ANS Low ofur b. 1 and II only e. T and 11Il only d. I, II, and ANS 8, Af er cons

Question

ANS Low ofur b. 1 and II only e. T and 11Il only d. I, II, and ANS 8, Af er considering current marke..ndíthma, "n investor dwide, to place 60% ofher funds in equities and the rest in bonds This is an essmple of A asset allocation B. security analysis C. active management D. market efficieney ANS 9. Which of the following is not an example of a financial intermediary? a. Goldman Sachs b. Allstate Insurance c. Bank of America d. Bloomberg ANS: 10. Stone Harbor Products takes out a bank loan. It receives 550,000 and signs a promissory note to pay back the loan over 10 years. In this transaction, a. a new financial asset was created b. a financial asset was traded for a real ass c. a financial asset was destroyed d. a real asset was created ANS 1. In calculating the Dow Jones Industrial Average, the adjustment for a stock split occurs b by adjusting the divisor c. by adjusting the numerator d by adjusting the market value weights ANS

Explanation / Answer

Question 6 is not visible clearly in the image.

7. Ans is (d)

Money markets are short-term investments lasting over a range of one night to less than a year. Since they are short-termed, they come with a very low rate of return. Ex: Treasury Bills, Certificate of Deposits, Municipal notes etc. These securities are insured by FDIC and thus the principal is safe.

8. Ans is (A)

After studying the market, she chose to allocate 60% of her cash(i.e asset) in equity and 40% in bonds. Thus this is called Asset Allocation.

9. Ans is (d)

All Banks & Insurance firms are regulated by the Central government bodies and thus they all come under Financial Intermediaries.

However, Bloomberg is a financial services agency that is famous for releasing an in-depth industry analysis on its website for ages. It is a private firm and thus is not regulated by any central body.

10. Ans is (a)

A loan security is created here which is a contractual agreement made between two counterparties. Thus this is a scenario where a new financial asset is created.

11. Ans is (b)

After the stock split, we have a new price for the stock. We cant divide this new weight of stock with the old divisor because the stock-split haven't actually changed the total value of the company. It just changed the price of a share and thus total outstanding shares in such a way that the total value of the company remains the same. So, technically a stock split though changes the price of the stock shouldn't change the value of the DJIA index. In order to make sure of this, the divisor is adjusted accordingly such that the index value remains the same though there is a change in the numerator because of the change in the price of the share due to the stock split.

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