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Financial Markets and Securities Offerings
Financial Markets and Securities Offerings MCQs
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Which of the following economic functions is provided by the securities markets?
A marketplace in which inefficient and expensive investment transactions take place.
Unstable security prices because of frequent price changes.
A small number of transactions.
Facilitation of the issuance and purchase of new securities.
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Which of the following is not true about financial markets?
Financial markets are the total supply and demand for securities.
Financial markets facilitate borrowing and lending of financial assets and obligations.
In perfectly competitive markets, financial intermediaries act as price setters to clear the market.
Financial markets change over time, causing people to adjust their pattern of consumption.
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The financial markets that trade debt securities with maturities of less than 1 year and are dealer-driven are
Primary markets.
Capital markets.
Secondary markets.
Money markets.
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Which of the following financial instruments can be traded in international money markets?
Mortgages.
Preferred stocks.
Government treasury bills.
Government treasury bonds.
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In capital markets, the primary market is concerned with the provision of new funds for capital investments through
New issues of bond and stock securities.
Exchanges of existing bond and stock securities.
The sale of forward or future commodities contracts.
New issues of bond and stock securities and exchanges of existing bond and stock securities.
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If a multinational firm were to raise equity capital on the London Stock Exchange, this would be referred to as a
Money market transaction.
Primary market transaction.
Secondary market transaction.
Mortgage market transaction.
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The over-the-counter (OTC) market is
An auction market where trading takes place at a particular physical site like the New York Stock Exchange.
A dealer market where brokers and dealers are linked by telecommunications equipment to trade securities.
An auction market that trades the majority of stocks.
A dealer market that trades securities on the stock exchanges due to the high dollar volume of trading.
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The market for outstanding, listed common stock is called the
Primary market.
New issue market.
Over-the-counter market.
Secondary market.
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Which of the following is a financial intermediary?
Mutual funds.
Money markets.
The New York Stock Exchange.
The over-the-counter market.
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James Wills, the treasurer of a major multinational company, needs to borrow $50 million to finance new production facilities. Wills is deciding betwe...
The rating assigned by Standard & Poor’s or Moody’s is critical in pricing public debt.
Private debt is issued to sophisticated investors such as insurance companies.
Public debt tends to have higher interest rates because of its lower liquidity.
Public debt needs to be registered with the SEC, a time-consuming and costly process.
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Financial market efficiency implies that
All securities are perfect substitutes, and that the net present value of any securities investment is zero.
A firm’s share price may not be a good estimate of future cash flows because price adjustment to new information is slow.
It is possible to systematically gain or lose abnormal profits from trading on the basis of available public information.
Because of the speculative nature of securities markets, share prices may not be the best benchmark for corporate financial choices.
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The strong form of the efficient markets hypothesis (EMH) states that current market prices of securities reflect
All publicly available information.
All information whether it is public or private.
No relevant information.
Only information found in past price movements.
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The semistrong form of the efficient markets hypothesis (EMH) states that current market prices of securities reflect
No pertinent information.
All pertinent information.
Only information contained in past price movements.
Only publicly available information.
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The weak form of the efficient markets hypothesis (EMH) states that current market prices of securities reflect
All past price movements.
All public information.
All public and private information.
No relevant information.
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Moody’s and Standard & Poor’s debt ratings depend on
The chances of default.
The size of the company.
The size and the type of issue.
The firm’s industry.
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If a bond is rated below BBB, it is called
A zero-coupon bond.
An investment grade bond.
A junk bond.
An income bond.
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Which one of the options below best describes a public offering where there is less price uncertainty due to the existence of a benchmark price?
Shelf registration.
A subsequent or secondary offering.
A red herring registration.
An initial public offering.
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Confidential negotiations between Company A and Company B were completed this morning. It was decided that in 1 week, it will be publicly announced th...
Weak form efficient but is not semi-strong form efficient.
Strong form efficient but is not semi-strong form efficient.
Semi-strong form efficient but is not strong form efficient.
Strong form efficient but is not weak form efficient.
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Which of the following statements is not correct with regard to initial public offerings (IPOs)?
In a best-efforts offering, the underwriter has no obligation to purchase unsold shares.
In an underwritten offering, the underwriter has an obligation to purchase all unsold shares.
Best-efforts offerings provide the firm with the greater assurance that all offered shares will be sold.
More risky stock offerings are done on a best-efforts basis.
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The most important considerations with respect to short term investments are
Return and value.
Risk and liquidity.
Return and risk.
Growth and value.
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All of the following are alternative marketable securities suitable for investment except:
US treasury bills.
Euro dollars.
Commercial paper.
Convertible bonds.
