Finance Exam 1 Chapter 2

The secondary market is defined as _____; the capital market is the market where _____ are traded. the market for the exchange of already-issued securities; long-term financial instruments
Financial intermediaries: offer indirect securities (like a commercial bank)
If a company needs to raise capital from the financial markets and it wants to sell its debt or equity securities to any investor, whether an individual or professional investor, then the company is raising capital through a ________. public offering.
Terry calls a stockbroker and instructs her to purchase 100 shares of Chesapeake Energy Corporation common stock. This transaction occurs in the ______. secondary market.
Which of the following is an example of both a capital market and a primary market transaction? Ford Motor Company sells a new issue of common stock to raise funds through a public offering.
When an investment banking firm “underwrites” an issue of securities, the firm is performing which of the following? Offering to purchase the securities from the firm, thereby assuming the risk of resale to investors.
Money market instruments include__. T-Bills
John calls his stockbroker and instructs him to purchase 100 shares of Microsoft Corporation common stock. This transaction occurs in the ___. secondary market
Financial intermediaries: offer indirect securities
The investment banker performs what three basic functions? underwriting, distributing, and advising
General Motors raises money by selling a new issue of common stock. This transaction occurs in ___. the capital market
Which of the following would be considered a “flotation cost”? Underwriters’ spread
The money market: is where securities with less than one year to maturity are traded.
All of the following are benefits of organized exchanges except: increased stock price volatility
An actively-traded AAA-rated, Intel Corporation bond, maturing in 2015, provides an expected yield of 8%. The AAA-rated bond of a local Chicago-based company, not actively traded on any exchange, maturing in 2015, provides an expected yield to investors of 10%. The difference in expected yields is primarily due to ___. liquidity risk premium

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