Financial Markets Lesson 11 Quiz Answer
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Week- 4
Lesson #11 Quiz
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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