Question

1: Which of the following would be categorized as a primary market transaction?

     a. Jim buys 100 shares of a new stock issue offered by Google.

     b. Sam sells some of his Procter & Gamble stock online through E-Trade.

     c. Jack buys some AT&T bonds from an institutional investor.

     d. Alan sells a U.S. Treasury bond that he purchased two years ago.

2: Which of the following would be categorized as a money market instrument?

     a. 15-year U.S. Treasury Bond

     b. 91-day U.S. Treasury Bill

     c. 10-year General Motors bond

     d. shares of National City Bank's stock

3: Brown National Bank receives customer deposits averaging about $800 per

deposit. The bank makes loans, averaging about $30,000 per loan. This set of

information best illustrates the essence of:

     a. forward market transactions.

     b. money market transactions.

     c. interest rate risk.

     d. denomination intermediation.

4: We might call this a market for "used" securities; the securities

trading here were issued sometime earlier. This is the:

     a. direct market.

     b. secondary market.

     c. indirect transfer market.

     d. primary market.

5: One view of a bank is that it performs a sort of surveillance function on

behalf of depositors. In this view, the bank is playing the role of:

     a. transmission mechanism.

     b. transfer agent.

     c. delegated monitor.

     d. mediator.

Answer 1

1: Which of the following would be categorized as a primary market transaction?

     a. Jim buys 100 shares of a new stock issue offered by Google.

Primary market transactions refer to first sale of a security.

2: Which of the following would be categorized as a money market instrument?

b. 91-day U.S. Treasury Bill

Money market instruments should have maturity of 1 year or less.

3: Brown National Bank receives customer deposits averaging about $800 per

deposit. The bank makes loans, averaging about $30,000 per loan. This set of

information best illustrates the essence of:

d. denomination intermediation.

4: We might call this a market for "used" securities; the securities

trading here were issued sometime earlier. This is the:

b. secondary market.

5: One view of a bank is that it performs a sort of surveillance function on

behalf of depositors. In this view, the bank is playing the role of:

c. delegated monitor.