1. Primary Markets Are Markets Where Users of Funds Raise Cash by Selling Securities to Funds' Suppliers.

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Date Submitted: 11/23/2012 08:36 PM

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Chapter 01



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 is an example of a(n) 

A. primary market transaction

B. asset transformation by Morgan Stanley...