Exam 2: Financial Markets

Each stock's rate of return in a given year consists of a dividend yield (which might be zero) plus a capital gains yield (which could be positive, negative, or zero). Such returns are calculated for all the stocks in the S&P 500. A simple average of those returns (which gives equal weight to each company in the S&P 500) is then calculated. That average is called the "return on the S&P Index," and it is often used as an indicator of the "return on the market."

Which of the following statements is CORRECT?

You recently sold 200 shares of Disney stock, and the transfer was made through a broker. This is an example of:

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.

Primary markets are large and important, while secondary markets are smaller and less important.

Which of the following statements is CORRECT?

When a corporation's shares are owned by a few individuals who are associated with the firm's management, we say that the stock is closely held.

The annual rate of return on any given stock can be found as the stock's dividend for the year plus the change in the stock's price during the year, divided by its beginning-of-year price. If you obtain such data on a large portfolio of stocks, like those in the S&P 500, find the rate of return on each stock, and then average those returns, this would give you an idea of stock market returns for the year in question.

Which of the following statements is NOT CORRECT?

Which of the following statements is CORRECT?

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.

Money markets are markets for

Which of the following statements is CORRECT?