Fin 301 module 7

When commercial paper is issued, it is issued to mature in no more than 270 days in order to avoid burdensome securities regulation requirements.

True

A private placement offering of securities does not have to be registered with the SEC.

True Answer: A securities offering exempt from registration with the SEC is sometimes referred to as a private placement or an unregistered offering. Under the federal securities laws, a company may not offer or sell securities unless the offering has been registered with the SEC or an exemption from registration is available. Generally speaking, private placements are not subject to some of the laws and regulations that are designed to protect investors, such as the comprehensive disclosure requirements that apply to registered offerings. Private and public companies engage in private placements to raise funds from investors.

Which one of the following parties can sell shares of ABC stock in the primary market? A. ABC company B. Any corporation, other than the ABC company C. Any institutional shareholder D. Any private individual shareholder E. Only officers and directors of ABC company

a

An auction market: A. is an electronic means of exchanging securities. B. has a physical trading floor. C. handles primary market transactions exclusively. D. is also referred to as an OTC market. E. is dealer-based

b

Security dealers: A. match buyers with sellers. B. buy and sell from their own inventory. C. operate on a physical trading floor. D. operate exclusively in auction markets. E. are limited to trading non-listed stocks.

b

One example of a primary market transaction would be the: A. sale of 100 shares of stock by Maria to her best friend. B. purchase by Theo of 5,000 shares of stock from his father. C. sale of 1,000 shares of newly issued stock by Alt Company to Miquel. D. sale by Terry of 50,000 shares of stock to his brother. E. sale of 5,000 shares of stock owned by a corporate CEO to his son.

c

You contacted your stock broker this morning and placed an order to sell 300 shares of a stock that trades on the NYSE. This sale will occur in the: A. dealer market. B. over-the-counter market. C. secondary market. D. primary market. E. tertiary market.

c

The issuer of a security must be involved in all _____ transactions involving that security. A. exchange-listed B. secondary market C. over-the-counter D. dealer market E. primary market

e

Which one of the following statements is correct? A. All of the major stock exchanges are U.S. based. B. The NYSE was created by the National Association of Securities Dealers in the early 1930s. C. The Chicago Stock Exchange is a dealer market. D. OTC markets have a physical trading floor generally located in either New York City or Chicago. E. The primary purpose of the NYSE is to match buyers with sellers.

e

The money market includes financial assets expected to mature within one year.

True

The spot market is a market in which a transaction takes place with immediate delivery of an item being purchased and sold.

True

The futures market is a market in which a transaction takes place with immediate delivery of an item being purchased and sold.

False Answer: Market in which the transaction

The capital market includes financial assets expected to mature within one year.

False Answer: Capital market assets have maturities in excess of one year.

The lead or originating underwriter for a securities offering may assemble a selling syndicate as well as an underwriting syndicate for all offerings except all or nothing underwritings which require underwriting syndicates only.

False Answer: False, selling syndicates can be created for all securities offerings.

The marketability characteristic of an asset refers to the speed with which the asset can be converted into cash without loss of value.

False Answer: False, the liquidity characteristic refers to the speed with which the asset can be converted into cash without loss of value. Marketability refers to the level of ease or the ability of buyers or sellers of a security to create and complete a transaction

In a primary market transaction, the funds move from a buyer of the security to the seller of the security rather than to the issuer of the security. The issuer of the security is only interested in the price at which the securities were sold.

False Answer: The issuer receives all or some of the funds in a primary market sale of securities.

The difference between the Over the Counter Market and the Exchange Market is that the Over the Counter Market conducts trading at specific geographic locations hence the name Over the Counter Market.

False Answer: No geographic locations

One of the characteristics of all exchange markets is that they have a physical geographic location where you can observe trading taking place.

False Answer: This used to be true. It is no longer the case as evidenced by the BATS exchange which is completely online.

A broker-dealer firm is operating as a broker when it is handling transactions for customers rather than for itself.

True

In a secondary market transaction, the funds move from a buyer of the security to the seller of the security rather than to the issuer of the security. The issuer of the security is only interested in the price at which the securities were sold.

True

In financial market transactions involving financial intermediaries, the financial intermediary receives a claim on the user of the funds, while the investor or saver receives a claim on the intermediary.

True

Regional and National stock exchanges, insurance companies, and mutual funds are all examples of financial intermediaries.

True

Secondary markets provide benefits to the marketplace. These include the benefits of liquidity and the efficient allocation of capital.

True

Securities are financial assets with no explicit value of their own.

True

The liquidity characteristic of an asset refers to the speed with which the asset can be converted into cash without loss of value.

True

The marketability characteristic of an asset refers to the level of ease or the ability of buyers or sellers of a security to create and complete a transaction.

True