4. Which is incorrect about financial securities?a. Financial securities are guarantees the holders in terms of their claims.b. Financial securities give stable financial retum and safer environment to investors. c. Financialsecurities are utilized by firms to generate capitalization for firms or the govemment. d. Financialsecurities are regulated by the govermment to protect the investing public. e. All of the abovef. None of the above5. Which is correct about debt securities?a. Debt securities make the holders owners and give them the right to vote in all matters of the fim.b. Debt securities give the holders the right to receive interest and dividends.c. Debt securities give the holders the right to be elected as board of directors or to vote them.d. Debt securities give the holders the right to convert them into stocks if the indenture states.e. All of the abovef. None of the above.6. Which is not considered as a debt security is sued byprivate entities?a. Straight bondsb. Floating-rate corporate notesc. Commercial paperd. Acceptance

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Answered: 4. Which is incorrect about financial…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Which of the following statements is false? A. Asset-backed securities (ABS) may be backed by financial assets other than mortgages. B. Residential mortgage-backed securities (RMBS) are backed by mortgages on income producing real estate properties. C. The securitization of financial assets increases the liquidity of the underlying financial assets. D. In a sequential-pay collateralized mortgage obligations (CMOs), all scheduled principal payments and prepayments are paid to each tranche in sequence until that tranche is paid off.
Substantial doubt exists regarding a client's ability to continue. The client must present its plans to mitigate the effects of the events and conditions. Which item is NOT an acceptable plan? a. Restructure debt to delay due date of Bonds Payable. b. Sell assets used in product production for cash. c. Issue Common Stock at market value. d. Decrease dividend requirements. e. Obtain cash by issuing notes.
Banks use gap analysis to measure interest rate risk in their balance sheets. If firm XYZ is said to have a positive gap, this means: Group of answer choices C. Rate-sensitive assets exceed rate-sensitive liabilities B. Long-term assets are funded with short-term liabilities D. Rate-sensitive assets equal rate-sensitive liabilities A. Liabilities reprice before assets
1.What are the benefits and costs to an FI of holding large amounts of liquid assets? Why are Treasury securities considered good examples of liquid assets? 2. What are the primary methods that insurance companies can use to reduce their exposure to liquidity risk?
Which of the following statements is false? A. Internal controls are the processes by which the firm ensures that it presents accurate financial statements. B. Greenfield investments provide uncertain cash flows with high yields and high growth potential. C. Footnotes allow investors or any users to improve their assessments of the amount, timing, and uncertainty of the estimates reported in financial statements. D. Secondary markets are the markets in which existing, already outstanding securities are traded among investors.
Why are unrealized gains and losses from available-for-sale securities not reported as a component of net income? Select one: a. Because goodwill exists that must be separately accounted for b. Because the investor has the ability to exercise significant influence over the investee c. Because consolidated financial statements must be prepared d. Because large swings in market value over which management has no control may distort current period performance as measured by net income
The financial market offers the investors a means to sell their financial asset thereby a. Increasing the wealth of investor b. Offering liquidity to such assets c. Decreasing the wealth of investor d. Diluting the liquidity of such assets
If the stock market is efficient, why do companies manage their earnings? O To avoid violating debt covenants. O To receive bonuses based on reported earnings. O Because companies do not believe the Efficient Market Hypothesis. O All of the above.
22.Lower the debt equity ratio A. Lower the protection to creditors B. Higher the protection to creditors C. It does not affect the creditors D. None of the above
Which of these is a main characteristic of debt capital?(a) Investors in debt participate in the ownership of the firm.(b) Investors in debt are paid interest.(c) Debt is more risky for the investor and less risky for the firm.(d) If dividends are not paid, this can lead to foreclosure, legal proceeding and financial distress.
If bonds payable are not callable, the issuing corporation a.can exchange them for common stock b.can repurchase them in the open market c.is more likely to repurchase them if the interest rates increase d.must get special permission from the SEC to repurchase them
8. Which is least likely true about bonds? a. It is a financial security. b. The issuer has the obligation to make specified payments. c. Bondholders have the right to make decisions on the firm's affairs. d. Bondholders have the right to claim interest payments. е. с &d f. All of the above g. None of the above

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