Question 1

Which of the following statements is CORRECT?

Accepted Answer

A) While the distinctions are becoming blurred, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise capital from other parties. 
B) The NYSE operates as an auction market, whereas NASDAQ is an example of a dealer market. 
C) Money market mutual funds usually invest their money in a well-diversified portfolio of liquid common stocks. 
D) Money markets are markets for long-term debt and common stocks. 
E) A liquid security is a security whose value is derived from the price of some other "underlying" asset. 
A) While the distinctions are becoming blurred, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise capital from other parties. 
B) The NYSE operates as an auction market, whereas NASDAQ is an example of a dealer market. 
C) Money market mutual funds usually invest their money in a well-diversified portfolio of liquid common stocks. 
D) Money markets are markets for long-term debt and common stocks. 
E) A liquid security is a security whose value is derived from the price of some other "underlying" asset.

Question 2

The term IPO stands for "individual purchase order," as when an individual (as opposed to an institution)places an order to buy a stock.

Accepted Answer

A) True 
 B)False

Question 3

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?

Accepted Answer

A) This is an example of a direct transfer of capital. 
B) This is an example of a primary market transaction. 
C) This is an example of an exchange of physical assets. 
D) This is an example of a money market transaction. 
E) This is an example of a derivative market transaction. 
A) This is an example of a direct transfer of capital. 
B) This is an example of a primary market transaction. 
C) This is an example of an exchange of physical assets. 
D) This is an example of a money market transaction. 
E) This is an example of a derivative market transaction.

Question 4

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.

Accepted Answer

A) True 
 B)False

Question 5

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.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is a primary market transaction?

Accepted Answer

A) You sell 200 shares of IBM stock on the NYSE through your broker. 
B) 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. 
C) IBM issues 2,000,000 shares of new stock and sells them to the public through an investment banker. 
D) One financial institution buys 200,000 shares of IBM stock from another institution. An investment banker arranges the transaction. 
E) IBM sells 2,000,000 shares of treasury stock to its employees when they exercise options that were granted in prior years. 
A) You sell 200 shares of IBM stock on the NYSE through your broker. 
B) 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. 
C) IBM issues 2,000,000 shares of new stock and sells them to the public through an investment banker. 
D) One financial institution buys 200,000 shares of IBM stock from another institution. An investment banker arranges the transaction. 
E) IBM sells 2,000,000 shares of treasury stock to its employees when they exercise options that were granted in prior years.

Question 7

Which of the following statements is CORRECT?

Accepted Answer

A) Hedge funds are legal in Europe and Asia, but they are not permitted to operate in the United States. 
B) Hedge funds are legal in the United States, but they are not permitted to operate in Europe or Asia. 
C) Hedge funds have more in common with investment banks than with any other type of financial institution. 
D) Hedge funds have more in common with commercial banks than with any other type of financial institution. 
E) Hedge funds are not as highly regulated as most other types of financial institutions. The justification for this light regulation is that only "sophisticated investors" (i.e., those with high net worths and high incomes) are permitted to invest in these funds, and these investors supposedly can do any necessary "due diligence" on their own rather than have it done by the SEC or some other regulator. 
A) Hedge funds are legal in Europe and Asia, but they are not permitted to operate in the United States. 
B) Hedge funds are legal in the United States, but they are not permitted to operate in Europe or Asia. 
C) Hedge funds have more in common with investment banks than with any other type of financial institution. 
D) Hedge funds have more in common with commercial banks than with any other type of financial institution. 
E) Hedge funds are not as highly regulated as most other types of financial institutions. The justification for this light regulation is that only "sophisticated investors" (i.e., those with high net worths and high incomes) are permitted to invest in these funds, and these investors supposedly can do any necessary "due diligence" on their own rather than have it done by the SEC or some other regulator.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

In a "Dutch auction" for new stock,individual investors place bids for shares directly.Each potential bidder indicates the price he or she is willing to pay and how many shares he or she will purchase at that price.The highest price that permits the company to sell all the shares it wants to sell is determined,and this is the "market clearing price." All bidders who specified this price or higher are allowed to purchase their shares at the market clearing price.

Accepted Answer

A) True 
 B)False

Question 10

Money markets are markets for

Accepted Answer

A) Foreign currencies. 
B) Consumer automobile loans. 
C) Common stocks. 
D) Long-term bonds. 
E) Short-term debt securities such as Treasury bills and commercial paper. 
A) Foreign currencies. 
B) Consumer automobile loans. 
C) Common stocks. 
D) Long-term bonds. 
E) Short-term debt securities such as Treasury bills and commercial paper.

Question 11

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.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements is CORRECT?

Accepted Answer

A) The NYSE does not exist as a physical location. Rather it represents a loose collection of dealers who trade stock electronically. 
B) An example of a primary market transaction would be your uncle transferring 100 shares of Walmart stock to you as a birthday gift. 
C) Capital market instruments include both long-term debt and common stocks. 
D) 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. 
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. 
A) The NYSE does not exist as a physical location. Rather it represents a loose collection of dealers who trade stock electronically. 
B) An example of a primary market transaction would be your uncle transferring 100 shares of Walmart stock to you as a birthday gift. 
C) Capital market instruments include both long-term debt and common stocks. 
D) 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. 
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.

Question 13

Which of the following statements is CORRECT?

Accepted Answer

A) The New York Stock Exchange is an auction market, and it has a physical location. 
B) Home mortgage loans are traded in the money market. 
C) If an investor sells shares of stock through a broker, then it would be a primary market transaction. 
D) Capital markets deal only with common stocks and other equity securities. 
E) While the distinctions are blurring, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise capital from other parties. 
A) The New York Stock Exchange is an auction market, and it has a physical location. 
B) Home mortgage loans are traded in the money market. 
C) If an investor sells shares of stock through a broker, then it would be a primary market transaction. 
D) Capital markets deal only with common stocks and other equity securities. 
E) While the distinctions are blurring, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise capital from other parties.

Which of the following statements is CORRECT?

The term IPO stands for "individual purchase order," as when an individual (as opposed to an institution)places an order to buy a stock.

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 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.

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.

Which of the following is a primary market transaction?

Which of the following statements is CORRECT?

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

Money markets are markets for

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.

Which of the following statements is CORRECT?

Which of the following statements is CORRECT?

An Overview of Financial Management

Financial Statements, cash Flow, and Taxes

Analysis of Financial Statements

Time Value of Money

Interest Rates

Bonds and Their Valuation

Risk and Rates of Return

Stocks and Their Valuation

The Cost of Capital

The Basics of Capital Budgeting

Cash Flow Estimation and Risk Analysis

Real Options and Other Topics in Capital Budgeting

Capital Structure and Leverage

Distributions to Shareholders: Dividends and Share Repurchases

Working Capital Management

Financial Planning and Forecasting

Derivatives and Risk Management

Multinational Financial Management

Hybrid Financing: Preferred Stock, leasing, warrants, and Convertibles

Mergers and Acquisitions

Continuous Compounding and Discounting

Zero Coupon Bonds

Bankruptcy and Reorganization

Calculating Beta Coefficients

Using the Capm to Estimate the Risk-Adjusted Cost of Capital

Techniques for Measuring Beta Risk

Degree of Leverage

Filters

Exam 2: Financial Markets and Institutions

Which of the following statements is CORRECT?

The term IPO stands for "individual purchase order," as when an individual (as opposed to an institution)places an order to buy a stock.

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 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.

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.

Which of the following is a primary market transaction?

Which of the following statements is CORRECT?

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

Money markets are markets for

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.

Which of the following statements is CORRECT?

Which of the following statements is CORRECT?

An Overview of Financial Management

Financial Statements, cash Flow, and Taxes

Analysis of Financial Statements

Time Value of Money

Interest Rates

Bonds and Their Valuation

Risk and Rates of Return

Stocks and Their Valuation

The Cost of Capital

The Basics of Capital Budgeting

Cash Flow Estimation and Risk Analysis

Real Options and Other Topics in Capital Budgeting

Capital Structure and Leverage

Distributions to Shareholders: Dividends and Share Repurchases

Working Capital Management

Financial Planning and Forecasting

Derivatives and Risk Management

Multinational Financial Management

Hybrid Financing: Preferred Stock, leasing, warrants, and Convertibles

Mergers and Acquisitions

Continuous Compounding and Discounting

Zero Coupon Bonds

Bankruptcy and Reorganization

Calculating Beta Coefficients

Using the Capm to Estimate the Risk-Adjusted Cost of Capital

Techniques for Measuring Beta Risk

Degree of Leverage

Filters