Economics is a subfield of Finance (t/f) 1.1 - F. Finance is a subfield of Economics. (right
answer)
Which of the following is not an example of firm
... [Show More] capital? 1.1 - Financial markets
Which of the following are examples of firm capital? 1.1 - Cash, Labor, Machinery
Capital is defined as a financial asset. (t/f) 1.1 - T. Capital is defined as a financial asset.
Corporate finance is devoted to understanding various types of financial instruments. (t/f)
1.1 - F. Investments is devoted to understanding various types of financial instruments.
(right answer)
Which of the following is an example of firm capital? 1.1 - Cash
Corporate finance focuses on the decision making by the management of the firm. (t/f) 1.1 -
T. Corporate finance focuses on the decision making by the management of the firm.
What are the three important areas of finance discussed in this section?1.1 - Corporate
Finance, Investments, and Banking/financial institutions
Banks make money when interest rates they charge to borrowers are less than interest
rates they pay depositors. (t/f) 1.1 - F. Banks make money when interest rates they charge
to borrowers are MORE than interest rates they pay depositors. (right answer)
Stocks and bonds are two types of financial instruments. t/f 1.1 - T. Stocks and bonds are
two types of financial instruments.
Stock represents ownership in a particular company. t/f 1.2 - T. Stock represents
ownership in a particular company.
Companies can raise capital by issuing bonds or stocks. t/f 1.2 - T. Companies can raise
capital by issuing bonds or stocks.
A stock is a debt instrument issued by corporations. t/f 1.2 - F. A stock represents
ownership in a company (right answer)
A Treasury bond is a debt instrument issued by corporations. t/f 1.2 - F. A Treasury bond is
a debt instrument issued by governments. (right answer)A bond is a debt instrument issued by corporations or governments. t/f 1.2 - T. A bond is a
debt instrument issued by corporations or governments.
A stock is a share of ______________ in a particular company. 1.2 - ownership 1.2
A bond is similar to a loan. t/f 1.2 - T A bond is similar to a loan.
Primary financial markets are markets where issuers place new securities with investors.
t/f 1.3 - T. Primary financial markets are markets where issuers place new securities with
investors.
What are the two ways a syndicate can place a bond? 1.3 - Competitive sale or negotiated
sale
An IPO is a seasoned equity offering. t/f 1.3 - false. IPO is new equity offering (right
answer)
An IPO occurs on the primary market. t/f 1.3 - T An IPO occurs on the primary market.
Syndicates are generally made up of investment banks and other institutional investors. t/f
1.3 - T Syndicates are generally made up of investment banks and other institutional
investors.
While competitive sales allow underwriters to submit bids to purchase bonds, negotiated
sales do not. t/f 1.3 - F negotiated and competitive sales both submit bids. negotiated sales
more involved (right answer)
NASDAQ is the world's largest secondary financial market. t/f 1.4 - F The NYSE is the
world's largest secondary financial market. (right)
Auction markets have a physical location. t/f 1.4 - T Auction markets have a physical
location. (right)
Dealer markets have a physical location. t/f 1.4 - F Auction markets have a physical
location. Dealer markets do not. (right)
Nasdaq is an example of an auction market. t/f 1.4 - F Nasdaq is an example of a dealer
market. (right)
Stocks that are listed on dealer markets generally have a single dealer for each stock. t/f 1.4
- F Stocks that are listed on dealer markets generally have multiple dealers for each stock.
(right)
When dealers have to compete with one another, transaction costs will generally ___________.
1.4 - decrease1.4Markets are where prices are determined. t/f 1.4 - T Markets are where prices are
determined.
The NYSE specialist has an objective to provide liquidity to the market. t/f 1.5 - T The NYSE
specialist has an objective to provide liquidity to the market.
The NYSE specialist will charge a higher price to sellers of the stock and a lower price to the
buyer of the stock. t/f 1.5 - F The NYSE specialist will charge a lower price to sellers of the
stock and a higher price to the buyer of the stock. (right)
The ask price of stock A is $56.75 while the bid price for stock A is $56.71. What is the bid
ask spread? 1.5 - .04
56.75-56.71 = 0.04
The ask price of stock A is $215.54 while the bid price for stock A is $215.14. What is the
bid ask spread? 1.5 - .40
215.54-215.14 = 0.40
The bid-ask spread is compensation to the specialist for providing liquidity to the market.
t/f 1.5 - T The bid-ask spread is compensation to the specialist for providing liquidity to the
market.
What are the two types of orders that are used by investors? 1.6 - Market Orders and Limit
Orders 1.6
Market orders are __________ sensitive while limit orders are _____________ sensitive. 1.6 - time,
price 1.6
A market order to buy a stock would execute at the current ask price. t/f 1.6 - T A market
order to buy a stock would execute at the current ask price. 1.6
A market order to sell a stock would execute at the current ask price. t/f 1.6 - False. The
order would execute at the current bid price.
A limit order to buy a stock at $101.55 would execute at the current ask price. t/f 1.6 -
False. The order would execute when the ask price is at or below $101.55.
A limit order to buy a stock at $101.55 would execute when the ask price is at or below
$101.55. t/f 1.6 - T A limit order to buy a stock at $101.55 would execute when the ask
price is at or below $101.55.
Which of the following best explains the role of prices? 1.7 - Prices convey information,
Prices affect the distribution of income, Prices affect incentives
Efficient markets are those in which prices are volatile. t/f 1.7 - f Efficient markets are
those in which prices reflect all relevant information. right [Show Less]