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MarketMaker2 Trivia Quiz

If you liked the first one, you'll love this tough quiz about financial markets

A multiple-choice quiz by ryan2525. Estimated time: 5 mins.

Author
ryan2525

Time
5 mins

Type
Multiple Choice

Quiz #
4,465

Updated
Dec 03 21

# Qns
10

Difficulty
Tough

Avg Score
5 / 10

Plays
581

One at a Time - Single Page - Timed Game

Question 1 of 10

1. Federal Reserve Chairmen are frequently described as being 'hawks' or 'doves'. If the current Chairman raised rates by 100 basis points, he would be considered a what?

Answer: (Paul Volcker)

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Question 2 of 10

2. What does LIBOR stand for? Hint

Lowest Investment Bank Offering Rate

London International Bank Offering Rate

London InterBank Offering Rate

Lowest International Bond Offering Rate

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Question 3 of 10

3. When pricing options, investors and analysts refer to what model or theory? Hint

Capital Asset Pricing Model

Black-Scholes Model

Convergence Theory

Financial Option Pricing Model

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Question 4 of 10

4. When trading options, if one believed the markets would see increased volatility in the near future, he or she would use what kind of trading strategy? Hint

Bear Spread

Strangle

Straddle

Bull Spread

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Question 5 of 10

5. If one wanted to get a good indication of the overall performance of the equity markets at a certain point in time, he or she would look at the performance of what index? Hint

S and P 500

Wilshire 5000

Dow Jones Industrial Average

AMEX

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Question 6 of 10

6. For a number of years, Warren Buffet, the famous investor, refused to invest in a certain sector of the market. What sector was this? Hint

Telecommunciations

Bio-tech

Technology

Pharmaceuticals

7. The late 1980's saw the rise of many things, including junk bonds takeovers. More we saw a dramatic rise in takeovers which were primarily financed with bank debt, what is this type of transaction called? Hint

IBO

SEO

IPO

LBO

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Question 8 of 10

8. When the markets are said to undergo a 'correction', they drop by a certain amount. What percentage drop in value constitutes a 'correction'? Hint

5 percent

10 percent

15 percent

20 percent

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Question 9 of 10

9. To find the value of a company, what numbers are typically aggregated and discounted? Hint

Revenues

Cash Flows

Earnings

Dividends

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Question 10 of 10

10. The great Baring banking family was recently made insolvent by the reckless trading of what type of security? Hint

Options Contracts

Mortgages

Bonds

Futures Contracts

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Quiz Answer Key and Fun Facts

1. Federal Reserve Chairmen are frequently described as being 'hawks' or 'doves'. If the current Chairman raised rates by 100 basis points, he would be considered a what?

Answer: Hawk

If a Federal Reserve Chairman raised the Federal Funds rate by 100 bps or 1 percentage point, he would be considered tough on inflation and would therefore be regarded as an inflation 'hawk.'

2. What does LIBOR stand for?

Answer: London InterBank Offering Rate

LIBOR is used as a benchmark for pricing nearly everything in the financial markets. One might refer to a loan priced at 200 basis points over LIBOR, which would mean 2 percentage points over the current LIBOR.

3. When pricing options, investors and analysts refer to what model or theory?

Answer: Black-Scholes Model

The Black-Scholes Model was developed in the late 1980's by two Nobel Laureates who eventually used their model to become extremely rich in the options markets. Today, their model is used daily by anyone who works with derivatives.

4. When trading options, if one believed the markets would see increased volatility in the near future, he or she would use what kind of trading strategy?

Answer: Straddle

A straddle strategy enables the investor to achieve rates of return that are in proportion to the volatility of the markets, with returns increasing as markets fluctuate up or down.

5. If one wanted to get a good indication of the overall performance of the equity markets at a certain point in time, he or she would look at the performance of what index?

Answer: Wilshire 5000

The Wilshire 5000 Total Market Index is a Canada-based index that holds shares of every major corporation in North America and is an excellent indication of overall market performance.

6. For a number of years, Warren Buffet, the famous investor, refused to invest in a certain sector of the market. What sector was this?

Answer: Technology

Much to the dismay of his investors, for quite some time the billionaire money manager refused to participate in the country's technology craze, citing ridiculous valuations and extreme speculation. Later, he relented sufficiently to invest in companies such as IBM and Intel, presumably once things had calmed down a little.

Answer: LBO

Leveraged buyouts were popularized by corporate raiders like Carl Icahn who became stinking rich off of every deal.

8. When the markets are said to undergo a 'correction', they drop by a certain amount. What percentage drop in value constitutes a 'correction'?

Answer: 10 percent

When an index loses 10 percent of its value, it is said to have corrected. A recession would require a 20 percent decline.

9. To find the value of a company, what numbers are typically aggregated and discounted?

Answer: Cash Flows

A rough indication of the value of a company is typically the sum of the discounted cash flows. This proves difficult because cash flows are indeed uncertain in the future. This is why the value of a firm is really decided by the markets and not number crunchers.

10. The great Baring banking family was recently made insolvent by the reckless trading of what type of security?

Answer: Futures Contracts

The great family was brought down by one man who traded options on the Nikei index in Tokyo, betting billions that it would climb to a reasonable level over a certain time. Normally a sound strategy, he did not expect a major earthquake which came and destroyed the equity markets in Japan. Since his positions were largely unhedged, his exposure was in the trillions of dollars.

The Barings were sold for change.

Source: Author ryan2525

This quiz was reviewed by FunTrivia editor stedman before going online.
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