Mã đề 231

1. Among financial institutions, mutual funds are the largest holders of corporate equity securities.
T

2. Banks hold a substantial volume of low-risk corporate bonds because of their high yields.
F-Banks typically hold a substantial volume of low-risk corporate bonds because of their perceived
safety and stability, rather than their high yields. Low-risk corporate bonds are generally considered
less risky than other types of investments, such as stocks or high-yield bonds, and offer a steady
stream of income in the form of interest payments. While some low-risk corporate bonds may offer
relatively high yields compared to other low-risk investments, such as government bonds, this is not
necessarily the primary reason why banks hold them in their portfolios.

3. Mortgage is the primary asset of credit union institutions.

F-Consumer loans are the primary

4. Investment bankers help deficit spending units (DSUS) bring new primary security issues to market.
(trang 26/chap 1/ phiên bản 7)
T

5. The zero coupon bond is always a discount bond. (phân vân về short-term)
T

6. The function of money as a medium of exchange can reduce the transaction cost.
T

7. Finance companies take small consumer deposits and make large consumer loans.
F-They typically raise funds through borrowing from other financial institutions or through the
issuance of bonds or other debt securities. They then use these funds to make loans to consumers or
to purchase other assets.)

8. Life insurance companies are more likely to invest in corporate capital market securities than
commercial banks.
T

9. One financial institution buys 200,000 shares of HAGL stock from another institution. An
investment banker arranges the transaction. This is an example of a secondary market transaction.
T

10. Both governments and businesses issue both debt and equity capital market securities.
False -> Government units cannot issue stock since they are not allowed to sell ownership in
themselves. Corporations can issue both bonds and stock

11. The main reason why banks are the leading source of external finance for businesses is the
interest rates on bank loans are usually lower than interest rates on corporate bonds
F-While interest rates on bank loans may sometimes be lower than interest rates on corporate bonds,
it is not the main reason why banks are the leading source of external finance for businesses. Other
factors such as convenience, relationship banking, and the ability to provide other financial services
also play a role. (They hold mostly non tradednontraded loans which can avoid free-rider problems
and have an information-cost advantage in reducing adverse selection problems)

12. The problem which senior managers may be in a position to enrich themselves at the expense of
the shareholders is call moral hazard problem in debt contracts.
F-in Equity contracts

13. Deposits in a credit union by a household are an example of direct finance.

F-> Indirect finance

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 14. The asset structure of banks' balance sheets tends to reflect a longer maturity structure than that
of the liability side.
T

15. The free-rider problem explains why investors are reluctant to buy information. Thus the moral
hazard problem remains.
F-> Adverse selection remains

16. Repurchase Agreements (Repos) are the most important non-deposit source of funds for
commercial banks, which means banks buy and sell Fed Funds to adjust liquidity.
T

17. Primary capital market securities provide marketability and possibilities for investors to alter the
riskiness of their portfolios.
False -> New issues of equity securities may be sold directly to investors by the issuing corporation,
but they are usually distributed by an investment banker acting as agent for the issuer in the primary
market -> secondary

17. Commercial banks often hold investment securities that are low liquid, have high level of default
risk and can easily be traded in the primary markets
F-Commercial banks typically hold investment securities that are highly liquid and have relatively low
levels of default risk, as they need to be able to sell them quickly in case they need to meet their
obligations.

18. Brokers "make markets" by carrying inventories of securities.

T

20. Treasury bills are sold on a discount basis, with interest paid separately at maturity
False -> Treasury bills are sold at a discount off the face value and appreciate to the face value at
maturity. No additional interest is paid.

21. Commercial paper is available to most companies and individuals

F-Commercial paper is typically only available to large, creditworthy companies and financial
institutions that can issue short-term debt with a maturity of less than one year.

22. For the purpose of financing the purchase of assets such as machinery, buildings or equipment,
the firms typically issue capital market securities.
T

23. Companies can do the IPO through the secondary market.

F-IPO (Initial Public Offering) is a primary market transaction where a company offers its shares to the
public for the first time. It is done through an underwriting process by investment bankers who
purchase shares from the company and then sell them to the public.

23. If FPT company were to issue new stock this year, this would be considered a secondary market
transaction because FPT already has stock outstanding.
T

25. Difference between price initially paid and amount received when stock is sold is called interest
gain.
F- The difference between the price initially paid for a stock and the amount received when it is sold is
called capital gain or capital loss, depending on whether the sale price is higher or lower than the
purchase price. It is not called interest gain, as interest refers to a payment made by a borrower to a
lender for the use of money over a specified period.

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 26. A mortgage is a loan used to purchase a home/land/ building, where the property serves as the
borrower's collateral
T

27. Lemon problem in credit market describes a lender's problem of distinguishing the good-risk
applicants from the bad-risk applicants
T

28. Adverse selection is more likely in financial markets when interest rates rise because banks
eliminate risky borrowers by raising interest rates.
F- Adverse selection is actually more likely in financial markets when interest rates are low, not high.
When interest rates are low, more risky borrowers are able to access credit, as the cost of borrowing
is cheaper. However, this also means that there is a greater likelihood of adverse selection, as riskier
borrowers are more likely to seek out loans. When interest rates are high, the cost of borrowing is
more expensive, which tends to deter riskier borrowers, reducing the likelihood of adverse selection.

(The Bester model predicts that high-risk borrowers are more likely than low-risk borrowers to choose
contracts with higher interest rates and lower collateral requirements, thus eliminating the impact of
adverse selection -> banks do not eliminate risky.... because individuals and firms with the riskiest
investment projects are exactly those who are willing to pay the highest interest rates since if the
high-risk investment succeeds, they will be the main beneficiaries)

29. Common stock can be converted into corporate bond.

F-Common stock represents ownership in a corporation and provides the shareholder with voting
rights and the potential for dividends and capital appreciation. It cannot be converted into corporate
bonds

30. Venture capital firms attempt to overcome the principal-agent problem by holding large equity
stakes in the firms they invest in.
T

31. Your friend, Ann, has super-rich parents who gave her an Audi for her 18th birthday party and
have lavished her with luxury items throughout her entire life. She tells you that she has never felt the
need to get good grades in school or succeed at a job because her parents provide her with
everything. This situation is caused by moral hazard.
T

32. Maria is halfway to work before she realizes that she forgot to lock the back door. Because she has
renter's insurance, she decides it is not worth being late just to go home to lock the door. The adverse
selection is the main cause for this situation DA
F-The Moral Hazard is the main cause

33. Collateral is one solution for the moral hazard problem in equity contract.
F-in debt contracts

34. Yến Sào - Yến- Quân Company is a start-up entrepreneur which has recently appeared on the 100
"Shark Tank" show to raise for capital. An investor (a shark) has decided to offer an investment of 10
billion VND in the form of convertible bonds (in particular, the investor has the right to convert or not
to convert his bonds to equity). It can be deduced from this form of investment that the investor is
more concerned with profit (return) than the safety of the investment.
False -> Sharks are more concerned with safety than profit in the investment because Sharks don't
know the company's activities. In the financial market, stock is at higher risk than bonds so they
want to receive safety before being a company's shareholder. This investment also reduces adverse
selection in financial activities.

35. "Trinh Van Quyet, chairman of property company FLC, manipulated his company's stock price by
using 20 different trading accounts to create fake demand, investigators have said. Specifically,

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 between December 1 and January 10, the company's employees, acting on Quyet's orders, traded
back and forth nearly VND 1.69 trillion ($73.93 million) worth of FLC shares, driving its price up from
VND14,650 to a new high of VND24,000 on January 7. When the prices peaked, he told his family
members to sell 175 million FLC shares, of which 74.8 million were matched at a price of VND22,586.
Quyet only disclosed the information to the Ho Chi Minh Stock Exchange only after the sale, while
regulations require advance notice of three days"
F - The scenario described is an example of market manipulation, where an individual or entity
artificially inflates or deflates the price of a security through fraudulent or deceptive practices.
Adverse selection and moral hazard are concepts related to information asymmetry and risk- taking
behavior in financial markets, and they are not directly related to market manipulation. While it is
possible that adverse selection or moral hazard could be factors in this scenario, the information
provided does not suggest that they are the primary drivers of the market manipulation that
occurred

II. TỰ LUẬN

1. If DHG decided to issue additional common stock, and Vaga purchased 100 shares of this stock
from Smyth Barry, the underwriter, would this transaction be a primary or a secondary market
transaction? Would it make a difference if Vaga purchased previously outstanding DHG stock in the
dear market? Explain
If DHG decided to issue additional common stock and Varga purchased 100 shares of this stock from
Smyth Barry, the underwriter, it would be a primary market transaction. In a primary market
transaction, securities are issued and sold for the first time, with the proceeds going to the issuer of
the securities. In this case, DHG is issuing new shares, and Varga is buying them from the underwriter,
Smyth Barry, which is helping DHG sell the new shares.

If Varga purchased previously outstanding DHG stock in the dealer market, it would be a secondary
market transaction. In a secondary market transaction, securities that have already been issued are
bought and sold among investors, and the proceeds go to the investor selling the securities rather
than the issuer. In this case, Varga is buying previously issued shares from another investor in the
dealer market, so it would be a secondary market transaction. It is important to note that the nature
of the transaction (primary or secondary market) does not affect the ownership rights of the shares
that Varga purchases. However, the primary market transaction provides funding to DHG, while the
secondary market transaction does not.

2. Why are corporations more likely to raise funds externally by debt instead of equity? Because
moral hazard is less of a problem with debt contracts

Moral hazard is less of a problem with debt contracts because equity holders invest in the firm, obtain
the right of ownership, and always want to increase the profit possible, which creates moral hazards.
In contrast, debt contracts focus on whether the firm is profitable for repaying their debt amount,
creating very few moral hazards, as contracts are predetermined.

3. Comment on the statement: "Indirect finance is far more important than direct finance" The
statement "Indirect finance is far more important than direct finance" is a matter of debate among
economists and financial experts, and opinions may differ based on the context and perspective.

Transaction cost theory suggests that the choice between direct and indirect finance depends on the
relative costs of transactions involved in each method. Indirect finance involves financial
intermediaries, such as banks and mutual funds, that pool funds from many investors and lend or
invest them in various assets. This can reduce the transaction costs for both borrowers and lenders, as
intermediaries have expertise in screening, monitoring, and enforcing contracts, and can spread risks
across many investors. In contrast, direct finance involves borrowers issuing securities directly to
investors, which can involve higher transaction costs due to the need for extensive information
disclosure and contract negotiation.

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 Information asymmetry theory, on the other hand, suggests that direct finance can be preferred in
certain situations where borrowers have better information about their projects than lenders. In such
cases, lenders may be hesitant to lend or may require high interest rates to compensate for the risk of
adverse selection and moral hazard. Direct finance, by allowing borrowers to directly negotiate with
investors, can help reduce information asymmetry and provide better terms for borrowers.

Overall, the importance of indirect versus direct finance depends on a variety of factors, including
transaction costs, information asymmetry, the nature of the projects being financed, and the risk
preferences of lenders and borrowers. In some cases, indirect finance may be more efficient, while in
others, direct finance may be preferred. Therefore, it is not necessarily accurate to say
that one is "far more important" than the other, as both can play important roles in financial markets.

mã đề 132

1. Among financial institutions, mutual funds are the largest holders of corporate equity securities
T

2. Banks hold a substantial volume of low-risk corporate bonds because of their high yields.
F(Banks typically hold a substantial volume of low-risk corporate bonds because of their perceived
safety and stability, rather than their high yields. Low-risk corporate bonds are generally considered
less risky than other types of investments, such as stocks or high- yield bonds, and offer a steady
stream of income in the form of interest payments. While some low-risk corporate bonds may offer
relatively high yields compared to other low- risk investments, such as government bonds, this is not
necessarily the primary reason why banks hold them in their portfolios.)

3. The use of collateral makes it more costly for borrowers to take advantage of their asymmetric
information.
T

4. Investment bankers help deficit spending units (DSUS) bring new primary security issues to market.
T

5. Private placements are the simplest form of direct finance.

T

6. Eurodollars are euro-denominated deposits in outside the U.S. banks. hanas

F( eurodollars are deposits kept in banks outside of the US that are tor denominate in dollars euro
dollars have mo connection to the euro currency)

7. loans. Finance companies take small consumer deposits and make large consumer
F (they typically raise funds through borrowing from other financial institutions or through the
issuance of bonds or other debt securities. They then use these funds to make loans to consumers or
to purchase other assets.)

8. Life insurance companies are more likely to invest in corporate capital market securities than
commercial banks
T

9. One financial institution buys 200,000 shares of HAGL stock from another institution. An
investment banker arranges the transaction. This is an example of a secondary market transaction
T

10. Both governments and businesses issue both debt and equity capital market securities.
T
11. The main reason why banks are the leading source of external finance for businesses is the
interest rates on bank loans are usually lower than interest rates on corporate bonds.

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 F (The statement is partially true, as interest rates are one of the main factors why banks are a leading
source of external finance for businesses, but not the only one.)

12. Brokers "make markets" by carrying inventories of securities.

T

13. Deposits in a credit union by a household are an example of direct finance.

T

14. The asset structure of banks' balance sheets tends to reflect a longer maturity structure than that
of the liability side.
T

15. The free-rider problem explains why investors are reluctant to buy information. Thus the moral
hazard problem remains
F(The free-rider problem and the moral hazard problem are two separate concepts in economics and
finance, and they are not directly related to each other. The free-rider problem arises when
individuals or organizations are able to benefit from a public good (such as information) without
contributing to its production or cost. In the context of finance, the free-rider problem can arise when
investors are reluctant to pay for information, as they know that they can potentially benefit from the
information without having to bear the full cost of acquiring it. This can lead to a situation where no
one is willing to pay for information, even though it is valuable and can improve investment decisions.
On the other hand, the moral hazard problem arises when one party has an incentive to take
excessive risk because they know that they will not bear the full cost of their actions if they fail. This
can occur in finance when a borrower has an incentive to take on excessive risk because they know
that the lender will bear most of the losses if the investment fails.

Therefore, the statement "The free-rider problem explains why investors are reluctant to buy
information. Thus the moral hazard problem remains" is not entirely accurate, as it suggests that the
two problems are related in a causal chain. While it is true that both problems can exist in the
financial system, they are not directly linked to each other in the way that the statement implies.

16. Repurchase Agreements (Repos) are the most important non-deposit source of funds for
commercial banks, which means banks buy and sell Fed Funds to adjust liquidity.
T

17. Primary capital market securities provide marketability and possibilities for investors to alter the
riskiness of their portfolios.
F (Primary capital market securities refer to securities issued for the first time to raise capital, such as
IPOs or bond offerings. They do not necessarily provide marketability or the ability to alter the
riskiness of portfolios.)

18. Commercial banks often hold investment securities that are low liquid, have high level of default
risk and can easily be traded in the primary markets.
F (Commercial banks typically hold investment securities that are highly liquid, have low default risk,
and are traded in the secondary markets)

19. The major expenses of a finance company are salaries and loan losses.
F Sa & loan are important but there are may more option

20. Treasury bills are sold on a discount basis, with interest paid separately at maturity
F Sold at a discount off the face value & appreciate to value. No additional interest is paid.

21. Collateral is one solution for the moral hazard problem in equity contract
F (Collateral is not a solution for the moral hazard problem in equity contracts. It is a solution for the
adverse selection problem in debt contracts, where borrowers may have private information about

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 their creditworthiness and lenders may not be able to distinguish between high-risk and low-risk
borrowers.)

22. For the purpose of financing the purchase of assets such as machinery, buildings or equipment,
large firms typically issue capital market securities.
T

23. The term IPO stands for "individual purchase order," as when an individual (as opposed t
institution) places an order to buy a stock.
F (The term IPO stands for "Initial Public Offering." An IPO is the first sale of stock by a company to the
public, in order to raise capital and become publicly traded.)

24. If FPT company were to issue new stock this year, this would be considered a secondary market
transaction because FPT already has stock outstanding.
F (If FPT company were to issue new stock this year, this would be considered a primary market
transaction because it involves the first sale of new shares by the company to investors. A secondary
market transaction involves the buying and selling of previously issued securities among investors.)

25. Capital markets deal only with common stocks and other equity securities.
F (Capital markets deal with both equity and debt securities/In addition to common stocks and other
equity securities, capital markets also deal with bonds, notes, and other debt securities.)

26. The assumption of asymmetric information means that lenders know more than borrowers.
F (The assumption of asymmetric information means that one party in an economic transaction has
more or better information than the other party. It does not necessarily mean that lenders know
more than borrowers. In some cases, borrowers may have more or better information than lenders,
particularly about their own creditworthiness or the intended use of funds.)

27. Lemon problem in credit market describes a lender's problem of distinguishing the good-risk
applicants from the bad-risk applicants.
T

28. Adverse selection is more likely in financial markets when interest rates rise because banks
eliminate risky borrowers by raising interest rates.
F (Adverse selection is more likely in financial markets when interest rates fall, not rise. When interest
rates fall, the cost of borrowing decreases, which can increase the number of borrowers seeking
loans, including higher-risk borrowers who were previously excluded by higher interest rates. As a
result, lenders may face a larger pool of borrowers with varying levels of creditworthiness, making it
more difficult to distinguish between good and bad risks.)

29. A firm's principals are its managers.

F (A firm's principals are its owners, such as shareholders or partners, who have a financial interest in
the firm and may have the authority to make important decisions. Managers are employees of the
firm who are responsible for day-to-day operations but may not necessarily be owners or principals.)

30. Venture capital firms attempt to overcome the principal-agent problem by holding large equity
stakes in the firms they invest in.
T

31. Your friend, Ann, has super-rich parents who gave her an Audi for her 18th birthday party and
have lavished her with luxury items throughout her entire life. She tells you that she has never felt the
need to get good grades in school or succeed at a job because her parents provide her with
everything. This situation is caused by moral hazard.
T

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 32. Maria is halfway to work before she realizes that she forgot to lock the back door. 32. Because she
has renter's insurance, she decides it is not worth being late just to go home to lock the door. The
adverse selection is the main cause for this situation
F (The situation is an example of moral hazard, as Maria has insurance and is therefore less likely to
take steps to protect her property, such as going back home to lock the door)

33. Your car insurance has a high deductible (the amount that you have to pay out-of- pocket before
insurance kicks in). This will help to reduce the transaction cost.
F(False. The high deductible will not help to reduce transaction costs, as transaction costs refer to the
costs of conducting a financial transaction, such as brokerage fees, legal fees, and administrative
costs)

34. Yên- São- Yén- Quân Company is a start-up entrepreneur which has recently appeared on the
"Shark Tank" show to raise for capital. An investor (a shark) has decided to offer an investment of 10
billion VND in the form of convertible bonds (in particular, the investor has the right to convert or not
to convert his bonds to equity). It can be deduced from this form of investment that the investor is
more concerned with profit (return) than the safety of the investment.
T

35. "Trinh Van Quyet, chairman of property company FLC, manipulated his company's stock price by
using 20 different trading accounts to create fake demand, investigators have said. Specifically,
between December 1 and January 10, the company's employees, acting on Quyet's orders, traded
back and forth nearly VND1.69 trillion ($73.93 million) worth of FLC shares, driving its price up from
VND14,650 to a new high of VND24,000 on January 7. When the prices peaked, he told his family
members to sell 175 million FLC shares, of which 74.8 million were matched at a price of VND22,586.
Quyet only disclosed the information to the Ho Chi Minh Stock Exchange only after the sale, while
regulations require advance notice of three days". This is example of adverse selection and moral
hazard.
F(. The scenario described is an example of market manipulation, where an individual or entity
artificially inflates or deflates the price of a security through fraudulent or deceptive practices.
Adverse selection and moral hazard are concepts related to information asymmetry and risk-taking
behavior in financial markets, and they are not directly related to market manipulation. While it is
possible that adverse selection or moral hazard could be factors in this scenario, the information
provided does not suggest that they are the primary drivers of the market manipulation that
occurred)

tự luận

1. Question 1 (Ip): If DHG decided to issue additional common stock, and Varga purchased 100
shares of this stock from Smyth Barry, the underwriter, would this transaction be a primary or a
secondary market transaction? Would it make a difference if Vaga purchased previously
outstanding DHG stock in the dealer market?

If DHG decided to issue additional common stock and Varga purchased 100 shares of this stock from
Smyth Barry, the underwriter, it would be a primary market transaction. In a primary market
transaction, securities are issued and sold for the first time, with the proceeds going to the issuer of
the securities. In this case, DHG is issuing new shares, and Varga is buying them from the underwriter,
Smyth Barry, which is helping DHG sell the new shares.

If Varga purchased previously outstanding DHG stock in the dealer market, it would be a secondary
market transaction. In a secondary market transaction, securities that have already been issued are
bought and sold among investors, and the proceeds go to the investor selling the securities rather
than the issuer. In this case, Varga is buying previously issued shares from another investor in the
dealer market, so it would be a secondary market transaction. It is important to note that the nature
of the transaction (primary or secondary market) does not affect the ownership rights of the shares
that Varga purchases. However, the primary market transaction provides funding to DHG, while the
secondary market transaction does not

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 2. Question 2(1): Why are corporations more likely to raise funds externally by-debt instead of
equity?

Moral hazard is less of a problem with debt contracts because equity holders invest in the firm, obtain
the right of ownership, and always want to increase the profit possible, which creates moral hazards.
In contrast, debt contracts focus on whether the firm is profitable for repaying their debt amount,
creating very few moral hazards, as contracts are predetermined.

3. Question 3: (1p) Comment on the statement: "Only large, well established firms have access to
securities markets". (Hints: Using the transaction cost theory and Information asymmetry theory)

It is important to note that the nature of the transaction (primary or secondary market) does not
affect the ownership rights of the shares that Varga purchases. However, the primary market
transaction provides funding to DHG, while the secondary market transaction does not.

The transaction cost theory suggests that the cost of issuing securities in the market is higher for
smaller firms than for larger firms. This is because smaller firms have less bargaining power and a
lower level of reputation, which makes it more difficult and expensive for them to raise capital in the
securities market. As a result, smaller firms may choose alternative methods to raise capital, such as
bank loans or private equity.

However, the transaction cost theory does not entirely explain why smaller firms can have access to
securities markets. Another important factor is information asymmetry theory. Information
asymmetry refers to the fact that some market participants have more information than others,
which can create market inefficiencies.

Smaller firms may have an advantage in the securities market in terms of information asymmetry.
Since smaller firms are not as well-known as larger firms, they may need to provide more detailed and
transparent information to attract investors. This may make it easier for them to access the securities
market, as investors may be more confident in their investment decisions if they have access to
comprehensive and reliable information about the company.

In conclusion, while transaction cost theory suggests that smaller firms may face higher costs to
access securities markets, information asymmetry theory suggests that smaller firms may have an
advantage in providing detailed and transparent information to attract investors. Therefore, it is not
accurate to say that only large, well-established firms have access to securities markets.

2. As result of stock holder's investments in the company, which provide them ownership rights and
the constant desire to maximize profits, moral hazard is less of an issue with debt contracts. Debt
contracts in contrast, are preset and concentrate on whether the company will be successful enough
to pay back the total amount of the debt.

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