Coursera financial markets course is a very well designed learning course that helps one understanding how the financial markets work.
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
Also Check: Coursera Financial Markets Week 2 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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