Multiple Choice Difficulty: 2 Medium
IBM creates and sells additional stock to the investment banker Morgan Stanley. Morgan Stanley
then resells the issue to the U.S. public through its mutual funds.
Morgan Stanley is acting as a(n)
asset transformer.
asset broker.
government regulator.
foreign service representative.
derivatives trader.
References
Multiple Choice Difficulty: 2 Medium
19.
Award: 10.00 points
20.
Award: 10.00 points
A corporation seeking to sell new equity securities to the public for the first time in order to raise
cash for capital investment would most likely:
conduct an IPO with the assistance of an investment banker.
engage in a secondary market sale of equity.
conduct a private placement to a large number of potential buyers.
place an ad in the Wall Street Journal soliciting retail suppliers of funds.
issue bonds with the assistance of a dealer.
References
Multiple Choice Difficulty: 2 Medium
The largest capital market security outstanding in 2019 measured by market value was:
securitized mortgages.
corporate bonds.
municipal bonds.
Treasury bonds.
corporate stocks.
References
Multiple Choice Difficulty: 1 Easy
21.
Award: 10.00 points
22.
Award: 10.00 points
The diagram below is a diagram of the:
secondary markets.
primary markets.
money markets.
derivatives markets.
commodities markets.
References
Multiple Choice Difficulty: 1 Easy
_________ and __________ allow a financial intermediary to offer safe liquid liabilities such as
deposits while investing the depositors' money in riskier illiquid assets.
Diversification; high equity returns
Price risk; collateral
Free riders; regulations
Monitoring; diversification
Primary markets; foreign exchange markets
References
Multiple Choice Difficulty: 2 Medium
23.
Award: 10.00 points
24.
Award: 10.00 points
Depository institutions include:
banks only.
thrifts only.
finance companies only.
banks and thrifts.
All of these choices are correct.
References
Multiple Choice Difficulty: 2 Medium
Match the intermediary with the characteristic that best describes its function.
I. Provide protection from adverse events
II. Pool funds of small savers and invest in either money or capital markets
III. Provide consumer loans and real estate loans funded by deposits
IV. Accumulate and transfer wealth from work period to retirement period
V. Underwrite and trade securities and provide brokerage services
1. Thrifts
2. Insurers
3. Pension funds
4. Securities firms and investment banks
5. Mutual funds
1, 3, 2, 5, 4
4, 2, 3, 5, 1
2, 5, 1, 3, 4
2, 4, 5, 3, 1
5, 1, 3, 2, 4
References
Multiple Choice Difficulty: 2 Medium
25.
Award: 10.00 points
26.
Award: 10.00 points
Secondary markets help support primary markets because secondary markets:
I. offer primary market purchasers liquidity for their holdings.
II. update the price or value of the primary market claims.
III. reduce the cost of trading the primary market claims.
I only
II only
I and II only
II and III only
I, II, and III
References
Multiple Choice Difficulty: 2 Medium
Financial intermediaries (FIs) can offer savers a safer, more liquid investment than a capital market
security, even though the intermediary invests in risky illiquid instruments because:
FIs can diversify away some of their risk.
FIs closely monitor the riskiness of their assets.
the federal government requires them to do so.
FIs can diversify away some of their risk and closely monitor the riskiness of their assets.
FIs can diversify away some of their risk and the federal government requires them to do
so.
References
Multiple Choice Difficulty: 2 Medium
27.
Award: 10.00 points
28.
Award: 10.00 points
Households are increasingly likely to both directly purchase securities (perhaps via a broker) and
also place some money with a bank or thrift to meet different needs. Match the given investor's
desire with the appropriate intermediary or direct security.