Question 1

An example of a secondary market transaction involving a capital market security is

Accepted Answer

A) a new issue of a security with a very short maturity. 
B) a new issue of a security with a very long maturity. 
C) the transfer of a previously-issued security with a very short maturity. 
D) the transfer of a previously-issued security with a very long maturity.

Question 2

The investment banker prefers to avoid a negotiated purchase because it tends to be the least profitable arrangement for the investment banker.

Accepted Answer

A) True 
 B)False

Question 3

The investment banker does NOT underwrite the securities to be issued in which of the following?

Accepted Answer

A) initial public offering 
B) primary market transaction 
C) firm commitment 
D) best efforts

Question 4

General Electric (GE)has been a public company for many years with its common stock traded on the New York Stock Exchange.If GE decides to sell 500,000 shares of new common stock,the transaction will be describe as

Accepted Answer

A) an initial public offering. 
B) a secondary market transaction because GE common stock has been trading for years. 
C) a seasoned equity offering because GE has sold common stock before. 
D) a money market transaction because GE raises new money to fund its business.

Question 5

Which of the following premiums is NOT factored into the price of a long-term Treasury bond?

Accepted Answer

A) a real risk-free interest rate 
B) a maturity premium 
C) a default-risk premium 
D) an inflation-risk premium

Question 6

Which of the following statements about investment banking in the United States is MOST correct?

Accepted Answer

A) Investing banking is dominated by a few,very large,stand-alone investment banking firms,such as Bear Stearns. 
B) The investment banking industry is dominated by large banks that are also investment bankers. 
C) The top five banks involved in investment banking account for less than 25% of the industry's total market share. 
D) The investment banking industry became more competitive following the financial crisis in 2007 and 2008.

Question 7

During the period 1987 to 2011,the average yield on 3-Month U.S.Treasury bills was 3.85%,the average inflation rate was 2.92%,the average yield on 30-year Treasury bonds was 6.14%,and the average return on 30-year AAA-Rated Corporate Bonds was 7.00%.The real risk-free short-term interest rate is

Accepted Answer

A) 0.90%. 
B) 2.13%. 
C) 2.97%. 
D) 4.76%.

Question 8

The current rate of return on a one-year U.S.Government security is 3%.The rate of return on a two-year U.S.Government security is 5%.According to the expectations theory,what is the return on a one-year U.S.Government security purchased one year from today?

Accepted Answer

The answer of The current rate of return on a...

Question 9

All of the following securities are sold in money markets EXCEPT

Accepted Answer

A) common stock. 
B) commercial paper. 
C) 3-month U.S.Treasury Bills. 
D) 6-month certificates of deposit.

Question 10

Investment banking firms offer to facilitate the sale of securities to the public in a variety of ways.Which of the following methods guarantees the corporation with a pre-determined price for the securities?

Accepted Answer

A) a best efforts basis 
B) a commission basis 
C) a competitive bid 
D) an underwriting

Question 11

The stock market with the most stringent listing requirements is the

Accepted Answer

A) New York Stock Exchange (NYS
E) . 
B) NASDAQ Stock Market. 
C) American Stock Exchange (AMEX). 
D) All organized exchanges have the same listing requirements in order to make trading fair for all investors.

Question 12

A liquidity-risk premium is the additional return required by investors for securities that cannot quickly be converted into cash at a reasonably predictable price.

Accepted Answer