Lesson #11 Quiz >> Financial Markets

1. Why might companies like the idea of regulation?

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.
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.

2. What is tunneling?

When management of a company transfers cash from a corporate account to a personal account.
Any trick that somebody in the company uses to steal money from the company.
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.

3. Ideally, who must the board of directors be loyal to?

4. What is a fixed commission?

Fixed taxes imposed on brokerages if they wished to operate in the stock market.
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.
The opposite of dividends, i.e. fixed per-share prices charged by companies to shareholders.

5. Which of the following describes the contrast of federal vs state regulation in the US?

Securities are primarily regulated by federal government but corporate regulation is primarily by the state governments.
Securities regulation and corporate regulation are both primarily controlled by the federal government.
Securities are primarily regulated by state governments but corporate regulation is primarily by the federal government.
Securities regulation and corporate regulation are both primarily controlled by the state governments.

6. What is the US Securities and Exchange Commission (SEC) NOT responsible for doing?

To manage the EDGAR database.
To authorize companies to be traded publicly on the stock market.
To force organizations to maintain financial transparency.
To provide reliable and timely information on the performance of securities.

7. 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.
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.
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.
Chenxiang, the CEO of a company, directs the purchase and company-wide deployment of software written by his brother.

8. What happened when Goodbody and Company failed?

None of the retail investors lost any money.
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.
People began to distrust brokerages and pulled their money out of stocks.

9. 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.