Homework Assignment-Week 1

By Arwa Kheriwala

Q-1-1
If you bought a share of stock, what would you expect to receive, when would you
expect to receive it, and would you be certain that your expectations would be met?
Yes, I would receive the shares in my share account at the Market Value of the Share
Price purchased on the same day. Yes, for a publicly listed company I am certain my
expectations would be met.

Q-1-6
Is it better for a firms actual stock price in the market to be under, over, or equal to its
intrinsic value? Would your answer be the same from the standpoints of stockholders in
general and a CEO who is about to exercise a million dollars in options and then retire?
Explain.
I believe the actual stock price should be equal to its intrinsic value. Yes my answer
would be the same from shareholders point or CEOs point. As a CEO of a company it
would be my duty to make sure the company has indefinite lifespan and see all the laws
are followed and no unethical behavior is followed. Also if I have done my job well I
would not need to worry about my retirement.

2-1 How does a cost-efficient capital market help reduce the prices of goods and
services?
The financial intermediary are the institutions that brings the saver and the borrower
together. The more efficient the financial system , the lower the costs of intermediation,
the lower the costs to the borrower, and, hence, the lower the prices of goods and
services to consumers.
2-4 Indicate whether the following instruments are examples of money market or capital
market securities.
a. U.S. Treasury bills- Money Market
b. Long-term corporate bonds-Capital Market
c. Common stocks-Capital Market
d. Preferred stocks-Capital Market
e. Dealer commercial paper-Money Market

2-8 Identify and briefly compare the two leading stock exchanges in the United States
today.

NASDAQ and the New York Stock Exchange (NYSE) are the two leading stock
exchanges in the United States today.

NYSE is physically present and is an auction market where the buyer and seller bid for
the stocks.

NASDAQ is a telecommunication network where trading takes place directly between

investors and their buyers or sellers, who are the dealers who make this market. It deals
in electronic version of the stocks.

2-9 Describe the three different forms of market efficiency.

The Three form of market efficiency are:

Efficient market
Highly Efficient
Highly Inefficient