Question 1

An investment banker assumes underwriting risk in both negotiated purchases and privileged subscriptions with standby agreements.

Accepted Answer

A) True 
 B)False

Question 2

A wealthy private investor providing a direct transfer of funds is called

Accepted Answer

A)   a venture capitalist.
B)   an investment banker.
C)   a financial intermediary.
D)   an angel investor.

Question 3

Part of the U.S.Government's huge deficit is financed by foreign countries,such as China,which is a savings surplus unit.

Accepted Answer

A) True 
 B)False

Question 4

Financial intermediaries

Accepted Answer

A)   offer indirect securities.
B)   include the national and regional stock exchange.
C)   usually are underwriting syndicates.
D)   constitute the various secondary markets.

Question 5

The rate of return available on the next best investment alternative for the saver refers to the opportunity cost of funds.

Accepted Answer

A) True 
 B)False

Question 6

Prices of securities that are traded on the organized exchanges are determined by

Accepted Answer

A)   a "bid" and "ask" negotiation process amongst brokers who hold these securities in their own account.
B)   the Securities Exchange Commission.
C)   a continuous auction process reflecting the sentiments of buyers and sellers.
D)   the sellers of the securities.

Question 7

The vast majority of corporate bond business takes place over the counter.

Accepted Answer

A) True 
 B)False

Question 8

The New York Stock Exchange (NYSE) is

Accepted Answer

A)   an automated electronic trading platform.
B)   an auction market with face-to-face trading on the floor of the stock exchange in addition to automated, electronic trading.
C)   a hybrid market, allowing for face-to-face trading on the floor of the stock exchange in addition to automated, electronic trading.
D)   primarily a futures market.

Question 9

In response to the banking crisis and economic collapse of 2007 and 2008,the U.S.government moved to increase interest rates in order to attract foreign capital seeking high returns in U.S.banks.

Accepted Answer

A) True 
 B)False

Question 10

Common examples of financial intermediaries include all of the following EXCEPT

Accepted Answer

A)   Venture Capital Firms.
B)   Life Insurance Companies.
C)   Pension Funds.
D)   Mutual Funds.

Question 11

Three ways that savings can be transferred through the financial markets include all of the following EXCEPT

Accepted Answer

A)   direct transfer of funds.
B)   indirect transfer using the investment banker.
C)   indirect transfer using the venture capital firm.
D)   indirect transfer using the financial intermediary.

Question 12

John calls his stockbroker and instructs him to purchase 100 shares of Microsoft Corporation common stock.This transaction occurs in the

Accepted Answer

A)   secondary market.
B)   primary market.
C)   credit market.
D)   futures market.

Question 13

Primary market transactions cannot be undertaken in over the counter markets.

Accepted Answer

A) True 
 B)False

Question 14

An example of a primary market transaction involving a money-market security is

Accepted Answer

A)   a new issue of a security with a very short maturity.
B)   a new issue of a security with a very long maturity.
C)   the transfer of a previously-issued security with a very short maturity.
D)   the transfer of a previously-issued security with a very long maturity.

Question 15

An example of a primary market transaction is

Accepted Answer

A)   a new issue of common stock by AT&T.
B)   a sale of some outstanding common stock of AT&T by an investor.
C)   AT&T repurchasing its own stock from a stockholder.
D)   all of the above

Question 16

Identify three prominent theories that attempt to explain the term structure of interest rates.

Accepted Answer

Three possible theories may explain the ...

Question 17

The need for extensive regulation of investment banking firms is limited due to the highly competitive nature of that industry.

Accepted Answer

A) True 
 B)False

Question 18

The difference between the price the corporation gets and the public offering price is called the broker-dealer spread.

Accepted Answer

A) True 
 B)False

Question 19

The Securities and Exchange Commission (SEC)

Accepted Answer

A)   regulates only initial public offerings, or IPOs.
B)   regulates only primary market transactions to ensure investors are provided with adequate and accurate information on new securities.
C)   regulates both primary and secondary markets.
D)   regulates initial public offerings, but not seasoned equity offerings, in the primary market.

Question 20

Which of the following is an advantage of using private placements for debt?

Accepted Answer

A)   reduced costs from the elimination of the registration statement for the SEC, investment-banking underwriting fees and distribution costs
B)   lower interest costs
C)   fewer and less burdensome restrictive covenants
D)   the possibility of future SEC registration

Exam 2: The Financial Markets and Interest Rates

An investment banker assumes underwriting risk in both negotiated purchases and privileged subscriptions with standby agreements.

Correct AnswerverifiedShow Answer

Part of the U.S.Government's huge deficit is financed by foreign countries,such as China,which is a savings surplus unit.

Correct AnswerverifiedShow Answer

Common examples of financial intermediaries include all of the following EXCEPT

Correct AnswerverifiedShow Answer

John calls his stockbroker and instructs him to purchase 100 shares of Microsoft Corporation common stock.This transaction occurs in the

Correct AnswerverifiedShow Answer

Prices of securities that are traded on the organized exchanges are determined by

Correct AnswerverifiedShow Answer

Primary market transactions cannot be undertaken in over the counter markets.

Correct AnswerverifiedShow Answer

Identify three prominent theories that attempt to explain the term structure of interest rates.

Correct AnswerverifiedThree possible theories may explain the ...View AnswerShow Answer

The need for extensive regulation of investment banking firms is limited due to the highly competitive nature of that industry.

Correct AnswerverifiedShow Answer

Which of the following is an advantage of using private placements for debt?

Correct AnswerverifiedShow Answer

The vast majority of corporate bond business takes place over the counter.

Correct AnswerverifiedShow Answer

An example of a primary market transaction is

Correct AnswerverifiedShow Answer

Three ways that savings can be transferred through the financial markets include all of the following EXCEPT

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The rate of return available on the next best investment alternative for the saver refers to the opportunity cost of funds.

Correct AnswerverifiedShow Answer

Financial intermediaries

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An example of a primary market transaction involving a money-market security is

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The New York Stock Exchange (NYSE) is

Correct AnswerverifiedShow Answer

In response to the banking crisis and economic collapse of 2007 and 2008,the U.S.government moved to increase interest rates in order to attract foreign capital seeking high returns in U.S.banks.

Correct AnswerverifiedShow Answer

A wealthy private investor providing a direct transfer of funds is called

Correct AnswerverifiedShow Answer

The difference between the price the corporation gets and the public offering price is called the broker-dealer spread.

Correct AnswerverifiedShow Answer

The Securities and Exchange Commission (SEC)

Correct AnswerverifiedShow Answer

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Three possible theories may explain the ...
View Answer

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