A quickie quiz

1
A quickie quiz

• Phase 2
• ECN 324
• Summer term 1

2
Mortgage Markets

1. What is an important difference between a
   conventional mortgage loan and an FHA mortgage
   loan?
2. How does a second mortgage differ from a home
   equity line of credit?
3. Why is marketability important to the lender?
4. What is a pass-through security?

3
Equity Markets

1. In what way does the NYSE differ from the NASDAQ?
2. Who benefits most from an IPO?
3. What important function does venture capital
   perform?

4
Stock Valuation Models

1. What are the two sources of risk in Modern
   Portfolio Theory (MPT)?
2. What are the two sources of risk in the Capital
   Asset Pricing Model (CAPM)?
3. Why is diversification important?
4. What is the most important implication of the
   Efficient Markets Hypothesis (EMH)?

5
Market Microstructure

1. How does a Cash account differ from a Margin
   account in terms of settlement?
2. How does a market order differ from a limit order
   in terms of execution?
3. What does it mean to sell short?
4. What are the short-sellers expectations?
5. How many shares in a round lot? In a block trade?

6
Financial Futures

1. What expectation does the long futures position
   holder have?
2. How does the short position futures make money?
3. What is the important difference between a
   forward contract and a futures contract?
4. What is meant by marking-to-market?
5. What is basis in a futures position?

7
Options Markets

1. What is the call buyers expectation regarding
   stock prices?
2. Why would an investor/speculator buy a put?
3. What does it mean if you are a naked call writer?
4. What is intrinsic value and how does it relate to
   an in-the-money situation?
5. When does an option have zero time value?

8
Interest Rate Futures

1. What type of securities are involved in a swap?
2. How does a plain vanilla swap differ from forward
   swap?
3. If interest rates decline, do you want to be a
   borrower or a lender?
4. Who benefits most from an interest rate cap? An
   interest rate floor?