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Chapter 2 Financial Markets

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Quiz on Chapter 2 Financial Markets, created by run2hurdle on 26/09/2015.
run2hurdle
Quiz by run2hurdle, updated more than 1 year ago
run2hurdle
Created by run2hurdle over 8 years ago
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Resource summary

Question 1

Question
Money market securities have maturities of one year or less.
Answer
  • True
  • False

Question 2

Question
Preferred stock pays a variable dividend.
Answer
  • True
  • False

Question 3

Question
The cost of borrowing funds is most commonly called the interest rate.
Answer
  • True
  • False

Question 4

Question
The primary market is the only market in which the issuer is directly involved in the transaction and recieves direct benefits from the issue.
Answer
  • True
  • False

Question 5

Question
The over-the-counter market is generally reserved for stocks with very large trading volume.
Answer
  • True
  • False

Question 6

Question
T-Bonds are money market securities, while T-bills and T-notes are traded in the capital market.
Answer
  • True
  • False

Question 7

Question
Market makers include both specialist and dealers.
Answer
  • True
  • False

Question 8

Question
Specialist and dealers determine the price of the security.
Answer
  • True
  • False

Question 9

Question
Corporate bonds pay interest payments that are usually tax-exempt to investors.
Answer
  • True
  • False

Question 10

Question
The New York Stock Exchange is an example of an organized market.
Answer
  • True
  • False

Question 11

Question
Earnings should retained only if the firm needs capital very badly and would have difficulty raising it from external sources.
Answer
  • True
  • False

Question 12

Question
The importance of the role of financial management is emphasized by examples of companies whose strategic financing decisions contributed to their demise, or to their success when economic conditions changed rapidly.
Answer
  • True
  • False

Question 13

Question
The riskiness inherent in a firm's earnings per share (EPS) depends on both the types of projects the firm takes on and the manner in which the projects are financed.
Answer
  • True
  • False

Question 14

Question
The two most important functions of markets are to establish fair prices and provide liquidity.
Answer
  • True
  • False

Question 15

Question
Bonds are long-term loans that typically pay interest per year based on the average bank rate.
Answer
  • True
  • False

Question 16

Question
The _______ is a financial relationship created by a number of institutions with arrangements that allow the suppliers and demanders of long term funds to make transactions.
Answer
  • money market
  • bond market
  • capital market
  • eurobond market

Question 17

Question
The AMEX Exchange could be classified as a/an ______ security exchange.
Answer
  • organized
  • over-the-counter
  • primary
  • closed

Question 18

Question
In the over-the-counter market, dealers are linked with the purchasers and sellers of securities through the _____ system.
Answer
  • NASDAQ
  • bonds
  • stocks
  • short-term funds

Question 19

Question
Common stockholders expect to receive a return through capital gains and
Answer
  • interest payments
  • dividends
  • fixed periodic dividends
  • coupon payments

Question 20

Question
Bonds with an AAA rating will have a ______ interest rate compared to bonds with a BAA rating.
Answer
  • lower
  • equal
  • higher
  • undetermined

Question 21

Question
The______ is the financial market in which securities are initially issued.
Answer
  • OTC
  • secondary market
  • primary market
  • private placement

Question 22

Question
________ are long-term debt instruments that are used by business and government to raise large sums of money.
Answer
  • T-bills
  • Common stock
  • Preferred stock
  • Bonds

Question 23

Question
Shares of ____ are units of ownerships interest, or equity, in a corporation.
Answer
  • bank loans
  • common stock
  • debt
  • commercial paper

Question 24

Question
The possibility that the issuer of debt will not pay the principal as scheduled.
Answer
  • liquidity risk
  • default risk
  • contractual risk
  • maturity risk

Question 25

Question
Which of the following does not need to be considered when assessing the impact of financial decision?
Answer
  • Financial market conditions
  • timing of the earnings flow
  • project earnings
  • all of the above must be considered.

Question 26

Question
Money markets are markets for
Answer
  • foreign currency exchange
  • corporate stocks
  • long-term bonds
  • short-term debt securities

Question 27

Question
Which of the following is not a major participant in the money market.
Answer
  • Federal Reserve
  • Commercial Banks
  • Money Market Mutual Funds
  • Wall Street Dealers

Question 28

Question
If a $2,000 bond is quoted at 120:16, the price of the bond is ______
Answer
  • 1,205.31
  • 1,205.00
  • 2,410.62
  • 2,410.00

Question 29

Question
The difference between Common Stock and Preferred Stock lies in:
Answer
  • vote or not
  • fixed or variable dividends
  • Priority of claim on assets
  • all of the above
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