Finance



Name ____________________________________________

Fin 308 Test 2

MCQs

1. $1000

2. Discount

3. Congress

4. Inflation and interest rates to rise

5. They adjust their bond portfolios by selling long term bonds and investing short term.

5. Potential collapse of the entire bond market and financial system

6. Laddered

7. Barbell

8. Bring together investors that have excess money and businesses that need funds

9. The Sale of Stock

10. Gets paid dividends before common stockholder

11. Always has a dividend payment

12. To invest large portions of their fund contributions

13. Prospectus

14. All of the above

15. The prevailing stock price divided by earnings in the past year

16. Both a and b

17. True

18. Invest in US stocks

19. Can only be used by institutional investors

20. A margin call

21. You are selling borrowed shares of stock with the intention of paying back the number of shares sold

22. True

23. All of the above

Difference between Hedge and Mutual Funds

A. The first and the very most difference is that hedge funds usually operate more aggressively in the market i.e. they take more risks and also make use of derivatives to cope up with the risks. This in turn, increases their capabilities to get positive return even when the market is falling through speculative positions and hedging. Whereas, mutual funds are not allowed to take highly leveraged position in the market and thus, are relatively safe investments.

B. Another factor that differentiates hedge funds from that of mutual funds is their availability to limited and sophisticated group of investors. This group usually comprises of high net worth investors who have the capability of bear high risks for high returns. The criterion is strict for becoming an investor in the hedge funds and is determined by the US government while this is not the case for mutual funds.

C. The investment motives of hedge funds are tied with absolute growth and they do not really ...