In: Finance
1. Which of the following statements is (are) correct?
(x) Primary markets provide a forum in which demanders of funds
raise funds by issuing new financial instruments, such as stocks
and bonds.
(y) Primary market financial instruments include stock issues from
firms allowing their equity shares to be publicly traded on stock
market for the first time. We usually refer to these first-time
issues as initial public offerings
(z) Money markets feature debt securities or instruments with
maturities of more than one year.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (x) only
2. Which of the following statements is (are) correct?
(x) Once firms issue financial instruments in primary markets,
these same stocks and bonds are then traded in secondary
markets
(y) Once firms issue financial instruments such as stock in primary
markets, no money accrues to a corporation when its stock sells in
the secondary market.
(z) In the United States, investment banks are the financial
institutions that arrange most secondary market
transactions for businesses.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (x) only
3. Which of the following statements is (are) correct?
(x) U.S. Treasury notes and bonds, U.S. government agency bonds and
corporate stocks and bonds are
capital market instruments
(y) Treasury bills, commercial paper, and banker's acceptances are
all money market instruments but
corporate stocks and bonds are not
(z) Federal funds, repurchase agreements, and commercial paper are
included in the category of money market instruments
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (z) only
7. According to the textbook, which of the following statements
is (are) correct?
(x) Money markets are subject to wider price fluctuations and are
therefore more risky than capital market
instruments.
(y) Mortgages are capital market instruments that are long-term
loans to individuals or businesses to
purchase homes, pieces of land, or other real property.
(z) A derivative security is a security formalizing an agreement
between two parties to exchange a standard
quantity of an asset at a predetermined price on a specified date
in the future.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (y) only