FINC 409 module 9/10

In the United States, which of these financial institutions arrange most primary market transactions for businesses?

investment banks

Which of these feature debt securities or instruments with maturities of one year or less?

money markets

Which of these is defined as a combination of investment assets held by an investor?

portfolio

Which of these provide a forum in which demanders of funds raise funds by issuing new financial instruments, such as stocks and bonds?

primary markets

Once firms issue financial instruments in primary markets, these same stocks and bonds are then traded in which of these?

secondary markets

Which of these does NOT perform vital functions to securities markets of all sorts by channelling funds from those with surplus funds to those with shortages of funds?

secondary markets

Which of these is a measure of risk to reward earned by an investment over a specific period of time?

coefficient of variation

Which of the following is NOT a money market instrument?

corporate bonds

Which of the following is defined as the portion of total risk that is attributable to firm or industry factors and can be reduced through diversification?

firm specific risk

Which of the following are demanders of loanable funds?

governments, households and businesses

Primary market financial instruments include stock issues from firms allowing their equity shares to be publicly traded on the stock market for the first time. We usually refer to these first-time issues as which of the following?

initial public offerings

Financial intermediaries provide which of the following?

- Purchase the financial claims that fund users issue. - Finance purchases by selling financial claims to household investors and other fund suppliers.

Why would foreign participants borrow from U.S. financial markets?

- They look for the cheapest source of funds. - They look at the economic conditions of their home country

How is the shadow banking system the same as the traditional banking system?

It intermediates the flow of funds between net savers and net borrowers.

Which of the following is an index that tracks 500 companies, which allows for a great deal of diversification?

S&P 500

When monetary policy objectives are to contract the economic growth, which of the following occurs?

The Federal Reserve decreases the supply of funds available in the financial markets

Which of these statements is true?

When people purchase a stock, they do not know what their return is going to be—either short term or in the long run.

Which of these includes any capital gain (or loss) that occurred as well as any income that you received from a specific investment?

dollar return

Which of these is the dollar return characterized as a percentage of money invested?

percentage return

Which of the following is defined as the volatility of an investment, which includes firm specific risk as well as market risk?

total risk