Financial Markets and instituitions
True
A financial intermediary is a corporation that takes funds from investors and then provides those funds to those who need capital. A bank that takes in demand deposits and then uses that money to make long-term mortgage loans is one example of a financial intermediary
True
A publicly owned corporation is a company whose shares are held by the investing public, which may include other corporations as well as institutional investors.
True
A share of common stock is not a derivative, but an option to buy the stock is a derivative because the value of the option is derived from the value of the stock.
TRUE
Financial institutions are more diversified today than they were in the past, when federal laws kept investment banks, commercial banks, insurance companies, and similar organizations quite separate. Today the larger financial services corporations offer a variety of services, ranging from checking accounts, to insurance, to underwriting securities, to stock brokerage.
True
Hedge funds are somewhat similar to mutual funds. The primary differences are that hedge funds are less highly regulated, have more flexibility regarding what they can buy, and restrict their investors to wealthy, sophisticated individuals and institutions.
True
If you decide to buy 100 shares of Google, you would probably do so by calling your broker and asking him or her to execute the trade for you. This would be defined as a secondary market transaction, not a primary market transaction.
True
If you wanted to know what rate of return stocks have provided in the past, you could examine data on the Dow Jones Industrial Index, the S&P 500 Index, or the NASDAQ Index.
e. Short-term debt securities such as Treasury bills and commercial paper.
Money markets are markets for a. Foreign currencies. b. Long-term bonds. c. Consumer automobile loans. d. Common stocks. e. Short-term debt securities such as Treasury bills and commercial paper.
False
Primary markets are large and important, while secondary markets are smaller and less important.
False
Private markets are those like the NYSE, where transactions are handled by members of the organization, while public markets are those like the NASDAQ, where anyone can make transactions.
False
The term IPO stands for "individual purchase order," as when an individual (as opposed to an institution) places an order to buy a stock.
False
Trades on the NYSE are generally completed by having a brokerage firm acting as a "dealer" buy securities and adding them to its inventory or selling from its inventory. The NASDAQ, on the other hand, operates as an auction market, where buyers offer to buy, and sellers to sell, and the price is negotiated on the floor of the
e. IBM issues 2,000,000 shares of new stock and sells them to the public through an investment banker.
Which of the following is a primary market transaction? a. IBM sells 2,000,000 shares of treasury stock to its employees when they exercise options that were granted in prior years. b. One financial institution buys 200,000 shares of IBM stock from another institution. An investment banker arranges the transaction. c. You buy 200 shares of IBM stock from your brother. The trade is not made through a broker; you just give him cash and he gives you the stock. d. You sell 200 shares of IBM stock on the NYSE through your broker. e. IBM issues 2,000,000 shares of new stock and sells them to the public through an investment banker.
d. Preferred stock.
Which of the following is an example of a capital market instrument? a. Banker's acceptances. b. Commercial paper. c. Money market mutual funds. d. Preferred stock. e. U.S. Treasury bills.
a. As they are generally defined, money market transactions involve debt securities with maturities of less than one year.
Which of the following statements is CORRECT? a. As they are generally defined, money market transactions involve debt securities with maturities of less than one year. b. The NYSE is an example of an over-the-counter market. c. Only institutions, and not individuals, can engage in derivative market transactions. d. If you purchase 100 shares of Disney stock from your brother-in-law, this is an example of a primary market transaction. e. If Disney issues additional shares of common stock through an investment banker, this would be a secondary market transaction.
a. Capital market instruments include both long-term debt and common stocks.
Which of the following statements is CORRECT? a. Capital market instruments include both long-term debt and common stocks. b. If your uncle in New York sold 100 shares of Microsoft through his broker to an investor in Los Angeles, this would be a primary market transaction. c. An example of a primary market transaction would be your uncle transferring 100 shares of Walmart stock to you as a birthday gift. d. The NYSE does not exist as a physical location. Rather it represents a loose collection of dealers who trade stock electronically. e. While the two frequently perform similar functions, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise large blocks of capital from investors.
d. This is an example of a direct transfer of capital.
You recently sold 100 shares of Microsoft stock to your brother at a family reunion. At the reunion your brother gave you a check for the stock and you gave your brother the stock certificates. Which of the following best describes this transaction? a. This is an example of a derivative market transaction. b. This is an example of an exchange of physical assets. c. This is an example of a money market transaction. d. This is an example of a direct transfer of capital. e. This is an example of a primary market transaction
d. A secondary market transaction
You recently sold 200 shares of Disney stock, and the transfer was made through a broker. This is an example of: a. A money market transaction. b. A primary market transaction. c. An over-the-counter market transaction. d. A secondary market transaction. e. A futures market transaction.