Chap003 - Chapter 3 How Securities Are Traded Multiple...

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Chapter 3 How Securities Are Traded Multiple Choice Questions 1. A purchase of a new issue of stock takes place A) in the secondary market. B) in the primary market. C) usually with the assistance of an investment banker. D) A and B. E) B and C. Answer: E Difficulty: Easy Rationale: Funds from the sale of new issues flow to the issuing corporation, making this a primary market transaction. Investment bankers usually assist by pricing the issue and finding buyers. 2. The following statements regarding the specialist are true : 3. Investment bankers Bodie, Investments, Sixth Edition 43
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Chapter 3 How Securities Are Traded 4. In a "best-efforts" basis 5. The secondary market consists of A) transactions on the AMEX. B) transactions in the OTC market. C) transactions through the investment banker. D) A and B. E) A, B, and C. Answer: D Difficulty: Moderate Rationale: The secondary market consists of transactions on the organized exchanges and in the OTC market. The investment banker is involved in the placement of new issues in the primary market.
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