CBE Financial Markets and Instruments Flashcards
6 cards from real CBE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CBE Financial Markets and Instruments flashcards as text
The equity risk premium (ERP) is best defined as:
Answer: The excess return investors demand for holding stocks over risk-free assets
The ERP is the additional return investors expect from equities above the risk-free rate as compensation for bearing greater risk.
In the U.S. capital markets, which regulatory body oversees securities exchanges and broker-dealers?
Answer: SEC
The Securities and Exchange Commission (SEC) regulates U.S. securities markets, exchanges, and investment firms to protect investors.
A futures contract differs from a forward contract primarily because futures contracts are:
Answer: Standardized and traded on exchanges
Futures contracts are standardized, exchange-traded agreements with daily mark-to-market settlement, unlike over-the-counter forward contracts.
Which of the following best describes an asset-backed security (ABS)?
Answer: A bond secured by collateral in the form of pooled financial assets
An ABS is a financial instrument backed by a pool of underlying assets such as auto loans, credit card receivables, or mortgages.
Market capitalization of a publicly traded company is calculated as:
Answer: Share price multiplied by total shares outstanding
Market capitalization equals the current share price multiplied by total shares outstanding, reflecting the market's total valuation of the company.
The Federal Open Market Committee (FOMC) primarily influences financial markets by:
Answer: Setting the federal funds rate target
The FOMC meets eight times per year to set the target range for the federal funds rate, which influences borrowing costs throughout the economy.