Question 1

The primary function of the money markets is to provide liquidity to businesses,governments,and individuals so that they can meet their short-term needs for cash.

Accepted Answer

A) True 
 B)False

Question 2

Most American investors who are interested in investing in companies listed on foreign exchanges do so by purchasing ____.

Accepted Answer

A)   Foreign stocks directly from brokers that do business in the country where the company is located.
B)   Foreign stocks from brokers in the United States.
C)   American Depository Receipts (ADRs) or mutual funds that hold international stocks.
D)   Stocks directly from the foreign company.
E)   None of the above.F) All of the above
G) B) and D)

Question 3

Which of the following is not a task that investment bankers perform?

Accepted Answer

A)   They buy securities from corporations trying to raise funds.
B)   They take deposits from investors and make loans to corporations.
C)   They resell securities purchased from corporations to investors.
D)   They help corporations design securities with the features that are most attractive to investors given existing market conditions.E) None of the above
F) All of the above

Question 4

____ efficiency states that all publicly available information is reflected in current market prices.

Accepted Answer

A)   Weak-form
B)   Semistrong-form
C)   Strong-form
D)   EconomicE) All of the above
F) None of the above

Question 5

One reason investment bankers form syndicates is to spread the risk of potential losses.

Accepted Answer

A) True 
 B)False

Question 6

After a new issue is brought to market it is the marginal investor who determines the price at which the stock will trade.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements is correct?

Accepted Answer

A)   The SEC must approve the price at which a stock is to be offered to the public when a company "goes public."
B)   If a company's stock is listed,then it trades in the over-the-counter (OT
C)  market.
C)   If the "preemptive right" exists in a company's charter,then the holders of its Class A shares have the right to receive a specified amount of dividends before dividends can be paid on Class B shares.
D)   A "prospectus" is a document which describes a company and the securities it plans to offer,and the prospectus generally must be approved by the SEC before a public offering of new securities can be made.
E)   The decision to list a company's stock generally is more important to the company than the decision to go public,i.e. ,listing has a larger impact on the way the firm is operated than does going public.F) A) and B)
G) B) and D)

Question 8

The primary role of financial markets is to help bring together borrowers and savers by facilitating the flow of funds from individuals and businesses that have surplus funds to individuals,businesses,and governments that have needs for funds in excess of their income.

Accepted Answer

A) True 
 B)False

Question 9

____ represent(s) ownership in a company and entitle(s) the holder to future cash distributions from the operations of the firm.

Accepted Answer

A)   Equity
B)   Debt
C)   Swaps
D)   OptionsE) A) and C)
F) A) and D)

Question 10

The conversion of stock exchanges from not-for-profit mutual ownership organizations to for profit organizations is called what?

Accepted Answer

A)   Going public
B)   Privatization
C)   Demutualization
D)   CommunionE) A) and C)
F) None of the above

Question 11

Which of the following assets are traded in the derivative markets?

Accepted Answer

A)   Stocks,bonds,and options
B)   Stocks,futures,and options
C)   Options,futures,and swaps
D)   Futures,bonds,and swapsE) A) and B)
F) None of the above

Question 12

Recently,Hale Corporation announced the sale of 2.5 million newly issued shares of its stock at a price of $21 per share.Hale sold the stock to investment bankers,who in turn sold it to individual and institutional investors.A transaction such as this is said to be a primary market transaction.

Accepted Answer

A) True 
 B)False

Question 13

Students emerging from college and entering the work force typically consume ____ than their income resulting in ____.

Accepted Answer

A)   less;saving
B)   more;borrowing
C)   less;borrowing
D)   more;savingE) A) and C)
F) A) and D)

Question 14

You have just purchased shares in the Hi-Tech Long-Term Bond Fund,a mutual fund that invests in long-term corporate bonds.Your purchase constitutes

Accepted Answer

A)   A direct transfer of funds.
B)   An indirect transfer through an investment banker.
C)   An indirect transfer through a financial intermediary.
D)   A money market transaction.
E)   All of the above.F) B) and C)
G) A) and C)

Question 15

____ efficiency states that all information contained in past price movements only is fully reflected in the current market prices.

Accepted Answer

A)   Weak-form
B)   Semistrong-form
C)   Strong-form
D)   EconomicE) A) and D)
F) A) and C)

Question 16

Going public establishes a true market value for the firm and ensures that a liquid market will always exist for the firm's shares.

Accepted Answer

A) True 
 B)False

Question 17

Large,well-known public companies can reduce the time required to register and issue securities by using a(n)

Accepted Answer

A)   Shelf registration.
B)   Subchapter S registration.
C)   Underwriting syndicate.
D)   Secondary market registration.
E)   "Red herring" registration.F) B) and E)
G) All of the above

Question 18

Money markets are markets for

Accepted Answer

A)   Foreign currency exchange.
B)   Consumer automobile loans.
C)   Corporate stocks.
D)   Long-term bonds.
E)   Short-term debt securities.F) A) and B)
G) A) and D)

Question 19

The largest segment of the U.S.debt market is represented by the bond markets,where government,corporate,and foreign bonds are traded.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements about listing on a stock exchange is most correct?

Accepted Answer

A)   Listing is a decision of more significance to a firm than going public.
B)   Any firm can be listed on the NYSE as long as it pays the listing fee.
C)   Listing provides a company with some "free" advertising,and status as a listed company may enhance the firm's prestige.
D)   Listing reduces the reporting requirements for firms,because listed firms file reports with the exchange rather than with the SEC.
E)   Statements b and c are both correct.F) B) and E)
G) C) and D)

Exam 3: Financial Markets and the Investment Banking Process

Most American investors who are interested in investing in companies listed on foreign exchanges do so by purchasing ____.

Correct AnswerverifiedShow Answer

____ efficiency states that all information contained in past price movements only is fully reflected in the current market prices.

Correct AnswerverifiedShow Answer

Students emerging from college and entering the work force typically consume ____ than their income resulting in ____.

Correct AnswerverifiedShow Answer

Going public establishes a true market value for the firm and ensures that a liquid market will always exist for the firm's shares.

Correct AnswerverifiedShow Answer

The largest segment of the U.S.debt market is represented by the bond markets,where government,corporate,and foreign bonds are traded.

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The conversion of stock exchanges from not-for-profit mutual ownership organizations to for profit organizations is called what?

Correct AnswerverifiedShow Answer

The primary role of financial markets is to help bring together borrowers and savers by facilitating the flow of funds from individuals and businesses that have surplus funds to individuals,businesses,and governments that have needs for funds in excess of their income.

Correct AnswerverifiedShow Answer

The primary function of the money markets is to provide liquidity to businesses,governments,and individuals so that they can meet their short-term needs for cash.

Correct AnswerverifiedShow Answer

Money markets are markets for

Correct AnswerverifiedShow Answer

Which of the following is not a task that investment bankers perform?

Correct AnswerverifiedShow Answer

____ represent(s) ownership in a company and entitle(s) the holder to future cash distributions from the operations of the firm.

Correct AnswerverifiedShow Answer

Large,well-known public companies can reduce the time required to register and issue securities by using a(n)

Correct AnswerverifiedShow Answer

After a new issue is brought to market it is the marginal investor who determines the price at which the stock will trade.

Correct AnswerverifiedShow Answer

Recently,Hale Corporation announced the sale of 2.5 million newly issued shares of its stock at a price of $21 per share.Hale sold the stock to investment bankers,who in turn sold it to individual and institutional investors.A transaction such as this is said to be a primary market transaction.

Correct AnswerverifiedShow Answer

____ efficiency states that all publicly available information is reflected in current market prices.

Correct AnswerverifiedShow Answer

Which of the following statements about listing on a stock exchange is most correct?

Correct AnswerverifiedShow Answer

You have just purchased shares in the Hi-Tech Long-Term Bond Fund,a mutual fund that invests in long-term corporate bonds.Your purchase constitutes

Correct AnswerverifiedShow Answer

Which of the following assets are traded in the derivative markets?

Correct AnswerverifiedShow Answer

One reason investment bankers form syndicates is to spread the risk of potential losses.

Correct AnswerverifiedShow Answer

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Students emerging from college and entering the work force typically consume than their income resulting in .

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