Question 1

The annual rate of return on any given stock can be found as the stock's dividend for the year plus the change in the stock's price during the year, divided by its beginning-of-year price.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is an example of a capital market instrument?

Accepted Answer

A)   Commercial paper.
B)   Preferred stock.
C)   U.S. Treasury bills.
D)   Banker's acceptances.
E)   Money market mutual funds.F) B) and E)
G) A) and E)

Question 3

Each stock's rate of return in a given year consists of a dividend yield (which might be zero) plus a capital gains yield (which could be positive, negative, or zero). Such returns are calculated for all the stocks in the S&P 500. A weighted average of those returns, using each stock's total market value, is then calculated, and that average return is often used as an indicator of the "return on the market."

Accepted Answer

A) True 
 B)False

Question 4

A publicly owned corporation is a company whose shares are held by the investing public, which may include other corporations as well as institutional investors.

Accepted Answer

A) True 
 B)False

Question 5

If you wanted to know what rate of return stocks have provided in the past, you could examine data on the Dow Jones Industrial Index, the S&P 500 Index, or the Nasdaq Index.

Accepted Answer

A) True 
 B)False

Question 6

The NYSE is defined as a "primary" market because it is one of the largest and most important stock markets in the world.

Accepted Answer

A) True 
 B)False

Question 7

The "over-the-counter" market received its name years ago because brokerage firms would hold inventories of stocks and then sell them by literally passing them over the counter to the buyer.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements is CORRECT?

Accepted Answer

A)   The New York Stock Exchange is an auction market, and it has a physical location.
B)   Home mortgage loans are traded in the money market.
C)   If an investor sells shares of stock through a broker, then it would be a primary market transaction.
D)   Capital markets deal only with common stocks and other equity securities.
E)   While the distinctions are blurring, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise capital from other parties.F) B) and D)
G) C) and E)

Question 9

Which of the following statements is CORRECT?

Accepted Answer

A)   The term "IPO" stands for Introductory Price Offered, and it is the price at which shares of a new company are offered to the public.
B)   IPO prices are generally established by the market, and buyers of the new stock must pay the price that prevails at the close of trading on the day the stock is offered to the public.
C)   In a "Dutch auction," investors who want to buy shares in an IPO submit bids indicating how many shares they want to buy and the price they are willing to pay. The company determines how many shares it wants to sell. The highest price that enables the company to sell the desired number of shares is the price that all buyers must pay.
D)   It is possible that the price set in an IPO is so high that investors will refuse to buy the number of shares that the company wants to sell. In that case, the company is said to have "left money on the table."
E)   It is possible that the price set in an IPO is so low that investors will want to buy more shares than the company wants to sell. In that case, the company will have to issue more shares than it wants to sell.F) A) and E)
G) D) and E) C

Question 10

Hedge funds are somewhat similar to mutual funds. The primary differences are that hedge funds are less highly regulated, have more flexibility regarding what they can buy, and restrict their investors to wealthy, sophisticated individuals and institutions.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements is CORRECT?

Accepted Answer

A)   If you purchase 100 shares of Disney stock from your brother-in-law, this is an example of a primary market transaction.
B)   If Disney issues additional shares of common stock through an investment banker, this would be a secondary market transaction.
C)   The NYSE is an example of an over-the-counter market.
D)   Only institutions, and not individuals, can engage in derivative market transactions.
E)   As they are generally defined, money market transactions involve debt securities with maturities of less than one year.F) A) and C)
G) A) and B)

Question 12

Primary markets are large and important, while secondary markets are smaller and less important.

Accepted Answer

A) True 
 B)False

Question 13

Each stock's rate of return in a given year consists of a dividend yield (which might be zero) plus a capital gains yield (which could be positive, negative, or zero). Such returns are calculated for all the stocks in the S&P 500. A simple average of those returns is then calculated, and that average is called "the return on the S&P Index," and it is often used as an indicator of the "return on the market."

Accepted Answer

A) True 
 B)False

Question 14

A financial intermediary is a corporation that takes funds from investors and then provides those funds to those who need capital. A bank that takes in demand deposits and then uses that money to make long-term mortgage loans is one example of a financial intermediary.

Accepted Answer

A) True 
 B)False

Question 15

You recently sold 100 shares of Microsoft stock to your brother at a family reunion. At the reunion your brother gave you a check for the stock and you gave your brother the stock certificates. Which of the following best describes this transaction?

Accepted Answer

A)   This is an example of a direct transfer of capital.
B)   This is an example of a primary market transaction.
C)   This is an example of an exchange of physical assets.
D)   This is an example of a money market transaction.
E)   This is an example of a derivative market transaction.F) B) and D)
G) None of the above

Question 16

The annual rate of return on any given stock can be found as the stock's dividend for the year plus the change in the stock's price during the year, divided by its beginning-of-year price. If you obtain such data on a large portfolio of stocks, like those in the S&P 500, find the rate of return on each stock, and then average those returns, this would give you an idea of stock market returns for the year in question.

Accepted Answer

A) True 
 B)False

Question 17

The term IPO stands for "individual purchase order", as when an individual (as opposed to an institution) places an order to buy a stock.

Accepted Answer

A) True 
 B)False  False

Question 18

Which of the following statements is CORRECT?

Accepted Answer

A)   While the distinctions are becoming blurred, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise capital from other parties.
B)   The NYSE operates as an auction market, whereas Nasdaq is an example of a dealer market.
C)   Money market mutual funds usually invest their money in a well-diversified portfolio of liquid common stocks.
D)   Money markets are markets for long-term debt and common stocks.
E)   A liquid security is a security whose value is derived from the price of some other "underlying" asset.F) All of the above
G) B) and E) B

Question 19

You recently sold 200 shares of Disney stock, and the transfer was made through a broker. This is an example of:

Accepted Answer

A)   A money market transaction.
B)   A primary market transaction.
C)   A secondary market transaction.
D)   A futures market transaction.
E)   An over-the-counter market transaction.F) A) and B)
G) C) and D)

Question 20

Private markets are those like the NYSE, where transactions are handled by members of the organization, while public markets are those like the Nasdaq, where anyone can make transactions.

Accepted Answer

A) True 
 B)False

Exam 2: Financial Markets and Institutions

The annual rate of return on any given stock can be found as the stock's dividend for the year plus the change in the stock's price during the year, divided by its beginning-of-year price.

Correct Answer
verified

Which of the following is an example of a capital market instrument?

Correct Answer
verified

Correct Answer
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A publicly owned corporation is a company whose shares are held by the investing public, which may include other corporations as well as institutional investors.

Correct Answer
verified

If you wanted to know what rate of return stocks have provided in the past, you could examine data on the Dow Jones Industrial Index, the S&P 500 Index, or the Nasdaq Index.

Correct Answer
verified

The NYSE is defined as a "primary" market because it is one of the largest and most important stock markets in the world.

Correct Answer
verified

The "over-the-counter" market received its name years ago because brokerage firms would hold inventories of stocks and then sell them by literally passing them over the counter to the buyer.

Correct Answer
verified

Which of the following statements is CORRECT?

Correct Answer
verified

Which of the following statements is CORRECT?

Correct Answer
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C

Hedge funds are somewhat similar to mutual funds. The primary differences are that hedge funds are less highly regulated, have more flexibility regarding what they can buy, and restrict their investors to wealthy, sophisticated individuals and institutions.

Correct Answer
verified

Which of the following statements is CORRECT?

Correct Answer
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Primary markets are large and important, while secondary markets are smaller and less important.

Correct Answer
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Correct Answer
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A financial intermediary is a corporation that takes funds from investors and then provides those funds to those who need capital. A bank that takes in demand deposits and then uses that money to make long-term mortgage loans is one example of a financial intermediary.

Correct Answer
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You recently sold 100 shares of Microsoft stock to your brother at a family reunion. At the reunion your brother gave you a check for the stock and you gave your brother the stock certificates. Which of the following best describes this transaction?

Correct Answer
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Correct Answer
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The term IPO stands for "individual purchase order", as when an individual (as opposed to an institution) places an order to buy a stock.

Correct Answer
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False

Which of the following statements is CORRECT?

Correct Answer
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B

You recently sold 200 shares of Disney stock, and the transfer was made through a broker. This is an example of:

Correct Answer
verified

Private markets are those like the NYSE, where transactions are handled by members of the organization, while public markets are those like the Nasdaq, where anyone can make transactions.

Correct Answer
verified

Exam 2: Financial Markets and Institutions

The annual rate of return on any given stock can be found as the stock's dividend for the year plus the change in the stock's price during the year, divided by its beginning-of-year price.

Correct AnswerverifiedShow Answer

Which of the following is an example of a capital market instrument?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A publicly owned corporation is a company whose shares are held by the investing public, which may include other corporations as well as institutional investors.

Correct AnswerverifiedShow Answer

If you wanted to know what rate of return stocks have provided in the past, you could examine data on the Dow Jones Industrial Index, the S&P 500 Index, or the Nasdaq Index.

Correct AnswerverifiedShow Answer

The NYSE is defined as a "primary" market because it is one of the largest and most important stock markets in the world.

Correct AnswerverifiedShow Answer

The "over-the-counter" market received its name years ago because brokerage firms would hold inventories of stocks and then sell them by literally passing them over the counter to the buyer.

Correct AnswerverifiedShow Answer

Which of the following statements is CORRECT?

Correct AnswerverifiedShow Answer

Which of the following statements is CORRECT?

Correct AnswerverifiedC

Hedge funds are somewhat similar to mutual funds. The primary differences are that hedge funds are less highly regulated, have more flexibility regarding what they can buy, and restrict their investors to wealthy, sophisticated individuals and institutions.

Correct AnswerverifiedShow Answer

Which of the following statements is CORRECT?

Correct AnswerverifiedShow Answer

Primary markets are large and important, while secondary markets are smaller and less important.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A financial intermediary is a corporation that takes funds from investors and then provides those funds to those who need capital. A bank that takes in demand deposits and then uses that money to make long-term mortgage loans is one example of a financial intermediary.

Correct AnswerverifiedShow Answer

You recently sold 100 shares of Microsoft stock to your brother at a family reunion. At the reunion your brother gave you a check for the stock and you gave your brother the stock certificates. Which of the following best describes this transaction?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The term IPO stands for "individual purchase order", as when an individual (as opposed to an institution) places an order to buy a stock.

Correct AnswerverifiedFalse

Which of the following statements is CORRECT?

Correct AnswerverifiedB

You recently sold 200 shares of Disney stock, and the transfer was made through a broker. This is an example of:

Correct AnswerverifiedShow Answer

Private markets are those like the NYSE, where transactions are handled by members of the organization, while public markets are those like the Nasdaq, where anyone can make transactions.

Correct AnswerverifiedShow Answer

Correct Answer
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C

Correct Answer
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False

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B

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Correct Answer
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