b. Money market; money market
c. Capital market; money market
d. Capital market; capital market
ANSWER: b
30. Which of the following are NOT major investors in stocks?
a. commercial banks
b. insurance companies
c. mutual funds
d. pension funds
ANSWER: a
31. Which of the following financial intermediaries commonly invest in stocks and bonds?
a. pension funds
b. insurance companies
c. mutual funds
d. All of these are correct.
ANSWER: d
32. Securities represent a claim on the issuer.
a. True
b. False
ANSWER: True
33. Debt securities represent debt (borrowed funds) incurred by the issuer.
a. True
b. False
ANSWER: True
34. A five-year security was purchased two years ago by an investor who plans to resell it. The investor will sell the security in the
a. secondary market.
b. primary market.
c. deficit market.
d. surplus market.
ANSWER: a
35. When security prices fully reflect all available information, the markets for these securities are said to be efficient.
a. True
b. False
ANSWER: True
36. If markets are perfect, securities buyers and sellers do not have full access to information and cannot always break down securities to the precise size they desire.
a. True
b. False
ANSWER: False
37. A broker executes securities transactions between two parties and charges a commission for the transaction.
a. True
b. False
ANSWER: True
38. The adoption of the euro by 19 European countries has increased business between those countries and created a more competitive environment in Europe.
a. True
b. False
ANSWER: True
39. In recent years, financial institutions have consolidated to capitalize on economies of scale and on economies of scope.
a. True
b. False
ANSWER: True
40. Securities represent a claim on the provider of funds.
a. True
b. False
ANSWER: False
41. Debt securities include commercial paper, Treasury bonds, and corporate bonds.
a. True
b. False
ANSWER: True
42. Common types of capital market securities include Treasury bills and commercial paper.
a. True
b. False
ANSWER: False
43. Common types of money market securities include negotiable certificates of deposit and Treasury bills.
a. True
b. False
ANSWER: True
44. Money market securities are commonly issued to finance the purchase of assets such as buildings, equipment, or machinery.
a. True
b. False
ANSWER: False
45. The total asset value of savings institutions is larger than that of commercial banks.
a. True
b. False
ANSWER: False
46. Financial markets facilitating the flow of short-term debt securities with maturities of one year or less are known as
a. secondary markets.
b. capital markets.
c. primary markets.
d. money markets.
e. None of these are correct.
ANSWER: d
47. Which of the following transactions would NOT be considered a secondary market transaction?
a. An individual investor purchases some existing shares of stock in Apple through her broker.
b. An institutional investor sells some Disney stock through its broker.
c. A firm that was privately held engages in an offering of stock to the public.
d. All of these are correct.
ANSWER: c
48. If investors speculate in the underlying asset rather than in derivative contracts on the underlying asset, they will probably achieve ____ returns, and they are exposed to relatively ____ risk.