RVP STUDY GUIDE 2
Which of the following statements would describe the Fourth Market? A) A market for institutional investors in which large blocks of stock, both listed and unlisted, trade in transactions unassisted by broker-dealers. B) These transactions take place through electronic communications networks (ECNs). ECNs are open 24 hours a day and act solely as principals C) The after-hours market D) These transactions take place through electronic communications networks (ECNs) which are open during normal trading hours and act solely as principals
A) A market for institutional investors in which large blocks of stock, both listed and unlisted, trade in transactions unassisted by broker-dealers. The Fourth Market is a market for institutional investors in which blocks of stock trade through electronic communications networks (ECNs) that are open 24 hours a day acting as agents.
For primary and secondary markets, which of the following is TRUE? A) In the primary market, securities are sold to the public and the issuer receives the sale proceeds. B) In the primary market, securities are purchased from and sold to individual investors. C) In the secondary market, all sales proceeds go to the issuer. D) In the secondary market, securities transactions cannot take place on an exchange.
A) In the primary market, securities are sold to the public and the issuer receives the sale proceeds. In the primary market, the issuer of the securities receives the proceeds generated by the sale of the securities. In the secondary markets, such as an exchange or over-the-counter (OTC) securities trade between investors, one sells securities to another, and the issuer is not involved in the transaction.
Which of the following is TRUE regarding the primary market? A) Issuer transactions occur in the primary market. B) Price is determined by supply and demand. C) The NYSE is an example of a primary market. D) It is regulated by the Securities Act of 1934.
A) Issuer transactions occur in the primary market. The primary market is where securities are sold to the investing public through issuer transactions. It is regulated by the Securities Act of 1933. The NYSE is an example of a secondary market where price is determined by supply and demand.
Which of the following statements is TRUE? A) Municipalities, the federal government, and corporations can raise funds in the capital markets. B) Only municipalities can raise funds in the capital markets. C) Only corporations can raise funds in the capital markets. D) Only the federal government and municipalities can raise funds in the capital markets.
A) Municipalities, the federal government, and corporations can raise funds in the capital markets. Capital markets are a source of financing for corporations, municipalities, and governments.
A market in which exchange-listed securities are traded in the OTC market would BEST be described as the A) Third Market B) Second Market C) Fourth Market D) First Market
A) Third Market Broker-dealers registered as OTC market makers in exchange-listed securities may execute transactions in the Third Market. All securities listed on the NYSE and most securities listed on the regional exchanges are eligible for OTC trading as long as the trades are reported to the Consolidated Tape within 10 seconds of execution.
A corporation sells shares to the investing public in order to raise capital. This is known as A) an issuer transaction B) an exchange market execution C) a secondary market transaction D) a primary, or investor-to-investor, transaction
A) an issuer transaction The primary market is where securities are sold to the investing public by the issuer wishing to raise capital. These are known as primary market or issuer transactions.
All of the following are true regarding the term market EXCEPT A) it is unique to the U.S. securities industry B) it includes stock exchanges C) it is where buyers and sellers come together for the purpose of trading assets D) it can be a physical place or an electronic venue
A) it is unique to the U.S. securities industry The term market is used to describe any physical place or electronic venue where buyers and sellers can come together for the purpose of trading assets. Markets can be found in nearly every nation in the world and would include stock markets and other trading venues where they exist.
In the capital markets, securities such as stocks and bonds can be A) offered by the public sector only B) purchased and sold by institutions only C) purchased and sold by individuals only D) offered by both public and private sectors
D) offered by both public and private sectors In capital markets, both public and private sectors sell securities in order to raise funds. These securities can be bought and sold (traded) in the capital markets by individuals and institutions alike.
Raising funds is generally accomplished by corporations through the issuance of stock (equity) or bonds (debt). This is done in A) the currency market B) the secondary market C) the capital market D) the funding market
C) the capital market The issuance of stock or bonds by corporations to raise new funds takes place in the capital market.
A corporation needs to build a new manufacturing facility costing several hundred million dollars. In which of the following markets could this new capital be raised? A) Municipal bond market B) Capital market C) Government bond market D) Secondary market
B) Capital market Capital markets are a source of financing for corporations, municipalities, and governments. Capital can be raised by issuing equities or debt and offering the securities to investors in an initial public offering (IPO) or an additional public offering (APO). Note that bonds might be issued by a municipality or the federal government to raise money, but corporations (as noted in this question) do not issue government bonds, either federal or municipal.
A stock's market value is directly determined by which of the following? A) Vote of the stockholders B) Supply and demand C) Board of directors D) Company's financial condition
B) Supply and demand The market value of stock is directly determined by supply and demand and only indirectly by the remaining choices, such as a company's financial condition.
It is expected that financial markets A) be limited to stocks and bonds and not include derivatives like options. B) have transparent pricing for assets C) be nonregulated to allow for free trade D) have securities prices determined by a board of directors
B) have transparent pricing for assets A number of different assets, such as equities (stocks), debt (bonds), currencies, and derivative products like options, can be offered and traded in the financial markets. These markets are expected to have transparent pricing aligning with supply and demand and to adhere to basic rules and regulations. Reference: 1.2.1 in the License Exam Manual
When investors buy and sell securities to and from one another, these transactions occur A) on exchanges only B) in the secondary market C) in the over-the-counter market only D) in the primary market
B) in the secondary market Primary market transactions involve the issuer or someone acting on behalf of the issuer, such as an underwriter. Secondary markets are where investors can buy and sell securities to and from one another. The secondary market includes exchanges and the OTC market.
For the primary market, which of the following is TRUE? A) Issuer transactions occur in the primary market, and securities are offered at a public offering price. B) Issuer transactions occur in the primary market, and price is determined by supply and demand. C) All U.S. exchanges are primary markets, where securities are offered at a public offering price. D) All U.S. exchanges are primary markets, where price is determined by supply and demand.
A) Issuer transactions occur in the primary market, and securities are offered at a public offering price. The primary market, regulated by the 1933 Securities Exchange Act, is where securities are offered by issuers (issuer transactions) at an offering price. The sales proceeds of these transactions go to the issuer.
