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Financial Markets All Weeks Quiz Answers - Coursera

Financial Markets Lesson 10 Quiz Answers

Q1) Which of the following is FALSE of Direct Participation Programs (DPPs)?

  • They may skip corporate profits tax.
  • A major example of a DPP is a real estate partnerships.
  • They are for accredited investors only
  • They must operate for at least some minimum amount of time.

Q2) If Sabine is “under water”, what can we say about her situation? 

  • The value of her home is less than the value of her mortgage.
  • She has sent her keys to the bank and abandoned her house.
  • She has no choice but to declare bankruptcy.
  • She does not have enough money to make payments on her home.

Q3) Why does the 30 year mortgage rate so closely match the 10 year treasury bond YTM?

  • People could choose to finance their home with 10 year treasury bonds instead of with 30 year mortgages.
  • The interest rate of 30 year mortgages and the price of 10 year treasury bonds are set by the same organization.
  • There are similar psychological causes which influence both the 30 year mortgage rate and the 10 year treasury YTM.
  • Banks intentionally track the 10 year treasury bond YTM.

Q4) Who pays for private mortgage insurance on a mortgage?

  • The US government
  • The homeowner
  • Thank banks
  • Fannie Mae and Freddie Mac

Q5) Before the recession in 2007, why were banks giving out mortgages to people who could not afford them?

  • Banks would resell to mortgages to CMOs, and thus they were not incentivized to make sure their mortgages were unlikely to default.
  • CMOs were incentivized to buy mortgages which were likely to default, since these would only affect their lowest tranche.
  • Many people faked documents in order to get a mortgage, known as a “liar loan”
  • Banks had no way to verify whether people would be able to pay.

Q6) Select TWO key causes of the housing bubble which crashed in 2007:


  • Hyper-inflation
  • Fraudulent mortgage lending
  • Over-optimistic mortgage lending
  • Corruption within the government

Q7) During the housing bubble of 2007, which of the following tended to fluctuate with home price index? 

  • The percentage of new homeowners who regretted their decision.
  • The percentage of new homeowners who have been evicted from their home.
  • The percentage of new homeowners who think investing in real estate is a bad long term investment.
  • The percentage of new homeowners who think that investing in real estate is a good long term investment.

Q8) What in 2005 indicated the housing market might be a bubble? 

  • Media was discussing a home-buying mania in the American public.
  • The expected 10 year home price appreciation dropped below the 30 year mortgage rate.
  • Media was discussing how people were no longer purchasing houses.
  • Time magazine predicted that the housing market was a bubble.

Financial Markets Lesson 11 Quiz Answers

Q1) Why might companies like the idea of regulation?

       It helps them ensure they are representing the interests of their customers.
  • It allows them to compete on a level at which they do not have to use (potentially unethical or unfair) special tricks to avoid letting their competitors gain a competitive advantage.
  • Regulation could be used to give them a legal monopoly over a particular sector.
  • Companies have enough money to bribe government officials to create regulation that favors them.

Q2) What is tunneling? 

  • When management of a company transfers cash from a corporate account to a personal account.
  • When a member of the board of directors fires a high ranking employee so that a family member can take their place.
  • When a small group of majority shareholders in a company allow the company to be bought out for a very low price by another company in which the small group are also majority shareholders.
  • Any trick that somebody in the company uses to steal money from the company.

Q3) Ideally, who must the board of directors be loyal to? 

  • The government
  • The shareholders
  • The general public
  • The CEO

Q4) What is a fixed commission? 

  • The opposite of dividends, i.e. fixed per-share prices charged by companies to shareholders.
  • A fixed rate charged by all brokerages to buy or sell shares on the stock market.
  • The rate charged in order to join a trade groups.
  • Fixed taxes imposed on brokerages if they wished to operate in the stock market.

Q5) Which of the following describes the contrast of federal vs state regulation in the US? 

  • Securities regulation and corporate regulation are both primarily controlled by the state governments.
  • Securities regulation and corporate regulation are both primarily controlled by the federal government.
  • Securities are primarily regulated by federal government but corporate regulation is primarily by the state governments.
  • Securities are primarily regulated by state governments but corporate regulation is primarily by the federal government.

Q6) What is the US Securities and Exchange Commission (SEC) NOT responsible for doing? 

  • To authorize companies to be traded publicly on the stock market.
  • To force organizations to maintain financial transparency.
  • To manage the EDGAR database.
  • To provide reliable and timely information on the performance of securities.

Q7) Which of the following is NOT an example of insider trading? 

  • Mohammed is a secretary for a large corporation and overhears that they are about to take over a smaller corporation. He tells his wife, who purchases a large number of shares in the company immediately before the acquisition is announced.
  • Chenxiang, the CEO of a company, directs the purchase and company-wide deployment of software written by his brother.
  • Leah is a short sells shares for a company she used to work for and then creates a fake press release with bad news from the company.
  • Martha receives private information about a company from her stock broker. As a result, she sells all of her shares in this company, which fall substantially in price the next day.

  • Q8) What happened when Goodbody and Company failed? 
  • None of the retail investors lost any money.
  • People began to distrust brokerages and pulled their money out of stocks.
  • Goodbody and Company had to mail everybody their stocks before they failed.
  • Because Goodbody and Company held the shares for their clients, people lost most or all of their stocks.

  • Q9) Which of the following describes the Bank for International Settlements (BIS)? 

  • A bank for citizens of any country which allows them to deal in other currencies.
  • A former financial institution which was replaced by the G20.
  • The English name for the national bank of Switzerland, which strategically fosters relationships between banks internationally.
  • A bank for central banks which provides an intermediary for the central banks to deal with each other.

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