Test1Review - Chapter 1 Introduction 1 Primary markets are...

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Chapter 1 Introduction 1. Primary markets are markets where users of funds raise cash by sehling securities to funds suppliers. Answer: True Page: 4 Leveh2 Easy 2. Secondary markets are markets used by ckrpnrations to raise cash by issuing securities for a short time period. Answer: False Page: 5 Level: Easy 3. In a private placement, the isquar typically sells the entire issue to one or only a few institutional buyerc. Answer: True Page: 4 Level2 Easy 4. The NYSE is an example of a secondary market. @nswer: True Page: 6 Level: Easy 5. The NASDAQ market is an example of an over the counter market, Answer: True Page: 6 6. Money markets are the markets for securities with an original maturitx of 1 year or less. Answer: True Page: 7 Level: Easy 7. Eurgdollar bonds are dollar denominated bonds issued outcide the United States. Answer: True Page: 20 Level: Easy 8. Financial intermediaries such as banks dypically have assets that are riskier than their liabilities. Answer: Trua Page: 16 Level: Easy 9. Spinning is dhe process of alhocating shares in a 'hot' IPO to certain favored clients of investment banking firms in exchange for receiving additional investment banking business. Answer: True Page: 5 Level: Easy 10. Many stock research analysts of investment banking firms have baen accused of icsuing overly optimistic stock research reports on firms in order to help support the investment bankers' underwriting business. Answer: True Page: 6 Level: Medium 11. An individual buying an AT&T corporate bond in the secondary market is an example of direct finance. Answer: True Page: 13 Level: Medium 12. A derivative security is a security that has a maturity of greater than one year. Answer: False Page: 10 Level: Easy 13. What factors are encouraging financial institutions to offer overlapping financial services such as banking, investment banking, brokerage, etc? I. Regulatory changes allowing institutions to offer more services II. Technological improvements reducing the cost of providing financial services III. Increasing competition from full service global financial institutions IV. Reduction in the need to manage risk at financial institutions A) I only B) II and III only C) I, II and III only D) I, II and IV only E) I, II, III and IV Answer: C Page: 3 Level: Easy Use the following to answer questions 14-15: IBM creates and sells additional stock to the investment banker, Morgan Stanley. Morgan Stanley then resells the issue to
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the U.S. public.
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