to be an optimal portfolio. To construct an efficient portfolio, it is necessary to understand what is meant by expected return and risk.Investment ReturnThe return on an investment portfolio during a given interval of time is equal to the change in value of the portfolio plus any distributions received from the assets in the portfolio. These returns are expressed as a fraction of the initial portfolio value.R = (V1– V0 + D) / V0where V1 = portfolio value at the end of intervalV0 = portfolio value at the beginning of intervalD = cash distribution during intervalFor purposes of comparison, returns are expressed per unit of time, usually a year. If several years of units are included in the time horizon, then the return can be computed by averaging the return over the several unit intervals. There are three averaging methods in use: (1) the arithmetic average return (simple average of total return divided by number of time units), (2) time-weighted rate of return (also referred to as the geometric average), (3) dollar weighted return. One measure of risk is the extent to which future portfolio values are likely to diverge from the expected value.Portfolio RiskPortfolio risk can be measured in terms of the dispersion of returns about the expected value or mean return. The variance of return is a weighted sum of the squared deviations from the expected return. The standard deviation is the square root of the variance.Expected Portfolio ReturnA particularly useful way to quantify the uncertainty about the portfolio return is to specify the probability associated with each of the possible future returns and calculate the expected value of the portfolio return. The expected value is the weighted average of the possible outcomes, where the weights are the relative chances of occurrence. The expected return on the portfolio isexpressed as:E(R) = P1 R1 + P2 R2 + . . . + P N R NProbability distributions can take various shapes. For a symmetrical distribution, the dispersion of returns on one side of the expected return is the same as the dispersion on the other side of the expected return. The risk of a portfolio is measured by the variance and standard deviation of returns.DiversificationDiversification results from combining securities whose returns are less than perfectly correlated in order to reduce portfolio risk. It smoothes out the variation of returns and reduces the variability. Much of the total risk is diversifiable. But not all risks can be eliminated via diversification. Unsystematic risk (that which relates uniquely to the security or issuing firm) can be substantially reduced with a large, well-diversified portfolio. Still some risks remain which affect all firms to some degree (e.g. business cycles and interest rate changes). This is the market or systematic risk.Mathematically, a security’s return is compos ed of: R =βrm + e where, beta is a market sensitivity index, indicating how sensitive the security return is to changes in the market level. The unsystematic return is independent of the market return and is represented by the epsilon e. The systematic risk of a security is equal to β times the standard deviation of the market return. The unsystematic risk equals the standard deviation of the residual return factor. Portfolio systematic risk is equal to the portfolio beta factor times the risk of the market index. The portfolio beta factor is simply the average of the individual security betas, weighted by the proportion of each security in the portfolio.The Risk of Individual SecuritiesThe systematic risk of an individual security is that portion of its total risk that cannot be eliminated by combining it with other securities in a well diversified portfolio. Thus, we have: Security Return = Systematic Return + Unsystematic ReturnThe security return may be expressed as:R = β R M + ε where ε is unsystematic returnThe security return model is usually written in such a way that the average value of the unsystematic return is zero. This is accomplished by adding a factor alphaαto the model to represent the average value of the unsystematic returns over time.R = α + β R M + ε where ε is unsystematic returnThis model for security returns is referred to as the market model.Estimating BetaBeta can be estimated by regressing returns of a security on the returns of a market portfolio. Since historical data are employed the beta computed will vary with the time period used, number of observations, and market index employed. Thus a question may be raised about the stability of beta over time.THE CAPITAL ASSET PRICING MODELThe capital asset pricing model (CAPM) asserts that the expected return on a portfolio should exceed the risk-less rate of return by an amount that is proportional to the portfolio beta. The relationship between expected return and risk should be linear.Underlying AssumptionsThe model contains several critical assumptions: (1) investors are risk-averse; (2) investors have common time horizon; (3) investors have homogeneous expectations; (4) perfect markets exist, with no transactions costs and borrowing rates are equal to lending rates.Tests of the CAPMOne major difficulty in testing the CAPM is that the model is stated in terms of investor expectations and not in terms of required returns. Yet a number of tests have been tried, the results suggesting that there is indeed a linear risk/return relationship. More noted is Roll’s critique which states while the CAPM is testable in principle, no correct test of the theory has yet been presented. There is only one potentially testable hypothesis, namely that the true market portfolio is mean-variance efficient. Because the true market portfolio must contain all worldwide assets, the value of most of which cannot be observed, the hypothesis is in all probability untestable.THE MULTIFACTOR CAPMThe CAPM assumes the only risk is uncertainty about future market prices. But Robert Merton suggests that there exist extra-market sources of risk of concern to investors as well, such as future income, inflation, future investment opportunities. These risks affect ability to consume goods and to invest in securities in the future. Thus Merton has developed a “multifactor CAPM” to incorporate these extra-market risks in the model. In essence a security’s return has a Beta sensitivity to several factors. What these precise factors are and how many, however, has not been established. Thus this model is even harder to test than the straight CAPM.ARBITRAGE PRICING THEORY MODELDeveloped by Stephen Ross, the arbitrage pricing model (APT) assumes that there are several factors that determine the rate of return on a security, not just one as in the case of the CAPM. Rather, a security’s return is linearly related to “H” factors, but what they are is not specified. It is like the multifactor CAPM but distinguished from it in that it does not require a market index or standard deviation of returns.Empirical EvidenceEmpirical work suggests the following four plausible factors:1. unanticipated changes in industrial production;2. unanticipated changes in the spread between the yield on low grade and high grade bonds;3. unanticipated changes in interest rates and the shape of the yield curve;4. unanticipated changes in inflation.ATTACKS ON THE THEORYPortfolio theory is a normative theory. It describes how investors should behave. However, a number of positive theories have challenged portfolio theory by showing disparities between how investors should behave and how they actually behave.Asset Return Distribution and Risk MeasuresThere is empirical evidence to suggest that the probability distribution of returns is not normal, but is skewed. This means that between periods when the market exhibits relatively modest changes in returns, there will be periods when there are changes that are much higher (i.e., crashes and bubbles) than the normal distribution predicts.Assault by the Behavioral Finance Theory CampBehavioral finance looks at how psychology affects investor decisions and the implications not only for portfolio theory but also asset pricing theory and market efficiency. There are three themes in the behavioral finance literature: (1) investors err in making investment decisions because they rely on rules of thumb, (2) investors are influenced by form as well as substance in making investment decisions, (3) prices in the financial market are affected by errors and decision frames.The first theme involves heuristics, a term meaning a rule of thumb strategy to follow in order to shorten the time it takes to make a decision. There are circumstances where heuristics can workfairly well. But it can also lead to cognitive biases, or heuristic-driven biases.The second theme involves the concept of framing, meaning the way in which a situation or choice is presented to an investor can drive results. For example, investors often fail to treat the value of their stock portfolio at market value. Instead, they have a “mental account” where they continue to market the value of each stock in their portfolio at the purchase price despite the change in the market value.The third them of behavioral finance involves how errors caused by heuristics and framing dependence affect the pricing of assets.ANSWERS TO QUESTIONS FOR CHAPTER 12(Questions are in bold print followed by answers.)1. A friend has asked you to help him figure out a statement he received from his broker. It seems that, at the start of last year, your friend paid $900 for a bond, and sold it at the end of the year for $890. During the year, he received a single coupon payment of $110. The statement claims that his return (not including commissions and taxes) is 11.11% for the year. Is this claim correct?Returns can be measured by taking all the cash flows (interest payments and capital gains) and dividing by the cost of the security. The formula is:R=(I+P1-P0)/P0=$110+$890-$900/$900=11.11%,so the statement is correct.2. Suppose the probability distribution for the one-period return of some asset is as follows:Return Probability0.20 0.100.15 0.200.10 0.300.03 0.25-0.06 0.15a. W hat is this asset’s expected one-period return?b. What is this asset’s variance and standard deviation for the one-period return?a.The expected return for the asset is:(0.20) (0.10) + (0.15) (0.20) + (0.10) (0.30) + (0.03) (0.25) + (-0.06) (0.15) = 7.85%b.The asset’s return variance is:(0.10) [0.20-0.0785]2+(0.20) [0.15-0.0785]2+(0.30) [0.10-0.0785]2+(0.25) [0.03-0.0785]2+(0.15) [(-0.06) -0.0785] 2=0.006102.The square root of the variance is the standard deviation. Hence, the standard deviation is 0.07812.3. “A portfolio’s expected return and variance of return are simply the weighted average of the expected return and variance of the individual assets.” Do you agree with this statement?This statement is only partially correct. A portfolio’s expe cted return is a weighted average of the expected return of the assets comprising the portfolio. But the portfolio variance is not because it also depends on the correlation (covariance) of the asset returns.4. In the January 25, 1991, issue of The Value Line Investment Survey, you note the following:Company Beta (β)IBM 0.95Bally Manufacturing 1.40Cigna Corporation 1.00British Telecom 0.60a.How do you interpret these betas?b.Is it reasonable to assume that the expected return on British Telecom is less thanthat on IBM shares?c.“Given that Cigna Corporation has a β of 1.00, one can mimic the performance ofthe stock market as a whole by buying only these shares.” Do you agree with thisstatement?a.These figures represent the systematic risk of these stocks; how the stock’s return shouldmove relative to a market index return.b.According to the CAPM, the higher the beta, the greater the expected return. So, accordingtot he reported values for beta, the expected return for British Telecom is less than for IBM.c.This statement is not true. Investing in only these shares will still expose the investor to muchunsystematic risk, which can only be diversified away by investing in a portfolio of different securities.5. Assume the following:Expected market return = 15%Risk-free rate = 5.7%If a security’s beta is 1.3, what is its expected return according to the CAPM?The expected return is:.07+1.3 (.15-.07) =.174=17.4%, (assume risk free rate =7%).6. Professor Harry Markowitz, corecipient of the 1990 Nobel Prize in Economics, wrote the following:A portfolio with sixty different railway securities, for example, wouldnot be as well diversified as the same size portfolio with some railroad,some public utility, mining, various sorts of manufacturing, etc.Why is this true?This is true because railway securities are likely to be highly correlated with each other, whereas a well-diversified portfolio of issues from different industries leads to elimination of unsystematic risk.7. Following is an excerpt from an article, “Risk and Reward,” in The Economist of October 20, 1990:Next question: is the CAPM supported by the facts? That iscontroversial, to put it mildly. It is a tribute to Mr. Sharpe [cowinnerof the 1990 Nobel Prize in Economics] that his work, which dates fromthe early 1960s, is still argued over so heatedly. Attention has latelyturned away from beta to more complicated ways of carving up risk.But the significance of CAPM for financial economics would be hardto exaggerate.a.Summarize Roll’s argument on the problems inherent in empirically verifying theCAPM.b.What are some of the other “more complicated ways of carving up risk”?a.Roll argues that while the CAPM is testable in principle, no correct test of the theory has yetbeen presented. He also argues that there is practically no possibility that a correct test will be done because there is only one potentially testable hypothesis associated with the CAPM, namely that the true market portfolio is mean-variance efficient. Since this portfolio must contain all worldwide assets, the value of most of which cannot be observed, the hypothesis is probably untestable.b.CAPM assumes investors are only concerned with one risk -- the future prices of their assets.Merton asserts that there are other investor concerns, such as the ability to consume goods and services in the future. He has tried to incorporate more than one risk factor in his model.8.a.What are the difficulties in practice of applying the arbitrage pricing theory model?b.Does Roll’s criticism also apply to this pricing model?c.“In the CAPM investors should be compensated for accepting systematic risk: forthe APT model, investors are rewarded for accepting both systematic risk andunsystematic risk.” Do you agree with this statement?a.The difficulty lies in identifying the systematic factors.b.Roll’s criticism does not apply to the APT model because that model does not rely on a truemarket index.c.This statement is true for the CAPM, but not for the APT model. The latter also asserts thatinvestors should be compensated only for accepting systematic risk. But unlike the CAPM, there is more than one systematic risk.9.a.What does it mean that a return distribution has a fat tail?b.What is the implication if a return distribution is assumed to be normallydistributed but is in fact a fat-tailed distribution?a.Probability distributions are not normal, but are instead skewed. The tails of the distributionare more likely than predicted by a normal probability distribution.b.The implication is that between periods when the market exhibits relatively modest changesin returns, there will be periods when there are changes that are much higher (i.e., crashes and bubbles) than the normal distribution predicts.10. How does the behavioral finance approach differ from the standard finance theory approach?Standard financial theory assumes investors are rational utility maximizers. Behavioral finance theory challenges this assumption. It argues that investors are systematically subject to cognitive biases and errors. They make decisions based on mental shortcuts, called heuristics, and these shortcuts are not necessarily consistent with rational wealth maximizing behavior as predicted by the standard finance theory.。
fabozzi_金融市场与金融机构基础课后答案.doc
CHAPTER 4THE U.S. FEDERAL RESERVEAND THE CREATION OF MONEYCENTRAL BANKS AND THEIR PURPOSEThe primary role of a central bank is to maintain the stability of the currency and money supply for a country or a group of countries. The role of central banks can be categorized as: (1) risk assessment, (2) risk reduction, (3) oversight of payment systems, (4) crisis management.One of the major ways a central bank accomplishes its goals is through monetary policy. For this reason, central banks are sometimes called monetary authority. In implementing monetary policy, central banks, acting as a reserve bank, require private banks to maintain and deposit the required reserves with the central bank. In times of financial crisis, central banks perform the role of lender of last resort for the banking system. Countries throughout the world may have central banks. Additionally, the European Central Bank is responsible for implementing monetary policy for the member countries of the European Union.There is widespread agreement that central banks should be independent of the government so that decisions of the central bank will not be influenced for short-term political purposes such as pursuing a monetary policy to expand the economy but at the expense of inflation.In implementing monetary and economic policies, the United States is a member of an informal network of nations. This group started in 1976 as the Group of 6, or G6: US, France, Germany, UK, Italy, and Japan. Thereafter, Canada joined to for the G7. In 1998, Russia joined to form the G8.THE CENTRAL BANK OF THE UNITED STATES: THE FEDERAL RESERVE SYSTEMThe Federal Reserve System consists of 12 banking districts covering the entire country. Created in 1913, the Federal Reserve is the government agency responsible for the management of the US monetary and banking systems. It is independent of the political branches of government. The Fed is managed by a seven-member Board of Governors, who are appointed by the President and approved by Congress.The Fed's tools for monetary management have been made more difficult by financial innovations. The public's increasing acceptance of money market mutual funds has funneled a large amount of money into what are essentially interest-bearing checking accounts. Securitization permits commercial banks to change what once were illiquid consumer loans of several varieties into securities. Selling these securities gives the banks a source of funding that is outside the Fed's influence.INSTRUMENT OF MONETARY POLICY: HOW THE FED INFLUENCES THE SUPPLY OF MONEYThe Fed has three instruments at its disposal to affect the level of reserves.Reserve RequirementsUnder our fractional reserve banking system have to maintain specified fractional amounts of reserves against their deposits. The Fed can raise or lower these required reserve ratios, thereby permitting banks to decrease or increase their lending and investment portfolios. A bank's total reserves equal its required reserves plus any excess reserves.Open Market OperationsThe Fed's most powerful instrument is its authority to conduct open market operation. It buys and sells in open debt markets government securities for its own accounts. The Fed prefers to use Treasury bills because it can make its substantial transactions without seriously disrupting the prices or yields of bills.The Federal Open Market Committee, or FOMC, is the unit that decides on the general issues of changing the rate of growth in the money supply, by open market sales or purchases of securities. The implementation of policy through open market operations is the responsibility of the trading desk of the Federal Reserve Bank of New York.Open Market Repurchase AgreementsThe Fed often employs variants of simple open market purchases and sales, these are called the repurchase agreement (or repo) and the reverse repo. In a repo, the Fed buys a particular amount of securities from a seller that agrees to repurchase the same number of securities for a higher price at some future time. In a reverse repo, the Fed sells securities and makes a commitment to buy them back at a higher price later.Discount RateA bank borrowing from the Fed is said to use the discount window. The discount rate is the rate charged to banks borrowing directly from the Fed. Raising the rate is designed to discourage such borrowing, while lowering should have the opposite effect.DIFFERENT KINDS OF MONEYMoney is that item which serves as a numeraire. In a basic sense money can be defined as anything that serves as a unit of account and medium of exchange. We measure prices in dollars and exchange dollars for goods. Hence coins, currency, and any items readily exchanged into dollars (checking deposits or NOW accounts) constitute our money supply.MONEY AND MONETARY AGGREGATESMonetary aggregates measure the amount of money available to the economy at any time. The monetary base is defined as currency in circulation (coins and federal reserve notes) and reserves in the banking system. The instruments that serve as a medium of exchange can be narrowly defined as Mi, which is currency and demand deposits. M2 is Mi plus time and savings accounts, and money market mutual funds. Finally, M3 is M? plus short-term Treasury liabilities. While all three aggregates are watched and monitored, Mi is the most common form of the money supply, with its trait as being the most liquid. The ratio of the money supply to the economy's income is known as the velocity of money.THE MONEY MULTIPIER: THE EXPANSION OF THE MONEY SUPPLYThe money multiplier effect arises from the fact that a small change in reserves can produce a large change in the money supply. Through our fractional reserve system, a small increase will allow an individual bank, to lend out the greater part of these additional funds. These loans subsequently become deposits in other banks allowing them to expand proportionately. So, while one bank can expand its loans (or deposits) by an amount 1% of reserves required, all banks in the system can do likewise. Thus, in a simple format total change in deposits can be stated as change in reserves divided by the reserve requirement, which is also the formula for perpetuity. For example, if the change in the level of reserves is $100 and the reserve requirement is 20%, the change in total deposits will be $500 for a multiplier of 5. Of course, major assumptions are that banks will fully loan out their excess reserves and that depositors will not withdraw any of these extra reserves. THE IMPACT OF INTEREST RATES ON THE MONEY SUPPLYHigh rates of interest may make keeping excess reserves costly, since unused funds represent loans not made and interest not earned. High rates of interest will also affect the public's demand for holding cash. If deposits pay competitive interest rates, customers will be more willing to hold such bank liabilities and less cash. Therefore, a higher rate of interest can actually spur growth of the money supply. More likely, however, it will deter borrowing and slow monetary growth.THE MONEY SUPPLY PROCESS IN AN OPEN ECONOMYIn the modern era, almost every country has an open economy. Foreign commercial and central banks hold dollar accounts in the United States. Their purchases and sales of these deposits can affect exchange rates of the dollar against their own currency. The Fed has responsibility for maintaining stability in exchange rates. A purchase of foreign exchange with dollars depreciates the dollar's value, but it also adds dollars to the accounts of foreign banks in this country, thus adding to the U.S. monetary base. Most central banks of large economies own or stand ready to own a large amount of each of the world's major currencies, which are considered international reserves. Sales of foreign exchange transactions have monetary base implication and hence consequences for the domestic money supply, emphasis is given to coordinating monetarypolicies among developed nations.ANSWERS TO QUESTIONS FOR CHAPTER 4(Questions are in bold print followed by answers.)1.What is the role of a central bank?The role of a central bank has several functions: risk assessment, risk reduction, oversight of payment systems, and crisis management. It can do this through monetary policies, and through the implementation of regulations.2.Why is it argued that a central bank should be independent of the government?Central banks should be independent of the short-term political interests and political influences generally in setting economic policies.3.Identify each participant and its role in the process by which the money supply changes and monetary policy is implemented.The Fed determines monetary policy and seeks to implement it through changes in reserves. It is up to the nation's banking system to act on changes in reserves thereby affecting deposits, which constitute the greater part of the M| definition of the money supply.4.Describe the structure of the board of governors of the Federal Reserve System.The Board of Governors of the Federal Reserve System consists of 7 members who are appointed to staggered 14-year terms. The Board reviews discount operations and sets legal reserve requirements. In addition, all 7 members of the Board serve on the Federal Open Market Committee (FOMC), which determines the direction and magnitude of open-market operations. Such operations constitute the key instrument for implementing monetary policy.5.a・ Explain what is meant by the statement "the United States has a fractional reserve banking system."b. How are these items related: total reserves, required reserves, and excess reserves?a. A fractional reserve system requires that a fraction or percent of a bank's reserve be placedeither in currency in vault or with the Federal Reserve System.b.Total reserves are the amounts that banks hold in cash or at the Fed. Required reserves areamounts required by the Fed to meet some specific or legal reserve ratio to deposits. Excess reserves are bank reserves in currency and at the Fed which are in excess of legal requirements.Since these amounts are non-interest bearing, banks are often willing to lend these surplus funds to deficit banks at the Fed funds rate.5.What is the required reserve ratio, and how has the 1980 Depository Institutions Deregulation and Monetary Control Act constrained the Fed's control over the ratio?The required reserve ratio is the fraction of deposits a bank must hold as reserves. The DIDMCA constrained the Fed's control over the ratio by letting Congress set ranges of reserves for demand and time deposits.6.In what two forms can a bank hold its required reserves?A bank can hold its reserves in the form of currency in vault or in deposit at the Fed.8.a.What is an open market purchase by the Fed?b.Which unit of the Fed decides on open market policy, and what unit implements thatpolicy?c.What is the immediate consequence of an open market purchase?a.An open market purchase by the Fed consists of the purchase of U.S. Treasury securities.b.The FOMC decides on open market policy and directs the Federal Reserve Bank of New Yorkto implement it through sales and purchases of these securities.c.The immediate consequence of an open market purchase is to supply the seller of the securitywith a check on the Federal Reserve System that he can deposit in his bank, therebyimmediately increasing the excess reserves and thus nation's money supply.7.Distinguish between an open market sale and a matched sale (which is the same as a matched sale-purchase transaction or a reverse repurchase agreement).A matched sale or reverse repo involves the sale of a Treasury security with an agreement to buy it back at a later date and at a higher price as the cost for borrowing the funds. This contrasts with an outright sale at some discounted or premium price.8.What is the discount rate, and to what type of action by a bank does it apply?The discount rate is the rate a bank pays to borrow a t the "discount window” of the Fed. Such borrowings are often undertaken to meet temporary liquidity needs. Bank needs are monitored and the Fed likes to state that borrowing from it is a "privilege and not a right.”IL Define the monetary base and M2The monetary base includes total bank reserves plus currency in the hands of the public. M2 = Mi (currency and demand deposits) + savings and time deposits.12.Describe the basic features of the money multiplier.The money multiplier is crucial to the concept of money creation and is analogous to the idea of the autonomous spending multiplier and formula for a perpetuity. It is the inverse of the required reserve ratio (1/rr). If the reserve ratio is .2 then the money supply will expand five times any increase in new deposits. The multiplier will be less if banks hold excess reserves or experience cash drains.13.Suppose the Fed were to inject $100 million of reserves into the banking system by an open market purchase of Treasury bills. If the required reserve ratio were 10%, what is the maximum increase in Mi that the new reserves would generate? Assume that banks make all the loans their reserves allow, that firms and individuals keep all their liquid assets in depository accounts, and no money is in the form of currency.The maximum increase in Mi will be $1 billion assuming no cash drains in the system, and banks are fully loaned up.14.Assume the situation from question 13, except now assume that banks hold a ratio of0.5% of excess reserves to deposits and the public keeps 20% of its liquid assets in the form of cash. Under these conditions, what is the money multiplier? Explain why this value of the multiplier is so much lower than the multiplier from question 13.Substitute the given values of currency ratio, required reserves ratio, and excess reserves ratio of 20%, 10% and 0.5% respectively into the formula given on page 94 of the textbook. Now we have a lower multiplier value of 3.9=1.20A 305. This is because public and banks do not deposit or lend, all they can.。
金融市场基础知识培训讲学
证券从业资格考试金融市场基础知识三色笔记使用法证券从业资格考试金融市场基础知识三色笔记使用方法介绍：1、三色勾画法。
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现实中可用红笔划红色内容，蓝笔或黑笔划蓝色内容，一定用铅笔划褐色内容。
日常复习主要关注三色划线内容，考前快速浏览红色和蓝色内容，铅笔内容确定掌握时请擦掉。
2、知识点把握。
日常复习注意明确知识点，特别注意多选题知识点的提示。
“□”代表一个明显的知识点。
3、复习流程。
第一阶段，①自主快速浏览全书一遍；②在培训师指导下划三色重点，讲解和记忆重要知识点；③记忆三色重点一遍；④模拟测试一，确定成绩：参考分为55分以上。
233网校督促50分以下者加大复习力度。
第二阶段，①讲解模拟试卷一，学员在书中寻找做错试题对应的知识点，寻找做错原因，若内容未记录请用三色中一色自己勾画；②记忆三色重点一遍；③模拟测试二，确定成绩：参考分为60分以上。
233网校督促55分以下者加大复习力度。
70分以上者可结束该们课程复习，考前三天突击温习即可。
第三阶段，①讲解模拟试卷二，学员在书中寻找做错试题对应的知识点，寻找做错原因，若内容未记录请用三色中一色自己勾画；②记忆三色重点一遍；③模拟测试三，确定成绩：参考分为66分以上。
233网校督促60分以下者加大复习力度。
将确定已掌握的铅笔勾画内容擦掉。
④考前三天开始自由温习，考前1-2小时快速浏览红色和蓝色勾画内容。
第一章金融市场体系证券从业金融市场基础知识三色笔记：全球金融体系证券从业金融市场基础知识三色笔记：中国的金融体系证券从业金融市场基础知识三色笔记：中国多层次资本市场第二章证券市场主体证券从业金融市场基础知识三色笔记：证券发行人证券从业金融市场基础知识三色笔记：证券投资者证券从业金融市场基础知识三色笔记：中介机构证券从业金融市场基础知识三色笔记：自律性组织证券从业金融市场基础知识三色笔记：监管机构第三章股票市场证券从业金融市场基础知识三色笔记：股票证券从业金融市场基础知识三色笔记：股票发行证券从业金融市场基础知识三色笔记：股票交易第四章债券市场证券从业金融市场基础知识三色笔记：债券证券从业金融市场基础知识三色笔记：债券的发行与承销证券从业金融市场基础知识三色笔记：债券的交易第五章证券投资基金与衍生工具证券从业金融市场基础知识三色笔记：证券投资基金证券从业金融市场基础知识三色笔记：衍生工具第六章金融风险管理证券从业金融市场基础知识三色笔记：风险管理证券从业金融市场基础知识三色笔记：金融风险证券从业资格考试金融市场基础知识第一章金融市场体系(第一节全球金融体系)金融市场的概念金融市场是指以金融资产为交易对象、以金融资产的供给方和需求方为交易主体形成的交易机制及其关系的总和。
最新《金融市场与金融机构》课后习题答案
《金融市场与金融机构》米什金第七版课后习题答案
（请集中复习1-6、10-13、15章）
第一章为什么研究金融市场与金融机构
第二章金融体系概览
第三章利率的含义及其在定价中的作用
第四章为什么利率会变化
第五章利率的风险结构和期限结构如何影响利率
第六章金融市场是否有效
第十章货币政策传导：工具、目标战略和战术
第七版中的12题在第五六版中没有，此处的12-19题即为第七版的13-20题
第十一章货币市场
第十二章债券市场
第十三章股票市场
第十四章抵押贷款市场
第十五章外汇市场。
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Foundations of Financial Markets and Institutions, 4e (Fabozzi/Modigliani/Jones)Chapter 13 Primary Markets and the Underwriting of Securities Multiple Choice Questions1 The Traditional Process for Issuing New Securities1) The ________ involves the distribution to investors of newly issued securities by centralgovernments, its agencies, municipal governments, and corporationsA) OTC marketB) secondary marketC) primary marketD) stock marketAnswer: CDiff: 1Topic: 13.1 The Traditional Process for Issuing New SecuritiesObjective: 13.1 the role investment bankers play in the distribution of newly issued securities2) The participants in the marketplace that work with issuers to distribute newly issued securitiesare called investment bankers. Investment banking is performed by two groups:________.A) commercial banks and securities houses.B) hometown banks and securities houses.C) commercial banks and bank houses.D) savings & loans and bank houses.Answer: ADiff: 2Topic: 13.1 The Traditional Process for Issuing New SecuritiesObjective: 13.1 the role investment bankers play in the distribution of newly issued securities3) The traditional process in the United States for issuing new securities involves investmentbankers performing up to three functions. Which of the below is NOT one of these functions?A) One function is advising the issuer on the terms and the timing of the offering.B) One function is selling the securities to the issuer.C) One function is distributing the issue to the public.D) One function is buying the securities from the issuer.Answer: BComment: The traditional process in the United States for issuing new securities involvesinvestment bankers performing one or more of the following three functions:(1) advising the issuer on the terms and the timing of the offering,(2) buying the securities from the issuer, and(3) distributing the issue to the public.Diff: 1Topic: 13.1 The Traditional Process for Issuing New Securities13.1 the role investment bankers play in the distribution of newly issued securities Objective:4) An investment banker may merely act as an advisor and/or distributor of the new security. Thefunction of buying the securities from the issuer is called ________.A) advising.B) distributing.C) purchasing.D) underwriting.Answer: DDiff: 2Topic: 13.1 The Traditional Process for Issuing New SecuritiesObjective: 13.1 the role investment bankers play in the distribution of newly issued securities5) An ________ is a common stock offering issued by companies that have NOT previouslyissued common stock to the public.A) initial private issuance (IPI)B) seasoned equity offering (SEO)C) initial public offering (IPO)D) seasoned offering (SO)Answer: CDiff: 1Topic: 13.1 The Traditional Process for Issuing New SecuritiesObjective: 13.1 the role investment bankers play in the distribution of newly issued securities6) Which of the below statements is FALSE?A) A secondary common stock offering is an offering of common stock that had been issued inthe past by the corporation.B) For a secondary offering, the range for the gross spread as a percentage of the amount raisedis between 3% and 6%.C) For traditional bond offerings, the gross spread as a percentage of the principal is around 100basis points.D) The typical underwritten transaction involves so much risk of capital loss that a singleinvestment banking firm undertaking it alone would be exposed to the danger of losing asignificant portion of its capital.Answer: CComment: For traditional bond offerings, the gross spread as a percentage of the principal isaround 50 basis points.Diff: 2Topic: 13.1 The Traditional Process for Issuing New SecuritiesObjective: 13.2 the risk associated with the underwriting of a security2 Regulation of the Primary Market1) Underwriting activities are regulated by the ________.A) Initial Public Offerings Market (IPOM).B) Securities and Exchange Commission (SEC).C) Investment Banking Industry (IBI).D) Federal Bureau of Investigation (FBI).Answer: ADiff: 1Topic: 13.2 Regulation of the Primary MarketObjective: 13.4 how the SEC regulates the distribution of newly issued securities2) The type of information contained in the registration statement includes ________.A) the nature of the business of the issuer and key provisions or features of the security.B) the nature of the investment risks associated with the security and the background ofmanagement.C) the nature of the business of the issuer and the background of management.D) All of theseAnswer: DComment: The type of information contained in the registration statement is the nature of thebusiness of the issuer, key provisions or features of the security, the nature of the investmentrisks associated with the security, and the background of management.Diff: 2Topic: 13.2 Regulation of the Primary MarketObjective: 13.5 what a registration statement is3) The registration is actually divided into two parts. Part I is the ________. It is this part that istypically distributed to the public as an offering of the securities. Part II contains________,which is not distributed to the public as part of the offering but is available from the SEC uponrequest.A) registration; additional informationB) prospectus; supplemental informationC) supplemental information; registrationD) beginning information; prospectusAnswer: BDiff: 2Topic: 13.2 Regulation of the Primary MarketObjective: 13.5 what a registration statement is4) The Securities Act of 1933 ________.A) does not provide for penalties in the form of fines and/or imprisonment if the informationprovided is inaccurate or material information is omitted.B) governs the issuance of securities.C) provides that investors who purchase the security are entitled to sue the issuer but not theunderwriter to recover damages if they incur a loss as a result of the misleading information.D) provides that financial statements must be included after the registration statement. Answer: BComment: The Securities Act of 1933 governs the issuance of securities. The act requires thata registration statement be filed with the SEC by the issuer of a security. Financial statementsmust be included in the registration statement, and they must be certified by an independentpublic accountant. The act provides for penalties in the form of fines and/or imprisonment if theinformation provided is inaccurate or material information is omitted. Moreover, investors whopurchase the security are entitled to sue the issuer to recover damages if they incur a loss as aresult of the misleading information. The underwriter may also be sued if it can bedemonstrated that the underwriter did not conduct a reasonable investigation of the informationreported by the issuer. One of the most important duties of an underwriter is to perform duediligence.Diff: 2Topic: 13.2 Regulation of the Primary MarketObjective: 13.4 how the SEC regulates the distribution of newly issued securities5) Which of the below statements is TRUE?A) The filing of a registration statement with the SEC means that the security can be offered tothe public.B) When the SEC declares the registration statement is effective, it means that an amendmentto the registration statement can be filed.C) The registration statement must be reviewed and approved by the SEC's Division ofCorporate Finance before a public offering can be made.D) The approval of the SEC means that the securities have investment merit or are properlypriced or that the information is accurate.Answer: CComment: The filing of a registration statement with the SEC does not mean that the securitycan be offered to the public. The registration statement must be reviewed and approved by theSEC's Division of Corporate Finance before a public offering can be made. Typically, the staffof this division will find a problem with the registration statement. The staff then sends a letterof comments or deficiency letter to the issuer explaining the problem it has encountered. Theissuer must remedy any problem by filing an amendment to the registration statement. If thestaff is satisfied, the SEC will issue an order declaring that the registration statement is敜晦捥楴敶尬and the underwriter can solicit sales. The approval of the SEC, however, does notmean that the securities have investment merit or are properly priced or that the information isaccurate. It merely means that the appropriate information appears to have been disclosed.Diff: 3Topic: 13.2 Regulation of the Primary MarketObjective: 13.5 what a registration statement is6) A red herring is ________.A) a period of waiting for SEC approval.B) an amended prospectus.C) a preliminary prospectus.D) a prospectus printed fully in red ink.Answer: CComment: During the waiting period, the SEC does allow the underwriters to distribute apreliminary prospectus. Because the prospectus has not become effective, its cover page statesthis in red ink and, as a result, the preliminary prospectus is commonly called a red herring.Diff: 2Topic: 13.2 Regulation of the Primary MarketObjective: 13.4 how the SEC regulates the distribution of newly issued securities3 Variations in the Underwriting Process1) Not all deals are underwritten using the traditional syndicate process. For example, variationsin the United States, the Euromarkets, and foreign markets include ________.A) the auction process and rights offering for the underwriting of bonds.B) the bought deal of the Eurostock market.C) a rights offering for underwriting common stock.D) All of theseAnswer: CComment: Not all deals are underwritten using the traditional syndicate process we havedescribed. Variations in the United States, the Euromarkets, and foreign markets include thebought deal for the underwriting of bonds, the auction process for both stocks and bonds, and arights offering for underwriting common stock.Diff: 2Topic: 13.3 Variations in the Underwriting ProcessObjective: 13.3 the different types of underwriting arrangements2) The mechanics of a bought deal are that ________.A) the lead manager or a group of managers offers a potential issuer of debt securities a firm bidto purchase an undetermined amount of the securities with an interest (coupon) rate and maturityto be announced later.B) the issuer is given a month or more to accept or reject the bid.C) if the bid is rejected, the underwriting firm has bought the deal.D) the underwriter can sell the securities to other investment banking firms for distribution totheir clients and/or distribute the securities to its clients.Answer: DComment: The mechanics of a bought deal are as follows. The lead manager or a group ofmanagers offers a potential issuer of debt securities a firm bid to purchase a specified amount ofthe securities with a certain interest (coupon) rate and maturity. The issuer is given a day orso (maybe even only a few hours) to accept or reject the bid. If the bid is accepted, theunderwriting firm has bought the deal. It can, in turn, sell the securities to other investmentbanking firms for distribution to their clients and/or distribute the securities to its clients.Typically, the underwriting firm that buys the deal will have presold most of the issue to itsinstitutional clients.Diff: 2Topic: 13.3 Variations in the Underwriting ProcessObjective: 13.7 what is a bought deal underwriting for a bond issue, and why it is used3) A consequence of ________ is that underwriting firms need to expand their capital so thatthey can commit greater amounts of funds to such deals.A) accepting auction dealsB) rejecting bought dealsC) accepting bought dealsD) rejecting auction dealsAnswer: CDiff: 2Topic: 13.3 Variations in the Underwriting Process13.5 what a registration statement isObjective:4) A variation for underwriting securities is the auction process. In this method,________.A) the issuer announces the terms of the issue, and interested parties submit bids for part of theissue.B) the auction form is mandated for certain securities of regulated public utilities but not formunicipal debt obligations.C) the issuer announces the terms of the issue, and interested parties submit bids for the entireissue.D) mandated for many municipal debt obligations but not for certain securities of regulatedpublic utilities.Answer: CComment: A variation for underwriting securities is the auction process. In this method, theissuer announces the terms of the issue, and interested parties submit bids for the entire issue.The auction form is mandated for certain securities of regulated public utilities and for manymunicipal debt obligations. It is more commonly referred to as a competitive biddingunderwriting.Diff: 2Topic: 13.3 Variations in the Underwriting ProcessObjective: 13.3 the different types of underwriting arrangements5) In a variant of the auction process, a security is allocated to bidders from the highest bid price(________) to the lower ones (________) until the entire issue is allocated.A) (highest yield in the case of a bond); (higher yield in the case of a bond)B) (lowest yield in the case of a bond); (higher yield in the case of a bond)C) (lowest yield in the case of a bond); (lower yield in the case of a bond)D) (highest yield in the case of a bond); (lower yield in the case of a bond) Answer: BComment: The security is then allocated to bidders from the highest bid price (lowest yield inthe case of a bond) to the lower ones (higher yield in the case of a bond) until the entire issue isallocated.Diff: 3Topic: 13.3 Variations in the Underwriting Process13.3 the different types of underwriting arrangementsObjective:6) Suppose that an issuer is offering $600 million of a bond issue, and nine bidders submit thefollowing yield bids:Bidder Amount BidA $150 million 5.1%B $140 million 5.2%C$130 million5.2%D$100 million5.3%E$75 million5.4%F$25 million5.4%G$80 million5.5%H$70 million5.6%Which of the below statements is FALSE?A) The first five bidders (A, B, C, D, and E) will be allocated the amount for which they bidbecause they submitted the lowest-yield bids. In total, they will receive $595 million of the $600million to be issued.B) After allocating $420 million to the highest three bidders, then $180 million can be allocatedto the next two highest bidders.C) The lowest bidders will receive an amount proportionate to the amount for which they bid.D) After allocating $595 million to the highest bidders, then $5 million can be allocated to thenext lowest bidders.Answer: BComment: If we allocate $420 million to the highest three bidders, then $180 million cannotbe allocated to the next two highest bidders because they only have bid for $175 million.Diff: 2Topic: 13.3 Variations in the Underwriting ProcessObjective: 13.8 what a competitive bidding underwriting is7) When all bidders buy the amount allocated to them, then the auction is referred to ________.A) as a multiple-price auction or a Dutch auction.B) as a single-price auction or a German auction.C) as a single-price auction or a Dutch auction.D) as a multiple-price auction or a German auction.Answer: CDiff: 2Topic: 13.3 Variations in the Underwriting Process13.8 what a competitive bidding underwriting isObjective:8) Which of the below statements is FALSE?A) The value of a right can be found by calculating the difference between the price of a sharebefore the rights offering and the price of a share after the rights offering.B) The difference between the price before the rights offering and after the rights offeringexpressed as a percentage of the original price is called the concentration effect of the rightsissue.C) Value of a right = Share price rights on - Share price ex rightsD) Value of a right = Price before rights offering - Price after rights offering Answer: BComment: The difference between the price before the rights offering and after the rightsoffering expressed as a percentage of the original price is called the dilution effect of the rightsissue.Diff: 3Topic: 13.3 Variations in the Underwriting ProcessObjective: 13.9 what a rights offering for the sale of common stock is9) Which of the below statements is FALSE?A) Using an auction allows corporate issuers to place newly issued debt obligations directly withinstitutional investors rather than follow the indirect path of using an underwriting firm.B) By dealing with just a few institutional investors, investment bankers argue, issuers cannot besure of obtaining funds at the lowest cost.C) A preemptive right grants existing shareholders the right to buy some proportion of the newshares issued at a price below market value.D) For the shares sold via a preemptive rights offering, the underwriting services ofaninvestment banker are needed.Answer: DComment: For the shares sold via a preemptive rights offering, the underwriting services of aninvestment banker are not needed.Diff: 2Topic: 13.3 Variations in the Underwriting ProcessObjective: 13.8 what a competitive bidding underwriting is4 Private Placement of Securities1) In addition to underwriting securities for distribution to the public, securities may be placedwith a limited number of institutional investors such as ________.A) insurance companies.B) investment companies.C) pension funds.D) All of theseAnswer: DDiff: 2Topic: 13.4 Private Placement of SecuritiesObjective: 13.10 the advantages and disadvantages from an issuer's perspective of a privateplacement2) ________ are the major investors in private placements.A) Life insurance companies .B) Credit Unions.C) Pension funds.D) Auto insurance companies.Answer: ADiff: 2Topic: 13.4 Private Placement of SecuritiesObjective: 13.10 the advantages and disadvantages from an issuer's perspective of a privateplacement3) The Securities Act of 1933 does not provide specific guidelines to identify what is a________.A) private security.B) public placement.C) public offering.D) private offering.Answer: DDiff: 2Topic: 13.4 Private Placement of SecuritiesObjective: 13.10 the advantages and disadvantages from an issuer's perspective of a privateplacement4) In 1982, the SEC adopted Regulation D,which ________.A) exempts securities sold only within a state.B) states that if the offering is for $1 million or less, the securities need not be registeredC) sets forth the guidelines that determine if an issue is qualified for exemption from registration.D) exempts from registration ransactions by an issuer not involving any public offering.Answer: CComment: Public and private offerings of securities differ in terms of the regulatory requirements that the issuer must satisfy. The Securities Act of 1933 and the Securities ExchangeAct of 1934 require that all securities offered to the general public must be registered with theSEC, unless there is a specific exemption. The Securities Acts allow three exemptions fromfederal registration. First, intrastate offerings–that is, securities sold only within a state–areexempt. Second, there is a small- offering exemption (Regulation A). Specifically, if theoffering is for $1 million or less, the securities need not be registered. Finally, Section 4(2) ofthe 1933 act exempts from registration ransactions by an issuer not involving any publicoffering. At the same time, the 1933 act does NOT provide specific guidelines to identify whatis a private offering or placement. In 1982, the SEC adopted Regulation D, which sets forth theguidelines that determine if an issue is qualified for exemption from registration.Diff: 2Topic: 13.4 Private Placement of SecuritiesObjective: 13.10 the advantages and disadvantages from an issuer's perspective of a privateplacement5) Investment banking firms assist in the private placement of securities by ________.A) working with the issuer and potential investors on the design and pricing of thesecurity.B) lining up the investors but not designing or pricing the issue.C) designing the issue but not lining up the investors or pricing the issue.D) participating in the transaction on a fixed efforts underwriting arrangement Answer: AComment: Investment banking firms assist in the private placement of securities in severalways. They work with the issuer and potential investors on the design and pricing of thesecurity. Often, it has been in the private placement market that investment bankers first designnew security structures. Field testing of many of the innovative securities that we describe in thisbook occurred in the private placement market. The investment bankers may be involved withlining up the investors as well as designing the issue. Or, if the issuer has already identified theinvestors, the investment banker may serve only in an advisory capacity. An investment bankercan also participate in the transaction on a best efforts underwriting arrangement.Diff: 2Topic: 13.4 Private Placement of SecuritiesObjective: 13.10 the advantages and disadvantages from an issuer's perspective of a privateplacement6) In April 1990, the SEC Rule 144A became effective and ________.A) eliminated the five-year holding period by permitting large institutions to trade securitiesacquired in a private placement among themselves by registering these securities with the SEC.B) eliminated the two-year holding period by disallowing large institutions to trade securitiesacquired in a private placement among themselves without having to register these securitieswith the SEC.C) eliminated the two-year holding period by permitting large institutions to trade securitiesacquired in a private placement among themselves without having to register these securitieswith the SEC.D) added the two-year holding period by permitting small institutions to trade securities acquiredin a public placement among themselves without having to register these securities with the SEC.Answer: CComment: eliminated the two-year holding period by permitting large institutions to tradesecurities acquired in a private placement among themselves without having to register thesesecurities with the SEC.Diff: 2Topic: 13.4 Private Placement of SecuritiesObjective: 13.11 the reason for Rule 144A and its potential impact on the private placementmarket7) In regards to Rule 144a, which of the below statements is FALSE?A) Rule 144A encouraged non-U.S. corporations to issue securities in the U.S. private placementmarket by relaxing the requirement to hold the securities for two years.B) Rule 144A encourages non-U.S. corporations to issue securities in the U.S. private placementmarket by relaxing the requirement to furnish necessary disclosure set forth by U.S. securitieslaws.C) Rule 144A improved liquidity, reducing the cost of raising funds.D) Rule 144A improved the liquidity of securities acquired by all institutional investors in aprivate placement.Answer: DComment: Rule 144A encourages non-U.S. corporations to issue securities in the U.S. privateplacement market for two reasons. First, it will attract new large institutional investors into themarket that were unwilling previously to buy private placements because of the requirement tohold the securities for two years. Such an increase in the number of institutional investors mayencourage non-U.S. entities to issue securities. Second, foreign entities were unwilling to raisefunds in the United States prior to establishment of Rule 144A because they had to register theirsecurities and furnish the necessary disclosure set forth by U.S. securities laws. Privateplacement requires less disclosure. Rule 144A also improves liquidity, reducing the cost ofraising funds. SEC Rule 144A improves the liquidity of securities acquired bycertaininstitutional investors in a private placement.Diff: 3Topic: 13.4 Private Placement of SecuritiesObjective: 13.11 the reason for Rule 144A and its potential impact on the private placementmarketTrue/False Questions1 The Traditional Process for Issuing New Securities 1) Because of the low risks associated with the underwriting of securities, an underwritingsyndicate and a selling group are rarely formed.Answer: FALSEComment: Because of the risks associated with the underwriting of securities, an underwritingsyndicate and a selling group are typically formed.Diff: 1Topic: 13.1 The Traditional Process for Issuing New SecuritiesObjective: 13.2 the risk associated with the underwriting of a security2) The gross spread earned by the underwriter depends on numerous factors. Answer: TRUEDiff: 1Topic: 13.1 The Traditional Process for Issuing New Securities13.1 the role investment bankers play in the distribution of newly issued securities Objective:3) Depending on the type of underwriting agreement, the underwriting function may expose theinvestment banking firm to the risk of selling the securities to the public at a price greater thanthe price paid to the issuer.Answer: FALSEComment: Depending on the type of underwriting agreement, the underwriting function mayexpose the investment banking firm to the risk of selling the securities to the public at a price lessthan the price paid to the issuer.Diff: 1Topic: 13.1 The Traditional Process for Issuing New SecuritiesObjective: 13.1 the role investment bankers play in the distribution of newly issued securities2 Regulation of the Primary Market1) Rule 415 permits certain issuers to file a single registration document indicating that theyintend to sell a certain amount of a certain class of securities at one or more times within the nexttwo years.Answer: TRUEDiff: 1Topic: 13.2 Regulation of the Primary MarketObjective: 13.4 how the SEC regulates the distribution of newly issued securities 2) Rule 415 is popularly referred to as the closet registration rule because the securities can beviewed as sitting in the closet, and can be taken out of the closet and sold to the public withoutobtaining additional SEC approval.Answer: FALSEComment: Rule 415 is popularly referred to as the shelf registration rule because thesecurities can be viewed as sitting on a “shelf,”and can be taken off that shelf and sold to thepublic without obtaining additional SEC approval.Diff: 1Topic: 13.2 Regulation of the Primary MarketObjective: 13.6 the impact of the SEC Rule 415 (shelf registration)3) The time interval between the initial filing of the registration statement and the time theregistration statement becomes effective is referred to as the waiting period. Answer: TRUEDiff: 1Topic: 13.2 Regulation of the Primary MarketObjective: 13.4 how the SEC regulates the distribution of newly issued securities3 Variations in the Underwriting Process1) A corporation can offer existing shareholders new shares in a preemptive rights offering, andusing a standby underwriting arrangement, the corporation can have an investment banking firmagree to distribute any shares not subscribed to.。