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Financial Markets

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Submitted By strongsoil
Words 6308
Pages 26
Chapter 01
Introduction

True / False Questions

1. Primary markets are markets where users of funds raise cash by selling securities to funds' suppliers.
True False

2. Secondary markets are markets used by corporations to raise cash by issuing securities for a short time period.
True False

3. In a private placement, the issuer typically sells the entire issue to one, or only a few, institutional buyers.
True False

4. The NYSE is an example of a secondary market.
True False

5. Privately placed securities are usually sold to one or more investment bankers and then resold to the general public.
True False

6. Money markets are the markets for securities with an original maturity of 1 year or less.
True False

7. Financial intermediaries such as banks typically have assets that are riskier than their liabilities.
True False

8. There are three types of major financial markets today: primary, secondary, and derivatives markets. The NYSE and NASDAQ are both examples of derivatives markets.
True False

Multiple Choice Questions

9. What factors are encouraging financial institutions to offer overlapping financial services such as banking, investment banking, brokerage, etc.?

I. Regulatory changes allowing institutions to offer more services
II. Technological improvements reducing the cost of providing financial services
III. Increasing competition from full service global financial institutions
IV. Reduction in the need to manage risk at financial institutions
A. I only
B. II and III only
C. I, II, and III only
D. I, II, and IV only
E. I, II, III, and IV

Figure 1-1

IBM creates and sells additional stock to the investment banker, Morgan Stanley. Morgan Stanley then resells the issue to the U.S. public.

10. This transaction

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