Exam 3: Financial Markets and the Investment Banking Process

The percentage of flotation costs associated with a new equity issue is usually quite high for small issues as a consequence of certain fixed costs which must be incurred regardless of the issue size.

Market efficiency refers only to the speed at which financial transactions occur.

The conversion of stock exchanges from not-for-profit mutual ownership organizations to for profit organizations is called what?

The cost of meeting SEC and possible additional state reporting requirements regarding disclosure of certain financial information about the firm, the danger of losing control, and the possibility of an inactive market or low stock price are all potential disadvantages of going public.

____ represent(s) ownership in a company and entitle(s) the holder to future cash distributions from the operations of the firm.

If an individual investor buys and sells existing stocks through a broker, these are primary market transactions.

Investment bankers are not really like commercial "bankers" in the sense of taking deposits and issuing loans; rather, they help firms issue securities in the secondary market and their activities are limited to raising new equity capital.

If you purchase stock from a firm conducting a seasoned equity offering, this transaction will take place in ____ markets and ____ markets.

Which of the following assets are traded in the derivative markets?

Which of the following statements about listing on a stock exchange is most correct?

You have just purchased shares in the Hi-Tech Long-Term Bond Fund, a mutual fund that invests in long-term corporate bonds.Your purchase constitutes

When stock in a closely held corporation is offered to the public for the first time the transaction is called "going public" and the market for such stock is called the initial public offering, or IPO, market.

The primary role of financial markets is to help bring together borrowers and savers by facilitating the flow of funds from individuals and businesses that have surplus funds to individuals, businesses, and governments that have needs for funds in excess of their income.

Which of the following statements is correct?

The OTC market is a physical exchange, much like the New York Stock Exchange, where securities dealers provide trading in unlisted securities.

The derivatives market allows for

If Firm A owns no real assets of its own, but simply accepts the savings of individuals and invests them in financial assets issued by other firms or individuals, Firm A is a financial intermediary.

A prospectus is a document describing a new security issue and the issuing company.

____ efficiency states that all information contained in past price movements only is fully reflected in the current market prices.

Most American investors who are interested in investing in companies listed on foreign exchanges do so by purchasing ____.