IHI 108

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Which of the following statements is CORRECT?
A. Hedge funds are legal in Europe and Asia, but they are not permitted to operate in the United States.
B. Hedge funds are legal in the United States, but they are not permitted to operate in Europe or Asia.
C. Hedge funds have more in common with investment banks than with any other type of financial institution.
D. Hedge funds have more in common with commercial banks than with any other type of financial institution.
E. Hedge funds are not as highly regulated as most other types of financial institutions. The justification for this light regulation is that only “sophisticated” investors (i.e., those with high net worths and high incomes) are permitted to invest in these funds, and such investors supposedly can do any necessary “due diligence” on their own rather than have it done by the SEC or some other regulator.

Time lines can be constructed for annuities where the payments occur at either the beginning or the end of the periods.
True
False

Some of the cash flows shown on a time line can be in the form of annuity payments while others can be uneven amounts.
True
False

You recently sold 200 shares of Disney stock, and the transfer was made through a broker. This is an example of:
A. A money market transaction.
B. A primary market transaction.
C. A secondary market transaction.
D. A futures market transaction.
E. An over-the-counter market transaction.

Which of the following statements regarding a 15-year (180-month) $125,000, fixed-rate mortgage is CORRECT? (Ignore taxes and transactions costs.)
A. The remaining balance after three years will be $125,000 less one third of the interest paid during the first three years.
B. Because it is a fixed-rate mortgage, the monthly loan payments (which include both interest and principal payments) are constant. C. Interest payments on the mortgage will increase steadily over time, but the total amount of each payment will remain constant.
D. The proportion of the monthly payment that goes towards repayment of principal will be lower 10 years from now than it will be the first year.
E. The outstanding balance declines at a slower rate in the later years of the loan’s life.