Finance Exam 1-3

What type of transfer takes place when a firm is issuing new securities and is using Merrill Lynch to sell the issue in the financial market? Transfer through an Investment Banking House
What type of transfer takes place when a start-up firm issues securities straight to investors without using any sort of “middleman”? Direct Transfer
What type of transfer takes place when savers provide funds to an institution that then lends out or reinvests the funds in other securities? Transfer through a Financial Intermediary
Current market prices reflect all relevant information, whether publicly or privately held, describes what level of information efficiency? Strong-form efficiency
Current market prices reflect all relevant historical information, such as price movements, describes what level of information efficiency? Weak-form efficiency
Current market prices reflect all relevant publicly available information, describes what level of information efficiency? Semistrong-form efficiency
Define the financial market in the following scenario:Carol calls her broker and instructs him to immediately buy 1000 shares of DynaTech Industries, which is traded on the NYSE. Secondary Market
Define the financial market in the following scenario:Barton Trading Co., a public corporation, issues long-term bonds. Debt Market
Where do most stock-market transactions occur? In the secondary market
Do brokers or specialists oversee a group of stocks and ensures that the auction process is fair and efficient? Specialist
Agents for investors or brokerage firms who execute orders for his or her clients are called what? Brokers
Which major domestic stock exchange has the most restrictive listing requirements regarding the market value of the firm? New York Stock Exchange (NYSE)
An investment bank agrees to arrange the sale of a firm’s securities and does its best to sell all the shares, but makes no guarantees to that effect. This is an example of: A best efforts arrangement
The difference between the price at which an investment banking firm buys shares from a company and the price at which securities are sold in the primary market is called the: Underwriter’s spread
A document of facts filled with the SEC about a company that plans to issue securities is called: A registration statement
What type of capital transfer takes place when Merrill Lynch helps Initrode Auto raise capital through a public stock offering? Indirect transfer through an Investment Banking House
What type of capital transfer takes place when Carson Computing barrows money from its bank to finance an expansion? Indirect transfer through a Financial Intermediary
What type of capital transfer takes place when William barrows money from his family to start a new business? Direct Transfer
What type of capital transfer takes place when Gentech barrows money in the form of new, publicly issued, long-term bonds? Indirect transfer through an Investment Banking House
What type of capital transfer takes place when Joel buys shares in a mutual fund that invests in technology companies? Indirect transfer through a Financial Intermediary
Define the financial market in the following scenario:George uses an online brokerage account to buy 2000 shares of Hefferman Inc. at the current market price. Equity Market
Define the financial market in the following scenario:A farmer decides to buy 10000 bushels of wheat at a price of $4.80 per bushel six months from now. The transaction is completed using a regulated exchange, such as the Chicago Board of Trade. Derivatives Market
Define the financial market in the following scenario:Jerry’s broker has told him that he may buy up to 10000 shares in Farva Co.’s initial public offering this week. Primary Market
True or False:Information efficiency holds only if all investors are rational. False
On the NYSE, what would happen if investor demand for a stock outweighed its supply? The specialist would sell shares from his inventory of shares
If investor demand for a stock outweighed its supply, what would likely happen to the specialists ask price for the stock? It would increase
Suppose a brokerage firm is experiencing heavy trade volume and its brokers cant handle all of the trade requests. Who might the brokerage firm turn to for help in processing the orders? Independent Brokers
The costs incurred during the issue process are called: Flotation costs

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