Lecture_1_Questions

Lecture_1_Questions - Companies also are having a hard time...

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Lecture 1 Questions 1. a) Primary market financial instruments include issues of equity by firms initially going public. True or False? b) Primary market securities include the issue of additional equity or debt instruments of an already publicly traded firm. True or False? c) Markets that do not operate in a specified fixed location are called money markets. True or False? d) Capital Market Securities include notes, bonds and stocks. True or False? Answer: a) True, b) True, c) False, d) True. 2. What’s the importance of Commercial Papers? Answer: Commercial Papers are the unsecured debt notes issued by large, well-known companies to finance for the short-term. Investors buy these depending on the credit ratings of the companies but these ratings have proven to be misleading recently.
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Unformatted text preview: Companies also are having a hard time rolling over these papers at maturity because of lack of demand. 3. What are mortgage-backed securities? Answer: A mortgage-backed security is either an ownership claim in a pool of mortgages or an obligation that is secured by such a pool. 4. What is the difference between Eurodollars and Eurobonds? Answer: Eurodollars are dollar-denominated deposits at foreign banks or foreign branches of American banks. These deposits do not have to be in European banks. Eurobonds are bonds denominated in a currency other than that of the country in which it is issued. For instance a Eurodollar bond is a dollar-denominated bond sold outside US....
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