Coursera financial markets course is a very well designed learning course that helps one understanding how the financial markets work.
Financial Markets Lesson 8 Quiz Answers
Q1) Which of the following describes current short term interest rates?
They are very high
They are strongly negative
They are approximately equal to zero
They are changing for the first time in the last 100 years
Q2) What is the Federal Funds Rate and how long does it take to mature?
The longest term interest rate in the federal government, which takes one year to mature.
The shortest term interest rate in the federal government, which takes one hour to mature.
The shortest term interest rate in the federal government, which takes one month to mature.
The shortest term interest rate in the federal government, which takes one day to mature.
Q3) If you put $1000 into an account with a 20% interest rate, how much money will you have at the end of the year if interest is compounded ONCE per year?
200
1210
1200
1440
Q4) How do coupon bonds work?
You purchase a bond for the same price you eventually sell it for, but if you have a “coupon”, you may buy it for less money.
You purchase a bond for the same price you eventually sell it for, but bond owners are eligible for special offers from the federal government, also known as “coupons”, which incentivize the purchase of the bonds.
You purchase a bond for one price, but the final price you may sell it for depends on the type of “coupons” that are released to account for inflation.
You purchase a bond for the same price you eventually sell it for, but while it reaches maturity, you may clip “coupons” off the bond and exchange them for money.
Also Check: Coursera Financial Markets Week 2 Quiz Answers
Q5) What is the main difference between a consol and an annuity ?
The consol has a fixed price of $1 at inception whereas the annuity price is given by the market.
A consol pays a constant quantity (coupon) forever, whereas the annuity also pays a constant quantity but only until a fixed time T called the maturity date.
An annuity pays a constant quantity (coupon) forever, whereas the consol also pays a constant quantity but only until a fixed time T called the maturity date.
A consol is not subject to market risk.
Q6) The forward rate is:
The (inflation-adjusted) rate on a bond.
Equal to the yield to maturity of the bond.
Equal to the nominal rate of the bond.
The expected rate (yield) on a bond several months or years from now.
Q7) The real interest rate is calculated by:
Adding the inflation rate and the nominal interest rate.
Subtracting the nominal interest rate from the inflation rate.
Adding the nominal interest rate and the yield to maturity.
Subtracting the inflation rate from the nominal interest rate.
Q8) Irving Fisher’s Debt Deflation Theory starts from the observation that:
Deflation redistributed real wealth from creditors to debtors.
Deflation redistributed real wealth from debtors to creditors.
Deflation has no impact on the real wealth of debtors.
Deflation has no impact on the real wealth of creditors.
Financial Markets Lesson 9 Quiz Answers
Q1) Market capitalization is calculated by using:
The total number of employee of a company.
The earnings of a company.
The dividends of a company.
The price per share and the total number of outstanding shares.
Q2) The greater an investor’s ownership in a corporation is, the greater:
is the amount of taxes to be paid by the company.
is the profitability of the company.
is the total number of shares he/she owns with respect to the total number of shares outstanding.
is the total number of shares he/she owns.
Q3) A firm must make its dividend payments to __________ before it makes any dividend payments to its ___________.
its Chief Executive Officer preferred shareholders
the members of the board bondholders
bondholders preferred shareholders
preferred shareholders common shareholders
Q4) The basic corporate charter: (check all that apply)
says that the firm must pay dividends during its lifetime.
does not say that the firm ever has to raise debt. The board decides.
says that the firm must repurchase some of its shares beyond a certain threshold of issuance.
does not say that the firm ever has to issue warrants, convertible debt or any other debt securities.
Q5) In the Pecking Order Theory, the companies prioritize their sources of financing in the following order:
(1) Debt, (2) Internal financing, (3) Equity.
(1) Equity, (2) Debt issuance, (3) Internal financing.
(1) Internal financing, (2) debt issuance, (3) Equity.
(1) Equity, (2) Internal financing, (3) Debt.
Q6) A dilution is:
The issuance of new debt by a company.
A sale of an investor’s shares.
An increase in the ownership percentage of a share of stock caused by the issuance of new shares.
A reduction in the ownership percentage of a share of stock caused by the issuance of new shares.
Q7) A share repurchase is: (check all that apply)
The reverse of a dilution.
An alternative to paying dividends in order to return cash to investors.
A program by which a company buys backs its own shares from the marketplace or from its shareholders (at a fixed price).
A program by which investors buy back their previously sold shares of a given company.
Q8) The price-to-earnings ratio: (check all that apply)
Indicates the percentage of profit that is paid out as dividends.
Shows how much an investor is willing to pay for the stock of the company for each dollar of the company’s earnings.
Effectively shows the number of years of earnings at which the company is valued given the current level of the share price.
Measures the funds provided by creditors versus the funds provided by owners.
Q9) Generally, a reduction in dividend is interpreted by investors as:
A non-event.
Good news, with often an increase of the stock price.
A sign of future increase in profitability.
Bad news, with often a drop in the stock price.
Financial Markets Module 3 Honors Quiz Answers
Q1) Which of the following did Eugen von Böhm-Bawerk NOT believe caused the interest rate to be a small positive number?
People value money more today than they do in a year.
This is approximately the rate of technological progress.
There are advantages to roundaboutness.
Financial knowledge and expertise accumulates at a societal level at approximately this rate.
Q2) If you put $1000 into an account with a 20% interest rate, how much money will you have at the end of the year if interest is compounded CONTINUOUSLY?
(When inputting your answer, enter your rounded answer without decimal precision and do not type in the $ dollar sign) Enter answer here
1221
Q3) Suppose that a consol has a promised payment of 6 pounds per 100 pounds notional. This consol is now traded at 150 pounds. What it the current yield to maturity of the consol?
1%
2%
3%
4%
Q4) You observe that on today’s yield curve, the one year rate is R1=6% and the two year rate is R2=6.5%. What is the one year forward rate one year from now ?
5%
6.5%
6%
7%
Q5) A tech company can make a 3% real return on an investment. It can borrow funds to finance the investment at a nominal rate of 6% and the inflation rate is 1%. Hence:
The real rate of interest is 3%.
The investment will be profitable.
The real rate of interest is 2%.
The investment will be unprofitable.
Q6) If expected inflation is less than actual inflation, then wealth will be redistributed from:
The government to consumers.
Lenders to borrowers.
The consumers to the government.
Borrowers to lenders.
Q7) The market capitalization of a company provides information on:
The value of a company.
The pension benefits provided by the company.
The capital expenditures of the company.
The industry the company operates in.
Q8) Which of the following are true for stock splits ? (check all that apply)
Retained earnings are changed.
Market price per share is reduced after the split.
The total number of outstanding shares increases.
Proportional ownership is unchanged.
Q9) A rationale for preferred stock:
It lowers the cost of financing, as compared with debt issuance.
The dividends associated with it are tax-deductible.
Its holder benefits from an increased ownership in the company.
It expands the capital base without diluting common equity.
Q10) The Pecking Order Theory indicates that firms prefer _______ financing to _______ financing.
stock; debt
stock; retained earning
flexible; risky
internal; external
Q11) If the company I invest in issues a stock dividend at 5%, the value of my original shares are ___________ by a factor ___________. I am ___________ since I have an additional ___________ of value in the new shares.
raised, 1.05/1, worse off, 0.05/1.05
lowered, 1/1.05, worse off, 0.05/1.05
lowered, 1/1.05, better off, 0.05/1.05
raised, 1.05/1, better off, 0.05/1.05
Q12) Which one of the following statements is correct?
A cash dividend has no effect on the market value per share.
A stock repurchase increases the market value per share.
Stock repurchases are more tax advantageous than are cash dividends.
Stock repurchases provide more income to shareholders compared to dividends.
Q13) A company whose stock is selling at a price-to-earnings (P/E) ratio that is greater than the P/E ratio of the market most likely has:An anticipated earnings growth rate which is less than that of the average traded firm within the market.
An unpredictable future stream of earnings.
A dividend yield which is smaller than that of an average traded firm within the market.
A larger dividend yield compared to the dividend yield of an average traded firm within the market.
Q14) What are the main implications of John Lintner’s dividend model?
A firm should always pay a dividend equal to its EPS (earnings per share).
If the company’s EPS is smaller than last year’s dividend, the company should engage in share repurchases.
A firm should never pay any dividends.
A firm has to strike a balance. It should pay a dividend to share some of its earnings with shareholders but its dividend should not be too high, because that might lead to a cut in the dividend in a following year, which leads to a negative reaction among shareholders.
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