financial markets - CHAPTER 4 THE FINANCIAL ENVIRONMENT:...

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(Difficulty: E = Easy, M = Medium, and T = Tough) Multiple Choice: Conceptual Easy: Financial markets Answer: d Diff: E 1 . The New York Stock Exchange is primarily a. A secondary market. b. A physical location auction market. c. An over-the-counter market. d. Statements a and b are correct. e. Statements b and c are correct. Financial markets Answer: c Diff: E 2 . Which of the following statements is most 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 is buying 100 shares of Wal-Mart stock from your uncle. c. Capital market instruments include long-term debt and common stock. d. Statements b and c are correct. e. Statements a, b, and c are correct. Financial markets Answer: d Diff: E 3 . Which of the following statements is most correct? a. If an investor sells 100 shares of Microsoft to his brother-in-law, this is a primary market transaction. b. Private securities are generally less liquid than publicly traded securities. c. Money markets are where short-term, liquid securities are traded, whereas capital markets represent the markets for long-term debt and common stock. d. Statements b and c are correct. e. All of the statements above are correct. Chapter 4 - Page 1 CHAPTER 4 THE FINANCIAL ENVIRONMENT: MARKETS, INSTITUTIONS, AND INTEREST RATES
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Financial markets Answer: d Diff: E 4 . Which of the following is a secondary market transaction? a. You sell 200 shares of IBM stock in the open market. b. You buy 200 shares of IBM stock from your brother. c. IBM issues 2 million shares of new stock to the public. d. Statements a and b are correct. e. All of the statements above are correct. Financial markets Answer: c Diff: E 5 . Which of the following statements is most correct? a. Money markets are markets for long-term debt and common stocks. b. Primary markets are markets where existing securities are traded among investors. c. A derivative is a security whose value is derived from the price of some other “underlying” asset. d. Statements a and b are correct. e. Statements b and c are correct. Financial markets Answer: c Diff: E N 6 . Which of the following statements is most correct? a. While the distinctions are blurring, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise capital from other parties. b. Money market mutual funds usually invest their money in a well- diversified portfolio of liquid common stocks. c. The NYSE operates as an auction market, whereas NASDAQ is an example of a dealer market. d. Statements b and c are correct. e. All of the statements above are correct. Capital market instruments
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financial markets - CHAPTER 4 THE FINANCIAL ENVIRONMENT:...

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