Question 1

Financial intermediaries serve which of the following purposes?

Accepted Answer

A)   They allow for indirect investment in the capital markets by households.
B)   They aid in the flow of funds through the economy.
C)   They help provide allocation of funds to the best investments.
D)   All of these options are correct.E) A) and D)
F) None of the above

Question 2

Commission rates for stock transactions are fixed as a result of the Securities Act Amendments of 1975.

Accepted Answer

A) True 
 B)False

Question 3

The "capital structure" of the firm consists of long-term debt and equity.

Accepted Answer

A) True 
 B)False

Question 4

The "semi-strong" form of the efficient market hypothesis states that

Accepted Answer

A)   past price data is unrelated to future prices.
B)   prices reflect all public information.
C)   all information both public and private is immediately reflected in stock prices.
D)   none of these options are correct.E) None of the above
F) A) and B)

Question 5

When an investor buys stock in the stock market, he is purchasing shares from a company.

Accepted Answer

A) True 
 B)False

Question 6

In the new issues market for corporate capital, common stocks account for the largest percentage of new funds raised.

Accepted Answer

A) True 
 B)False

Question 7

Which characteristic is not true of electronic communication networks (ECNs) ?

Accepted Answer

A)   automatically match buy and sell orders at specific prices via computers.
B)   have forced organized security exchanges to make significant changes in their operations and structures.
C)   have increased the cost of trading.
D)   none of these options are false.E) A) and B)
F) A) and C)

Question 8

NASD regulates stockbrokers and brokerage firms.

Accepted Answer

A) True 
 B)False

Question 9

The efficient market hypothesis is generally concerned with the impact of information on the behavior of stock prices.

Accepted Answer

A) True 
 B)False

Question 10

Middle- to small-sized companies that are centered in one city or state would most likely be found on the

Accepted Answer

A)   NASDAQ National Market.
B)   NASDAQ Small Cap Market.
C)   Supplemental list.
D)   New York Stock Exchange.E) A) and C)
F) C) and D)

Question 11

The market for common stocks dominates the corporate bond markets in size.

Accepted Answer

A) True 
 B)False

Question 12

The purpose of secondary trading is to

Accepted Answer

A)   provide liquidity and competition between investments.
B)   provide a market to issue securities not handled in primary trading.
C)   provide jobs for brokers and dealers.
D)   provide lower commissions than on the organized exchanges.E) B) and C)
F) A) and D)

Question 13

The market for U.S. government securities is the most efficient in the world.

Accepted Answer

A) True 
 B)False

Question 14

The formation of the European Monetary Union and its single currency Euro is expected to

Accepted Answer

A)   eliminate foreign currency risk between its member countries.
B)   create stock and bond prices denominated in euros.
C)   have stock and bond indexes tracking a combined group of common stocks and bonds from the member countries.
D)   all of these options are true.E) A) and C)
F) B) and C)

Question 15

Financial intermediaries channel funds into the capital markets from the household sector.

Accepted Answer

A) True 
 B)False

Question 16

The size of the common stock market is larger than the size of the corporate bond market.

Accepted Answer

A) True 
 B)False

Question 17

Brokers on the organized stock exchange act as an agent for the person buying or selling securities.

Accepted Answer

A) True 
 B)False

Question 18

During the next several years, the major threat to the dominance of the U.S. money and capital markets is expected to come from

Accepted Answer

A)   Russia's difficulty in transforming its economy into a capitalistic one.
B)   Japan's prolonged recession and banking crisis.
C)   the Eurozone countries comprising the European Monetary Union and a single currency.
D)   the huge Chinese economy and its billion-plus people.E) A) and B)
F) None of the above

Question 19

Corporations prefer bonds over preferred stock for financing their operations because

Accepted Answer

A)   preferred stocks require a dividend.
B)   bond interest rates change with the economy, while stock dividends remain constant.
C)   the after-tax cost of debt is less than the cost of preferred stock.
D)   None of these options are true.E) A) and B)
F) A) and C)

Question 20

Money markets are the simplest form of capital markets because they involve trading in U.S. dollars.

Accepted Answer

A) True 
 B)False

Exam 14: Capital Markets

The formation of the European Monetary Union and its single currency Euro is expected to

Correct AnswerverifiedShow Answer

Money markets are the simplest form of capital markets because they involve trading in U.S. dollars.

Correct AnswerverifiedShow Answer

The market for common stocks dominates the corporate bond markets in size.

Correct AnswerverifiedShow Answer

Brokers on the organized stock exchange act as an agent for the person buying or selling securities.

Correct AnswerverifiedShow Answer

In the new issues market for corporate capital, common stocks account for the largest percentage of new funds raised.

Correct AnswerverifiedShow Answer

Commission rates for stock transactions are fixed as a result of the Securities Act Amendments of 1975.

Correct AnswerverifiedShow Answer

The market for U.S. government securities is the most efficient in the world.

Correct AnswerverifiedShow Answer

Financial intermediaries channel funds into the capital markets from the household sector.

Correct AnswerverifiedShow Answer

The purpose of secondary trading is to

Correct AnswerverifiedShow Answer

The efficient market hypothesis is generally concerned with the impact of information on the behavior of stock prices.

Correct AnswerverifiedShow Answer

The size of the common stock market is larger than the size of the corporate bond market.

Correct AnswerverifiedShow Answer

Financial intermediaries serve which of the following purposes?

Correct AnswerverifiedShow Answer

The "capital structure" of the firm consists of long-term debt and equity.

Correct AnswerverifiedShow Answer

The "semi-strong" form of the efficient market hypothesis states that

Correct AnswerverifiedShow Answer

During the next several years, the major threat to the dominance of the U.S. money and capital markets is expected to come from

Correct AnswerverifiedShow Answer

Which characteristic is not true of electronic communication networks (ECNs) ?

Correct AnswerverifiedShow Answer

NASD regulates stockbrokers and brokerage firms.

Correct AnswerverifiedShow Answer

Middle- to small-sized companies that are centered in one city or state would most likely be found on the

Correct AnswerverifiedShow Answer

When an investor buys stock in the stock market, he is purchasing shares from a company.

Correct AnswerverifiedShow Answer

Corporations prefer bonds over preferred stock for financing their operations because

Correct AnswerverifiedShow Answer

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