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
A call option gives the holder the right to:
Answer: Buy an asset at a specified price before expiration
A call option grants the buyer the right, but not the obligation, to purchase the underlying asset at the strike price before or at expiration.
The price-to-earnings (P/E) ratio is most commonly used to:
Answer: Compare a company's stock price relative to its earnings
The P/E ratio divides the stock price by earnings per share, providing a valuation metric that indicates how much investors pay per dollar of earnings.
In bond markets, the 'spread' typically refers to:
Answer: The yield difference between a bond and a benchmark such as Treasuries
The credit or yield spread measures how much additional yield a bond offers over a benchmark Treasury of the same maturity, reflecting credit and liquidity risk.
Quantitative easing (QE) as conducted by the Federal Reserve involves:
Answer: The Fed purchasing large quantities of assets to inject liquidity
QE involves the central bank purchasing financial assets such as Treasuries and MBS to expand the money supply and lower long-term interest rates.
Which of the following is an example of a money market instrument?
Answer: Commercial paper
Commercial paper is a short-term, unsecured debt instrument issued by corporations with maturities typically ranging from a few days to 270 days.
The Efficient Market Hypothesis (EMH) in its strong form asserts that stock prices reflect:
Answer: All public and private (insider) information
The strong form of EMH holds that all information—public and private—is already incorporated into stock prices, making it impossible to consistently earn excess returns.