Question 1

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 Wal-Mart 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.F) B) and E)
G) B) and D)

Question 2

Investment banking houses today often have divisions that engage in traditional investment banking and other divisions that engage in regular commercial banking.

Accepted Answer

A) True 
 B)False

Question 3

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.F) C) and E)
G) C) and D)

Question 4

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

Question 5

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 such investors supposedly can do any necessary "due diligence" on their own rather than have it done by the SEC or some other regulator.F) A) and D)
G) A) and E)

Question 6

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.F) C) and E)
G) D) and E)

Question 7

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.F) A) and E)
G) B) and C)

Question 8

The term "Dutch auction" in a new stock offering refers to a situation where each potential bidder indicates the price they are willing to pay and how many shares they will buy at that price. The highest price that permits the company to sell all the shares it wants to sell is determined--it is the "market clearing price," and all bidders who specified that price or higher are allowed to buy their shares at the market clearing price.

Accepted Answer

A) True 
 B)False

Question 9

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 10

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 11

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

Question 12

Financial institutions are more diversified today than they were in the past, when federal laws kept investment banking houses, commercial banks, insurance companies, and so on quite separate. Today the larger financial corporations offer a variety of services, ranging from checking accounts, to insurance, to underwriting securities, to stock brokerages.

Accepted Answer

A) True 
 B)False

Question 13

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

Exam 2: Financial Markets and Institutions

Which of the following is a primary market transaction?

Correct Answer
verified

Investment banking houses today often have divisions that engage in traditional investment banking and other divisions that engage in regular commercial banking.

Correct Answer
verified

Which of the following statements is CORRECT?

Correct Answer
verified

Which of the following statements is CORRECT?

Correct Answer
verified

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

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 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

Correct Answer
verified

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

Money markets are markets for

Correct Answer
verified

Which of the following statements is CORRECT?

Correct Answer
verified

Exam 2: Financial Markets and Institutions

Which of the following is a primary market transaction?

Correct AnswerverifiedShow Answer

Investment banking houses today often have divisions that engage in traditional investment banking and other divisions that engage in regular commercial banking.

Correct AnswerverifiedShow Answer

Which of the following statements is CORRECT?

Correct AnswerverifiedShow Answer

Which of the following statements is CORRECT?

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 AnswerverifiedShow Answer

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 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

Correct AnswerverifiedShow Answer

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 AnswerverifiedShow Answer

Money markets are markets for

Correct AnswerverifiedShow Answer

Which of the following statements is CORRECT?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified