You do not need to provide the reason for your answer.6. In a strong form efficient market, it is possible for investors to obtain abnormal returns by trading on publiclyavailable information. *TrueFalse7. Capital raising is how a business obtains money for operations and investments. The two main sources areissuing preference shares and issuing ordinary shares.TrueFalse8. The interest-only loan allows borrowers to pay interest only for an agreed period. After that, it requires them topay higher repayments./TrueFalse9. Initial public offering (IPO) is when a company is trading outstanding ordinary shares in the exchange market.TrueFalse10. Venture capitalists can reduce their investment risk by using stage funding, requiring entrepreneurs to make apersonal investment, and syndicating with other venture capitalists. "TrueFalse

6. In a strong form efficient market, it is possible for investors to obtain abnormal returns by trading on publicly available information. * True Falso 7. Capital raising is how a business obtains money for operations and investments. The two main sources are issuing preference shares and issuing ordinary shares. True False

6. In a strong form efficient market, it is possible for investors to obtain abnormal returns by trading on publicly available information. * True Falso 7. Capital raising is how a business obtains money for operations and investments. The two main sources are issuing preference shares and issuing ordinary shares. True False

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 3MCQ

See similar textbooks

Similar questions

18- which of the statements given below is false? Please select one; a) a financial intermediary borrows funds from people who have saved b) in a bull market stock prices are rising on average c) interest rates can be accurately described as the rental price of money d) a stock is a debt security that promises to make periodic payments for a specific period of time e) banks are financial intermediaries that accept deposits and make loans
Which of the following statements is correct? A. Investors appreciate illiquid assets in their portfolios as they can easily sell them off to cover margin calls. B. Liquid assets can quickly be converted into cash without changing prices too much. O C. Corporate bonds are among the most liquid financial assets as they trade at a very high frequency. D. Liquid assets tend to be cheaper as investors are not willing to pay for their liquidity benefits.
(a). Large businesses spend millions of dollars annually on insurance. Why? Should they insure against all risks or does insurance make more sense for some risks than others? (b). Why might firms prefer to fund investments using retained earnings or debt rather than issuing equity? (c). How does asymmetric information explain the negative stock price reaction to the announcement of an equity issue?
a. "Financial intermediaries play a crucial role in an economic crisis-they are responsible for both causing the market to crash and then helping it recover from the crisis." Is this statement true? Discuss with an example. b. What are the risks and rewards of investing in the stock market as compared to the bond market?
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.
The RBA decides to buy bonds and securities from commercial banks on the open market. Other things being equal, this will result in a(n) _________ in the price of financial assets. short term increase, but longer-term fall increase decrease short term decrease, but longer-term rise no change
3. Which one of the following statements is NOT true? A) Retained profits represent a free source of funds. B) The issuing of shares to raise finance can be expensive. C) Retained profits are the main source of business funds. D) Borrowing can increase the risk that a company faces.
A firm is planning to borrow money to make an equity repurchase to increase its stock price. It is basing its analysis on the fact that there will be fewer shares outstanding after the repurchases, and higher earnings per share. There are no taxes. a. Will earnings per share always increase after such an action? Explain.b. Will the higher earnings per share always translate into a higher stock price? Explain.c. Under what conditions will such a transaction lead to a higher price?
8. The efficient markets hypothesis True or False: The efficient markets hypothesis holds only if all investors are rational. O False O True Almost all financial theory and decision models assume that the financial markets are efficient. The informational efficiency of financial markets determines the ability of investors to "beat" the market and earn excess (or abnormal) returns on their investments. If the markets are efficient, they will react rapidly as new relevant information becomes available. Financial theorists have identified three levels of informational efficiency that reflect what information is incorporated in stock prices. Identify the form of capital market efficiency under the efficient market hypothesis described in the following statement: Current market prices reflect all relevant information, whether it is known publicly or privately. This statement is consistent with: O Semistrong form efficiency O Strong form efficiency O Weak form efficiency
Interest rate risk is of concern to a firm's financial officer, because (Select the best choice below.) A. it is more difficult to issue securities when interest rates are low. B. changes in interest rates affect the expected return of financial instruments. C. federal government taxation increases as interest rates rise, reducing the cash available to the firm. D. inflationary periods may reduce the real earnings of the firm. E. B and D
q15 Which type of brokerage account permits the broker to buy and sell shares for the investor without first contacting the investor for approval? a. Discretionary Account b. All the options are wrong c. Margin Account d. Cash Management Account q16 Buying assets that yield a return greater than the minimum acceptable hurdle rate is a part of which core principles of Finance. a. Cost principle b. Investment principle c. Dividend principle d. Financing principle
An arrangement with a broker to borrow stocks from them and then sell it in the market, with the hope that they earn a profit by buying the stock back again after it has fallen in price is called Select one: a. smart money. Ob. short sales. Oc. behavioral finance. Od. random walk.