MBA 620 MIDTERM EXAM 2026 QUESTION
COLLECTION FINANCIAL AND OPERATIONAL
MANAGEMENT MODULE SOLVED ITEMS AND
RESPONSE KEY
◉ Primary market. Answer: The markets in which newly issued
securities are
sold for the first time.
◉ Secondary market. Answer: Where securities are resold after
initial issue in the
primary market. Example: The New York Stock Exchange.
◉ Private markets. Answer: Transactions are worked out directly
between two parties and structured in any manners that appeal to
them. Example: Bank loans and private placements of debt with
insurance companies. Securities are more tailor-
made but less liquid.
◉ Public markets. Answer: Standardized contracts are traded on
organized exchanges. Securities that are issued here, such as
common stock and corporate bonds, are ultimately held by a large
,number of individuals. Securities are more liquid but subject to
greater
standardization.
◉ Derivatives. Answer: Those underlying assets that derive their
value from other traded assets. Examples: Futures, options,
forwards. The value is derived from the value of an underlying real
asset.
◉ Investment bank. Answer: Assist in the design of corporate
securities and then sell them to savers (investors) in the primary
markets
◉ Financial services corporation. Answer: Offer a wide range of
financial services such as brokerage operations, insurance, and
commercial banking.
◉ Financial intermediary. Answer: Buys security with funds that are
obtained by
issuing its own securities. An example is a common stock mutual
fund that buys common stocks with
funds obtained by issuing shares in the mutual fund.
,◉ Mutual fund. Answer: An organization that pools the money
deposited by savers to buy financial instruments. These instruments
receive dividends and interest on it. The resulting dividends,
interest, and capital gains are distributed to the fund's shareholders
after the deduction of operating expenses. Different funds are
designed to meet different objectives.
◉ Money market fund. Answer: Mutual funds which invest in short-
term securities carry low risk and also offer their shareholders
interest-bearing checking accounts.
◉ Open outcry auction. Answer: A method where traders meet face
to face at particular location at an agreed price and quantity. These
traders communicate with each other through hand signals and
shouts.
◉ Dealer market. Answer: A dealer holds an inventory of the
security and makes a market by offering to buy or sell. Others who
wish to buy or sell can see the offers made by the dealers, and can
contact the dealer of their choice to arrange a transaction.
◉ Automated trading platform. Answer: A computer system in
which buyers and sellers post orders and in which trades are
automatically executed for matching orders.
, ◉ Production opportunities. Answer: The cash generating activity
that require cash in the present but have the ability to generate more
cash in future. The higher the opportunities, the more cash will be
demanded now.
◉ Time preferences for consumption. Answer: Refer to the preferred
pattern of consumption. Establishes how much consumption
consumers are willing to save or consume at different levels of
interest. It majorly impacts required rate of return.
◉ Foreign trade deficit. Answer: Occurs when businesses and
individuals in the United States import more goods from foreign
countries compared to exports. This causes an increase in an
interest rate. Must be financed, and the main source of financing is
debt. Surplus occurs when exports are more than imports. As the
trade deficit increases, the debt financing increases, driving up
interest rates. U.S. interest rates must be competitive with foreign
interest rates; if the Federal Reserve attempts to set interest rates
lower than foreign rates, foreigners will sell U.S. bonds, decreasing
bond prices, resulting in higher U.S. rates.
◉ Algorithmic trading. Answer: Occurs when computers are
programed to buy or sell stocks on behalf of stockholders if a
particular event or sequence of events happens.
◉ High-frequency trading. Answer: A type of algorithmic trading in
which HFT traders, which are computers, buy and sell hundreds or
COLLECTION FINANCIAL AND OPERATIONAL
MANAGEMENT MODULE SOLVED ITEMS AND
RESPONSE KEY
◉ Primary market. Answer: The markets in which newly issued
securities are
sold for the first time.
◉ Secondary market. Answer: Where securities are resold after
initial issue in the
primary market. Example: The New York Stock Exchange.
◉ Private markets. Answer: Transactions are worked out directly
between two parties and structured in any manners that appeal to
them. Example: Bank loans and private placements of debt with
insurance companies. Securities are more tailor-
made but less liquid.
◉ Public markets. Answer: Standardized contracts are traded on
organized exchanges. Securities that are issued here, such as
common stock and corporate bonds, are ultimately held by a large
,number of individuals. Securities are more liquid but subject to
greater
standardization.
◉ Derivatives. Answer: Those underlying assets that derive their
value from other traded assets. Examples: Futures, options,
forwards. The value is derived from the value of an underlying real
asset.
◉ Investment bank. Answer: Assist in the design of corporate
securities and then sell them to savers (investors) in the primary
markets
◉ Financial services corporation. Answer: Offer a wide range of
financial services such as brokerage operations, insurance, and
commercial banking.
◉ Financial intermediary. Answer: Buys security with funds that are
obtained by
issuing its own securities. An example is a common stock mutual
fund that buys common stocks with
funds obtained by issuing shares in the mutual fund.
,◉ Mutual fund. Answer: An organization that pools the money
deposited by savers to buy financial instruments. These instruments
receive dividends and interest on it. The resulting dividends,
interest, and capital gains are distributed to the fund's shareholders
after the deduction of operating expenses. Different funds are
designed to meet different objectives.
◉ Money market fund. Answer: Mutual funds which invest in short-
term securities carry low risk and also offer their shareholders
interest-bearing checking accounts.
◉ Open outcry auction. Answer: A method where traders meet face
to face at particular location at an agreed price and quantity. These
traders communicate with each other through hand signals and
shouts.
◉ Dealer market. Answer: A dealer holds an inventory of the
security and makes a market by offering to buy or sell. Others who
wish to buy or sell can see the offers made by the dealers, and can
contact the dealer of their choice to arrange a transaction.
◉ Automated trading platform. Answer: A computer system in
which buyers and sellers post orders and in which trades are
automatically executed for matching orders.
, ◉ Production opportunities. Answer: The cash generating activity
that require cash in the present but have the ability to generate more
cash in future. The higher the opportunities, the more cash will be
demanded now.
◉ Time preferences for consumption. Answer: Refer to the preferred
pattern of consumption. Establishes how much consumption
consumers are willing to save or consume at different levels of
interest. It majorly impacts required rate of return.
◉ Foreign trade deficit. Answer: Occurs when businesses and
individuals in the United States import more goods from foreign
countries compared to exports. This causes an increase in an
interest rate. Must be financed, and the main source of financing is
debt. Surplus occurs when exports are more than imports. As the
trade deficit increases, the debt financing increases, driving up
interest rates. U.S. interest rates must be competitive with foreign
interest rates; if the Federal Reserve attempts to set interest rates
lower than foreign rates, foreigners will sell U.S. bonds, decreasing
bond prices, resulting in higher U.S. rates.
◉ Algorithmic trading. Answer: Occurs when computers are
programed to buy or sell stocks on behalf of stockholders if a
particular event or sequence of events happens.
◉ High-frequency trading. Answer: A type of algorithmic trading in
which HFT traders, which are computers, buy and sell hundreds or
