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Unformatted text preview: Financial markets Answer: c 1 . Which of the following statements is CORRECT? 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. Hedge funds Answer: d 2 . Which of the following statements is CORRECT? 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 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 the necessary due diligence on their own rather than have it done by the SEC or some other regulator....
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