Q&A Hero

Q: In what way might the Justice Department's actions result in increased concentration in the online search business in the future?

Q: When a bond's price falls, its yield to maturity ________ and its current yield ________. A) falls; falls B) rises; rises C) falls; rises D) rises; falls

Q: The current yield on a coupon bond is the bond's ________ divided by its ________. A) annual coupon payment; price B) annual coupon payment; face value C) annual return; price D) annual return; face value

Q: What criteria might have been used to prove collusion between TCI and 3G in the absence of signed agreements to coordinate their efforts to accumulate CSX voting shares?

Q: A frequently used approximation for the yield to maturity on a long-term bond is the A) coupon rate. B) current yield. C) cash flow interest rate. D) real interest rate.

Q: Do you agree or disagree with the federal courts ruling? Defend your position.

Q: Do you think the EU regulators would have taken a different position if the deal had involved a less visible firm than General Electric? Explain your answer.

Q: The yield to maturity on a consol bond that pays $200 yearly and sells for $1000 is A) 5 percent. B) 10 percent. C) 20 percent. D) 25 percent.

Q: Do you think that competitors are using antitrust to their advantage? Explain your answer.

Q: The yield to maturity on a consol bond that pays $100 yearly and sells for $500 is A) 5 percent. B) 10 percent. C) 12.5 percent. D) 20 percent. E) 25 percent.

Q: A consol bond is a bond that A) pays interest annually and its face value at maturity. B) pays interest in perpetuity and never matures. C) pays no interest but pays its face value at maturity. D) rises in value as its yield to maturity rises.

Q: What were the major obstacles between GE and the EU regulators? Why do you think these were obstacles? Do you think the EU regulators were justified in their position? Why/why not?

Q: Which of the following are true for a coupon bond? A) When the coupon bond is priced at its face value, the yield to maturity equals the coupon rate. B) The price of a coupon bond and the yield to maturity are positively related. C) The yield to maturity is greater than the coupon rate when the bond price is above the par value. D) All of the above are true. E) Only A and B of the above are true.

Q: This is the first time that a foreign regulatory body has prevented a deal involving U.S. firms only from occurring. What do you think are the long-term implications, if any, of this precedent?

Q: What are the important philosophical differences between U.S. and EU antitrust regulators? Explain the logic underlying these differences? To what extent are these differences influenced bypolitical rather than economic considerations? Explain your answer.

Q: Which of the following are true for a coupon bond? A) When the coupon bond is priced at its face value, the yield to maturity equals the coupon rate. B) The price of a coupon bond and the yield to maturity are negatively related. C) The yield to maturity is greater than the coupon rate when the bond price is above the par value. D) All of the above are true. E) Only A and B of the above are true.

Q: Which of the following are true for a coupon bond? A) When the coupon bond is priced at its face value, the yield to maturity equals the coupon rate. B) The price of a coupon bond and the yield to maturity are negatively related. C) The yield to maturity is greater than the coupon rate when the bond price is below the par value. D) All of the above are true. E) Only A and B of the above are true.

Q: What alternative actions could the government take to limit market power resulting from a business combination?

Q: Which of the following $1,000 face value securities has the highest yield to maturity? A) A 5 percent coupon bond selling for $1,000 B) A 10 percent coupon bond selling for $1,000 C) A 15 percent coupon bond selling for $1,000 D) A 15 percent coupon bond selling for $900

Q: Do you believe requiring consent decrees that oblige the acquiring firm to dispose of certain target company assets is an abuse of government power? Why or why not?

Q: Which of the following $1,000 face value securities has the highest yield to maturity? A) A 5 percent coupon bond selling for $1,000 B) A 10 percent coupon bond selling for $1,000 C) A 12 percent coupon bond selling for $1,000 D) A 12 percent coupon bond selling for $1,100

Q: What factors other than market share should be considered in determining whether a potential merger might result in an increased pricing power? Of these factors, which do you believe represent the most important justifications for the merger of Exelon and Constellation?

Q: How does the FTC define market share? In the electric utility market, to what extent does this methodology apply? To what extent does it not apply?

Q: A $10,000, 8 percent coupon bond that sells for $10,000 has a yield to maturity of A) 8 percent. B) 10 percent. C) 12 percent. D) 14 percent.

Q: What is anti-trust policy and why is it important? Why might its application be particularly important in the utility industry?

Q: The yield to maturity of a one-year, simple loan of $400 that requires an interest payment of $50 is A) 5 percent. B) 8 percent. C) 12 percent. D) 12.5 percent.

Q: The Sarbanes-Oxley bill is intended to achieve which of the following: a. Auditor independence b. Corporate responsibility c. Improved financial disclosure d. Increased penalties for fraudulent behavior e. All of the above

Q: The yield to maturity of a one-year, simple loan of $500 that requires an interest payment of $40 is A) 5 percent. B) 8 percent. C) 12 percent. D) 12.5 percent.

Q: All of the following factors are considered by U.S. antitrust regulators except for a. Market share b. Potential adverse competitive effects c. Barriers to entry d. Purchase price paid for the target firm e. Efficiencies created by the combination

Q: For simple loans, the simple interest rate is ________ the yield to maturity. A) greater than B) less than C) equal to D) not comparable to

Q: A diligent buyer must ensure that the target is in compliance with the labyrinth of labor and benefit laws, including those covering all of the following except for a. Sexual harassment b. Age discrimination, c. National security d. Drug testing e. Wage and hour laws.

Q: For a simple loan, the simple interest rate equals the A) real interest rate. B) nominal interest rate. C) current yield. D) yield to maturity.

Q: Foreign direct investment in U.S. companies that may threaten national security is regulated by which of the following: a. Hart-Scott-Rodino Antitrust Improvements Act b. Defense Production Act c. Sherman Act d. Federal Trade Commission Act e. Clayton Act

Q: Financial economists consider the ________ to be the most accurate measure of interest rates. A) simple interest rate B) discount rate C) yield to maturity D) real interest rate

Q: All of the following are true of the U.S. Foreign Corrupt Practices Act except for which of the following: a. The U.S. law carries anti-bribery limitations beyond U.S. political boundaries to within the domestic boundaries of foreign states. b. This Act prohibits individuals, firms, and foreign subsidiaries of U.S. firms from paying anything of value to foreign government officials in exchange for obtaining new business or retaining existing contracts. c. The Act permits so-called facilitation payments to foreign government officials if relatively small amounts of money are required to expedite goods through foreign custom inspections, gain approvals for exports, obtain speedy passport approvals, and related considerations. d. The payments described in c above are considered legal according to U.S. law and the laws of countries in which such payments are considered routine e. Bribery is necessary if a U.S. company is to win a contract that comprises more than 10% of its annual sales.

Q: The interest rate that financial economists consider to be the most accurate measure is the A) current yield. B) yield to maturity. C) yield on a discount basis. D) coupon rate.

Q: The interest rate that equates the present value of the cash flow received from a debt instrument with its market price today is the A) simple interest rate. B) discount rate. C) yield to maturity. D) real interest rate.

Q: Vertical mergers are likely to be challenged by antitrust regulators for all of the following reasons except for a. An acquisition by a supplier of a customer prevents the suppliers competitors from having access to the customer. b. The relevant market has few customers and is highly concentrated c. The relevant market has many suppliers. d. The acquisition by a customer of a supplier could become a concern if it prevents the customers competitors from having access to the supplier. e. The suppliers products are critical to a competitors operations

Q: A collaborative arrangement is a term used by regulators to describe agreements among competitors for all of the following except for a. Joint ventures b. Strategic alliances c. Mergers and acquisitions d. A & B only e. A & C only

Q: With an interest rate of 6 percent, the present value of $100 received one year from now is approximately A) $106. B) $100. C) $94. D) $92.

Q: All of the following are examples of antitakeover provisions commonly found in state statutes except for a. Fair price provisions b. Business combination provisions c. Cash-out provisions d. Short-form merger provisions e. Share control provisions

Q: With an interest rate of 8 percent, the present value of $100 received one year from now is approximately A) $93. B) $96. C) $100. D) $108.

Q: With an interest rate of 10 percent, the present value of a security that pays $1,100 next year and $1,460 four years from now is approximately A) $1,000. B) $2,000. C) $2,560. D) $3,000.

Q: State blue sky laws are designed to a. Allow states to block M&As deemed as anticompetitive b. Protect individual investors from investing in fraudulent securities offerings c. Restrict foreign investment in individual states d. Protect workers pensions e. Prevent premature announcement of M&As

Q: With an interest rate of 5 percent, the present value of $100 received one year from now is approximately A) $100. B) $105. C) $95. D) $90.

Q: Which other types of legislation can have a significant impact on a proposed transaction? a. State anti-takeover laws b. State antitrust laws c. Federal benefits laws d. Federal and state environmental laws e. All of the above

Q: The process of calculating what dollars received in the future are worth today is called A) calculating the yield to maturity. B) discounting the future. C) compounding the future. D) compounding the present.

Q: European antitrust policies differ from those in the U.S. in what important way? a. They focus on the impact on competitors b. They focus on the impact on consumers c. They focus on both consumers and competitors d. They focus on suppliers e. They focus on consumers, suppliers, and competitors

Q: Dollars received in the future are worth ________ than dollars received today. The process of calculating what dollars received in the future are worth today is called ________. A) more; discounting B) less; discounting C) more; inflating D) less; inflating

Q: Which of the following are used by antitrust regulators to determine whether a proposed transaction will be anti-competitive? a. Market share b. Barriers to entry c. Number of substitute products d. A and B only e. A, B, and C

Q: The concept of ________ is based on the notion that a dollar paid to you in the future is less valuable to you than a dollar today. A) present value B) future value C) interest D) deflation

Q: An $8,000 coupon bond with a $400 annual coupon payment has a coupon rate of A) 5 percent. B) 8 percent. C) 10 percent. D) 40 percent.

Q: U.S. antitrust regulators are most concerned about what types of transaction? a. Vertical mergers b. Horizontal mergers c. Alliances d. Joint ventures e. Minority investments

Q: All of the following are true about a consent decree except for a. Requires the merging parties to divest overlapping businesses b. An acquirer may seek to negotiate a consent decree in advance of consummating a deal. c. In the absent of a consent decree, a buyer usually makes the receipt of regulatory approval necessary to closing the deal. d. FTC studies indicate that consent decrees have historically been largely ineffectual in promoting competition e. Consent decrees tend to be most effective in promoting competition if the divestitures made by the acquiring firms are to competitors.

Q: If a $5,000 coupon bond has a coupon rate of 13 percent, then the coupon payment every year is A) $650. B) $1,300. C) $130. D) $13. E) None of the above.

Q: All of the following are true of antitrust lawsuits except for a. The FTC files lawsuits in most cases they review. b. The FTC reviews complaints that have been recommended by its staff and approved by the FTC c. FTC guidelines commit the FTC to make a final decision within 13 months of a complaint d. As an alternative to litigation, a company may seek to negotiate a voluntary settlement of its differences with the FTC. e. FTC decisions can be appealed in the federal circuit courts.

Q: (I) A discount bond requires the borrower to repay the principal at the maturity date plus an interest payment. (II) A coupon bond pays the lender a fixed interest payment every year until the maturity date, when a specified final amount (face or par value) is repaid. A) (I) is true, (II) false. B) (I) is false, (II) true. C) Both are true. D) Both are false.

Q: All of the following are true of the Hart-Scott-Rodino Antitrust Improvements Act except for a. Acquisitions involving firms of a certain size cannot be completed until certain information is supplied to the FTC b. Only the acquiring firm is required to file with the FTC c. An acquiring firm may agree to divest certain businesses following the completion of a transaction in order to get regulatory approval. d. The Act is intended to give regulators time to determine whether the proposed combination is anti-competitive. e. The FTC may file a lawsuit to block a proposed transaction

Q: Which of the following are generally true of all bonds? A) The longer a bond's maturity, the lower is the rate of return that occurs as a result of the increase in the interest rate. B) Even though a bond has a substantial initial interest rate, its return can turn out to be negative if interest rates rise. C) Prices and returns for long-term bonds are more volatile than those for shorter-term bonds. D) All of the above are true. E) Only A and B of the above are true.

Q: Which of the following are true about the Sherman Antitrust Act? a. Prohibits business combinations that result in monopolies. b. Prohibits business combinations resulting in a significant increase in the pricing power of a single firm. c. Makes illegal all contracts unreasonably restraining trade. d. A and C only e. A, B, and C

Q: Which of the following are true of coupon bonds? A) The owner of a coupon bond receives a fixed interest payment every year until the maturity date, when the face or par value is repaid. B) U.S. Treasury bonds and notes are examples of coupon bonds. C) Corporate bonds are examples of coupon bonds. D) All of the above. E) Only A and B of the above.

Q: In a tender offer, which of the following is true? a. Both acquiring and target firms are required to disclose their intentions to the SEC b. The targets management cannot advise its shareholders how to respond to a tender offer until has disclosed certain information to the SEC c. Information must be disclosed only to the SEC and not to the exchanges on which the targets shares are traded d. A and B e. A, B, and C

Q: (I) A simple loan requires the borrower to repay the principal at the maturity date along with an interest payment. (II) A discount bond is bought at a price below its face value, and the face value is repaid at the maturity date. A) (I) is true, (II) false. B) (I) is false, (II) true. C) Both are true. D) Both are false.

Q: A credit market instrument that pays the owner the face value of the security at the maturity date and nothing prior to then is called a A) simple loan. B) fixed-payment loan. C) coupon bond. D) discount bond.

Q: Why do you believe government regulators encouraged a private firm (J.P. Morgan Chase) to acquire Bear Stearns rather than have the government take control? Do you believe this was the appropriate course of action? Explain your answer.

Q: Which of the following represent important shortcomings of using industry concentration ratios to determine whether the combination of certain firms will result in an increase in market power? a. Frequent inability to define what constitutes an industry b. Failure to measure ease of entry or exit for other firms c. Failure to account for foreign competition d. Failure to account properly for the distribution of firms of different sizes e. All of the above

Q: A bond's future payments are called its A) cash flows. B) maturity values. C) discounted present values. D) yields to maturity.

Q: To what extent should regulators use their powers to promote social policy?

Q: A coupon bond pays the owner of the bond A) the same amount every month until the maturity date. B) a fixed interest payment every period, plus the face value of the bond at the maturity date. C) the face value of the bond plus an interest payment once the maturity date has been reached. D) the face value at the maturity date. E) none of the above.

Q: The purpose of the 1968 Williams Act was to a. Give target firm shareholders time to review takeover proposals b. Prosecute target firm shareholders who misuse information c. Protect target firm employees from layoffs d. Prevent tender offers e. Promote tender offers

Q: A loan that requires the borrower to make the same payment every period until the maturity date is called a A) simple loan. B) fixed-payment loan. C) discount loan. D) same-payment loan. E) none of the above.

Q: All of the following is true about proxy contests except for a. Proxy materials must be filed with the SEC immediately following their distribution to investors b. The names and interests of all parties to the proxy contest must be disclosed in the proxy materials c. Proxy materials may be distributed by firms seeking to change the composition of a target firms board of directors d. Proxy materials may be distributed by the target firm seeking to influence how their shareholders vote on a particular proposal e. Target firm proxy materials must be filed with the SEC.

Q: The Securities Act of 1933 requires the registration of all securities issued to the public. Such registration requires which of the following disclosures: a. Description of the firms properties and business b. Description of the securities c. Information about management d. Financial statements audited by public accountants e. All of the above.

Q: What are some of the differences between an organized exchange and an over-the-counter market?

Q: Discuss the differences between depository institutions, contractual savings institutions, and investment intermediaries.

Q: All of the following are true of the Williams Act except for a. Consists of a series of amendments to the 1934 Securities Exchange Act b. Facilitates rapid takeovers over target companies c. Requires investors acquiring 5% or more of a public company to file a 13(d) with the SEC d. Firms undertaking tender offers are required to file a 14(d)-1 with the SEC e. Acquiring firms initiating tender offers must disclose their intentions and business plans

Q: Why can a financial intermediary's risk-sharing activities be described as asset transformation?

Q: Which of the following is among the least regulated industries in the U.S.? a. Defenses b. Communications c. Retailing d. Public utilities e. Banking

Q: What are adverse selection and moral hazard?

Q: In determining whether a proposed transaction is anti-competitive, U.S. regulators look at all of the following except for a. Market share of the combined businesses b. Potential for price fixing c. Ease of new competitors to enter the market d. Potential for job loss among target firms employees e. The potential for the target firm to fail without the takeover