chapter 2
Which of the following statements is incorrect?
A highly liquid financial instrument with a maturity of 90 days would be traded in the capital market.
Which of the following statements is incorrect?
Dow Jones Industrial average (DJIA. is a price index that measures the change in prices of a market basket of goods and services that a typical consumer purchases.
Which of the following statement is correct?
Equities with maturities greater than one year generally are traded in the capital market.
which one of the transactions occurred in the primary market?
South Wind Products sold 1,000 shares of newly issued stock to Mike.
Which of the following statements is incorrect?
The FED is responsible for overseeing the securities industry and regulating all primary and secondary markets in which securities are traded.
Which of the following statements is incorrect?
The loans of the business finance companies are never secured by accounts receivable or inventory but rather based on trust among the companies.
Which of the following is the process by which investment bankers purchase new securities directly from the issuing company and resell them to public?
Underwriting
The financial market where a new security is sold for the first time is
a primary market.
if you just purchased a share of IBM through a New York Stock Exchange-based transaction, you participated in
a secondary market transaction.
Investment brokers are
agents who work on the behalf of an investor.
The nominate rate of interest is made up of
both real rate of interest and compensation for inflation.
investment dealers
brokers who make money by buying and selling securities at bid prices to make profits from the difference.
If a firm needs to finance a new corporate headquarters building, then it would most likely seek the funds in the
capital market.
The real rate of return can be justified, at a basic level, by
compensation for deferring consumption.
If inflation is anticipated to be 5 percent during the next year, while the real rate of interest for a one-year loan is 5 percent, then what should the nominal rate of interest be for a risk-free one-year loan?
10 percent
Which one of the following parties can sell shares of ABC stock in the primary market?
ABC company
If a firm sells common stock to the public for the very first time, it is known as ______________.
An IPO
which of the following statement is correct?
Capital markets are markets where equity and debt instruments with maturities of greater than one year are traded.
Which of the following statements is correct?
Secondary markets are where the owners of outstanding securities can resell them to other investors and the secondary markets provide the means for investors to convert their securities into cash.
Which of the following statements is correct?
Money market instruments are generally issued by firms of the highest credit rating.
Which of the following statements is incorrect?
Money markets are global markets where long-term debt instruments, which have maturities of greater than one year, are traded.
Which of the following statements is incorrect?
Private markets are organized financial markets where the general public buys and sells initial public offering (IOPs) through their stockbrokers, and the NYSE, for example, is a private market.
Which of the following statements is correct?
Secondary markets are like used-car markets in that they allow investors to buy or sell previously owned securities for cash.
Which of the following statements is incorrect?
The secondary markets are not well known to the general public because they are wholesale markets and the sales take place outside of the public view.
Money market instruments are generally issued by
firms of the highest credit rating
One of the main services offered by investment banks to companies is
helping companies sell new debt issues in the security markets.
Which of the following statements is correct?
in a weak-form efficient market, it would be possible to earn abnormally high returns by looking for patterns in security prices.
The price of borrowing money is called
interest
During an economic recession, we could expect
interest rates to decrease.
During an economic expansion, we would expect
interest rates to increase.
____________ make money by buying and selling securities at bid ask prices.
investment dealers.
Which of the following statements is correct?
investment funds, such as mutual funds, sell shares to investors and use the funds to purchase securities.
Valerie bought 200 shares of Able stock today. Able stock has been trading for sometime on the NYSE. Valerie's purchase occurred in which market?
secondary market.
Ted currently owns 100 shares of a publicly traded stock which he would like to sell. Which one of the following provides the most efficient means for Ted to sell his shares?
secondary placement transaction.
The general level of interest rates tends to follow
the business cycle.
A highly liquid financial instrument with a maturity of 90 days would be traded in
the money market
If a firm needs to adjust its liquidity position, then it would participate in
the money market.
The term money market came about because
the securities traded in this market are a close substitute for cash.
The most common reason that corporate firms use the futures and options markets is
to hedge risk.
If investment bank analysts decide that the applicant firm has excellent prospective for raising capital then, they will offer a contract on:
underwriting basis.