FIVE QUESTIONS FROM CHAPTER 1-3
1. “˜Nations are built on their real assets, not of pieces of paper’. This notion suggest that machinery and physical assets are the important component in the growth of a nation. However, financial assets also pay a vital part in the way firms have and will continue to accomplish this growth. Explain.
2. List 3 major differences between bonds and common equity. What makes equity more attractive to some investors and bonds attractive to others?
3. How does the highly developed financial markets aid in firm’s ability to conduct business and expand? (think about IPO, secondary, selling short, buying on margin)
4. Watch the three videos on Efficient Markets below. What does it mean for active and passive portfolio management if markets are, indeed, highly efficient?
5. Money market instruments are very liquid types of investments. What are the advantages and disadvantages of this liquidity?
6. Jane Doe opens a brokerage account to purchase 600 shares of Qualcomm at $80 per share. She borrows $10,000 from her broker to help pay for the purchase. The interest rate on the loan is 6%. What is the margin she purchases the stock? If the price falls to $70 per share, what is the remaining margin? If the maintenance margin is 30%, will she receive a margin call?