Question 1

​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  True

Question 2

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.

Accepted Answer

A) True 
 B)False

Question 3

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.

Accepted Answer

A) True 
 B)False  True

Question 4

Which of the following statements is NOT CORRECT?

Accepted Answer

A)   When a corporation's shares are owned by a few individuals,we say that the firm is "closely,or privately,held."
B)   "Going public" establishes a firm's true intrinsic value and ensures that a liquid market will always exist for the firm's shares.
C)   The stock of publicly owned companies must generally be registered with and reported to a regulatory agency such as the SEC.
D)   When stock in a closely held corporation is offered to the public for the first time,the transaction is called "going public,or an IPO," and the market for such stock is called the new issue or IPO market.
E)   It is possible for a firm to go public and yet not raise any additional new capital for the firm itself.

Question 5

A share of common stock is not a derivative,but an option to buy the stock is a derivative because the value of the option is derived from the value of the stock.

Accepted Answer

A) True 
 B)False

Question 6

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.

Accepted Answer

A) True 
 B)False

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.

Question 8

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.

Question 9

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."

Accepted Answer

A) True 
 B)False  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.

Question 11

Trades on the NYSE are generally completed by having a brokerage firm acting as a "dealer" buy securities and adding them to its inventory or selling from its inventory.The NASDAQ,on the other hand,operates as an auction market,where buyers offer to buy,and sellers to sell,and the price is negotiated on the floor of the exchange.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements is CORRECT?

Accepted Answer

A)   The term "IPO" stands for Introductory Price Offered,and it is the price at which shares of a new company are offered to the public.
B)   IPO prices are generally established by the market,and buyers of the new stock must pay the price that prevails at the close of trading on the day the stock is offered to the public.
C)   In a "Dutch auction," investors who want to buy shares in an IPO submit bids indicating how many shares they want to buy and the price they are willing to pay.The company determines how many shares it wants to sell.The highest price that enables the company to sell the desired number of shares is the price that all buyers must pay.
D)   It is possible that the price set in an IPO is so high that investors will refuse to buy the number of shares that the company wants to sell.In this situation,the IPO is said to be oversubscribed.
E)   It is possible that the price set in an IPO is so low that investors will want to buy more shares than the company wants to sell.In that case,the company will have to issue more shares than it wants to sell.

Question 13

The NYSE is defined as a "primary" market because it is one of the largest and most important stock markets in the world.

Accepted Answer

A) True 
 B)False

Question 14

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.

Question 15

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 16

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.

Question 17

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 18

Which of the following statements is CORRECT?

Accepted Answer

A)   The most important difference between spot markets versus futures markets is the maturity of the instruments that are traded.Spot market transactions involve securities that have maturities of less than one year whereas futures markets transactions involve securities with maturities greater than one year.
B)   Capital market transactions involve only preferred stock or common stock.
C)   If General Electric were to issue new stock this year,this would be considered a secondary market transaction since the company already has stock outstanding.
D)   Both NASDAQ dealers and "specialists" on the NYSE hold inventories of stocks.
E)   Money market transactions do not involve securities denominated in currencies other than the U.S.dollar.

Question 19

The "over-the-counter" market received its name years ago because brokerage firms would hold inventories of stocks and then sell them by literally passing them over the counter to the buyer.

Accepted Answer

A) True 
 B)False

Question 20

The NYSE is defined as a "spot" market purely and simply because it has a physical location.The NASDAQ,on the other hand,is not a spot market because it has no one central location.

Accepted Answer

A) True 
 B)False

Exam 2: Financial Markets and Institutions

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.

Correct Answer
verified
True

Correct Answer
verified

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.

Correct Answer
verified
True

Which of the following statements is NOT CORRECT?

Correct Answer
verified

A share of common stock is not a derivative,but an option to buy the stock is a derivative because the value of the option is derived from the value of the stock.

Correct Answer
verified

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.

Correct Answer
verified

Which of the following statements is CORRECT?

Correct Answer
verified

Which of the following statements is CORRECT?

Correct Answer
verified

Correct Answer
verified
False

Money markets are markets for

Correct Answer
verified

Correct Answer
verified

Which of the following statements is CORRECT?

Correct Answer
verified

The NYSE is defined as a "primary" market because it is one of the largest and most important stock markets in the world.

Correct Answer
verified

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?

Correct Answer
verified

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.

Correct Answer
verified

Which of the following statements is CORRECT?

Correct Answer
verified

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.

Correct Answer
verified

Which of the following statements is CORRECT?

Correct Answer
verified

The "over-the-counter" market received its name years ago because brokerage firms would hold inventories of stocks and then sell them by literally passing them over the counter to the buyer.

Correct Answer
verified

The NYSE is defined as a "spot" market purely and simply because it has a physical location.The NASDAQ,on the other hand,is not a spot market because it has no one central location.

Correct Answer
verified

Exam 2: Financial Markets and Institutions

​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.

Correct AnswerverifiedTrue

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedTrue

Which of the following statements is NOT CORRECT?

Correct AnswerverifiedShow Answer

A share of common stock is not a derivative,but an option to buy the stock is a derivative because the value of the option is derived from the value of the stock.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Which of the following statements is CORRECT?

Correct AnswerverifiedShow Answer

Which of the following statements is CORRECT?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedFalse

Money markets are markets for

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is CORRECT?

Correct AnswerverifiedShow Answer

The NYSE is defined as a "primary" market because it is one of the largest and most important stock markets in the world.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Which of the following statements is CORRECT?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Which of the following statements is CORRECT?

Correct AnswerverifiedShow Answer

The "over-the-counter" market received its name years ago because brokerage firms would hold inventories of stocks and then sell them by literally passing them over the counter to the buyer.

Correct AnswerverifiedShow Answer

The NYSE is defined as a "spot" market purely and simply because it has a physical location.The NASDAQ,on the other hand,is not a spot market because it has no one central location.

Correct AnswerverifiedShow Answer

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.

Correct Answer
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True

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True

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False

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