CH. 14 T/F

The formation of the European Monetary Union and its single currency Euro is expected to:

- Eliminate foreign currency risk between member countries -Create stock/bond prices in Euros -Have stock/bond indexes tracking a group of member countries' stocks and bonds

All of these are recognized as important influences in the development of the banking crisis of 2008 and the resulting credit crisis

-Consumers, especially homeowners, took on too much debt -Subprime loans were repackaged and sold as securities -Real estate prices collapsed

Which of the following is NOT a criterion for an efficient market?

-Prices adjust rapidly to new information -Large dollar amounts of securities can be absorbed without price destabilization -Each successive trade is made at a price close to the previous trade

The Securities Act of 1933 did what?

-Require that all securities sold in more than one state be registered with the SEC -Hold corporate officers liable for losses for those who were misled by false information in the prospectus -Require a prospectus for all new issues of securities, which contains all information appearing in the registration statement.

A key variable of market efficiency is the certainty of the income stream. The most efficient market is for corporate securities.

False

Brokers actually own the securities they buy and sell on the floor of the exchange.

False

In the new issues market for corporate capital, common stocks account for the largest percentage of new funds raised.

False

Securities issued by states and municipalities are referred to as statutory bonds and municipal bonds, respectively.

False

The weak form of the efficient market hypothesis states that an investor can profit by using past price data.

False

U.S. government agency securities are directly guaranteed by the full faith and credit of the U.S. Treasury.

False

When an investor buys stock in the stock market, he is purchasing shares from a company.

False

Capital markets consist of securities having maturities greater than one year.

True

The Sarbanes-Oxley Act of 2002 holds the CEO and CFO legally accountable for the accuracy of their firm's financial statements.

True

The capital markets serve as a way of allocating available capital to the most efficient user.

True

The "strong" form of the efficient market hypothesis states that

all information both public and private is immediately reflected in stock prices.

Companies list their stock around the globe to

increase liquidity for their stockholders and provide opportunities for the sale of new stock in foreign countries.

The purpose of secondary trading is to

provide liquidity and competition between investments.

The efficient market hypothesis deals primarily with

the degree to which prices adjust to new information.