Question 1

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 2

Which of the following is an example of a capital market instrument?

Accepted Answer

A)  Commercial paper.
B)  Preferred stock.
C)  U.S. Treasury bills.
D)  Banker's acceptances.
E)  Money market mutual funds.F) A) and E)
G) C) and D)

Question 3

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 weighted average of those returns,using each stock's total market value,is then calculated,and that average return is often used as an indicator of the "return on the market."

Accepted Answer

A) True 
 B)False

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

Question 6

A publicly owned corporation is a company whose shares are held by the investing public,which may include other corporations as well as institutional investors.

Accepted Answer

A) True 
 B)False

Question 7

You recently sold 200 shares of Disney stock,and the transfer was made through a broker.This is an example of:

Accepted Answer

A)  A money market transaction.
B)  A primary market transaction.
C)  A secondary market transaction.
D)  A futures market transaction.
E)  An over-the-counter market transaction.F) A) and E)
G) B) and E) C

Question 8

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 9

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  True

Question 10

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 11

Hedge funds are somewhat similar to mutual funds.The primary differences are that hedge funds are less highly regulated,have more flexibility regarding what they can buy,and restrict their investors to wealthy,sophisticated individuals and institutions.

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

Question 13

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

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is CORRECT?

Accepted Answer

A)  If you purchase 100 shares of Disney stock from your brother-in-law, this is an example of a primary market transaction.
B)  If Disney issues additional shares of common stock through an investment banker, this would be a secondary market transaction.
C)  The NYSE is an example of an over-the-counter market.
D)  Only institutions, and not individuals, can engage in derivative market transactions.
E)  As they are generally defined, money market transactions involve debt securities with maturities of less than one year.F) None of the above
G) B) and D)

Question 16

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 17

If you wanted to know what rate of return stocks have provided in the past,you could examine data on the Dow Jones Industrial Index,the S&P 500 Index,or the NASDAQ Index.

Accepted Answer

A) True 
 B)False

Question 18

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 19

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 20

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) A) and D)
G) C) and E)

Exam 2: Financial Markets and Institutions

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
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Which of the following is an example of a capital market instrument?

Correct Answer
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Correct Answer
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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
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Which of the following statements is NOT CORRECT?

Correct Answer
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B

A publicly owned corporation is a company whose shares are held by the investing public,which may include other corporations as well as institutional investors.

Correct Answer
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You recently sold 200 shares of Disney stock,and the transfer was made through a broker.This is an example of:

Correct Answer
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C

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
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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
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True

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
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Hedge funds are somewhat similar to mutual funds.The primary differences are that hedge funds are less highly regulated,have more flexibility regarding what they can buy,and restrict their investors to wealthy,sophisticated individuals and institutions.

Correct Answer
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Which of the following statements is CORRECT?

Correct Answer
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Correct Answer
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Correct Answer
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Which of the following statements is CORRECT?

Correct Answer
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Correct Answer
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If you wanted to know what rate of return stocks have provided in the past,you could examine data on the Dow Jones Industrial Index,the S&P 500 Index,or the NASDAQ Index.

Correct Answer
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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
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Correct Answer
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Which of the following statements is CORRECT?

Correct Answer
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Exam 2: Financial Markets and Institutions

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

Which of the following is an example of a capital market instrument?

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

Which of the following statements is NOT CORRECT?

Correct AnswerverifiedB

A publicly owned corporation is a company whose shares are held by the investing public,which may include other corporations as well as institutional investors.

Correct AnswerverifiedShow Answer

You recently sold 200 shares of Disney stock,and the transfer was made through a broker.This is an example of:

Correct AnswerverifiedC

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

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 AnswerverifiedTrue

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

Hedge funds are somewhat similar to mutual funds.The primary differences are that hedge funds are less highly regulated,have more flexibility regarding what they can buy,and restrict their investors to wealthy,sophisticated individuals and institutions.

Correct AnswerverifiedShow Answer

Which of the following statements is CORRECT?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is CORRECT?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If you wanted to know what rate of return stocks have provided in the past,you could examine data on the Dow Jones Industrial Index,the S&P 500 Index,or the NASDAQ Index.

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

Correct AnswerverifiedShow Answer

Which of the following statements is CORRECT?

Correct AnswerverifiedShow Answer

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B

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C

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True

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