Question 6 Which of the following statements is CORRECT? Capital markets deal on
ID: 2648652 • Letter: Q
Question
Question 6
Which of the following statements is CORRECT?
Capital markets deal only with common stocks and other equity securities.
Home mortgage loans are traded in the money market.
While the distinctions are blurring, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise capital from other parties.
If an investor sells shares of stock through a broker, then it would be a primary market transaction.
The New York Stock Exchange is an auction market, and it has a physical location.
Question 7
A hostile takeover is said to occur when another corporation or group of investors gains voting control over a firm and replaces the old managers. If the old managers were managing the firm inefficiently, then hostile takeovers can improve the economy. However, hostile takeovers are controversial, and legislative actions have been taken to make them more difficult to undertake.
True
False
Question 8
Multiple Choice: Conceptual
Considered alone, which of the following would increase a company's current ratio?
An increase in accounts receivable.
An increase in accrued liabilities.
An increase in accounts payable.
An increase in notes payable.
An increase in net fixed assets.
Question 9
Which of the following statements is CORRECT?
It is possible that the price set in an IPO is so low that investors will want to buy more shares than the company wants to sell. In that case, the company will have to issue more shares than it wants to sell.
The term "IPO" stands for Introductory Price Offered, and it is the price at which shares of a new company are offered to the public.
In a "Dutch auction," investors who want to buy shares in an IPO submit bids indicating how many shares they want to buy and the price they are willing to pay. The company determines how many shares it wants to sell. The highest price that enables the company to sell the desired number of shares is the price that all buyers must pay.
IPO prices are generally established by the market, and buyers of the new stock must pay the price that prevails at the close of trading on the day the stock is offered to the public.
It is possible that the price set in an IPO is so high that investors will refuse to buy the number of shares that the company wants to sell. In this situation, the IPO is said to be oversubscribed.
Question 10
How much would $1, growing at 3.5% per year, be worth after 75 years?
$13.86
$12.54
$15.28
$14.55
$13.20
Question 11
Which of the following is an example of a capital market instrument?
Preferred stock.
Banker's acceptances.
Commercial paper.
U.S. Treasury bills.
Money market mutual funds.
Question 12
Multiple Choice: Conceptual
You recently sold 100 shares of Microsoft stock to your brother at a family reunion. At the reunion your brother gave you a check for the stock and you gave your brother the stock certificates. Which of the following best describes this transaction?
This is an example of a direct transfer of capital.
This is an example of a primary market transaction.
This is an example of a derivative market transaction.
This is an example of a money market transaction.
This is an example of an exchange of physical assets.
a.Capital markets deal only with common stocks and other equity securities.
b.Home mortgage loans are traded in the money market.
c.While the distinctions are blurring, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise capital from other parties.
d.If an investor sells shares of stock through a broker, then it would be a primary market transaction.
e.The New York Stock Exchange is an auction market, and it has a physical location.
Explanation / Answer
Question 6
Which of the following statements is CORRECT?
Answer
e) The New York Stock Exchange is an auction market, and it has a physical location.
Note: New York Stock Exchange is a market where buyer & seller meet by auctioning the price by buyer & seller where the exchange is done and it is physically located
Question 7
A hostile takeover is said to occur when another corporation or group of investors gains voting control over a firm and replaces the old managers. If the old managers were managing the firm inefficiently, then hostile takeovers can improve the economy. However, hostile takeovers are controversial, and legislative actions have been taken to make them more difficult to undertake.
Answer
True
Question 8
Considered alone, which of the following would increase a company's current ratio?
Answer
An increase in accounts receivable.
Note : Increase in Account Recievable would lead to increase in current asset and which would increase current ratio
Question 9
Which of the following statements is CORRECT?
Answer
c) In a "Dutch auction," investors who want to buy shares in an IPO submit bids indicating how many shares they want to buy and the price they are willing to pay. The company determines how many shares it wants to sell. The highest price that enables the company to sell the desired number of shares is the price that all buyers must pay.
Question 10
How much would $1, growing at 3.5% per year, be worth after 75 years?
Amount would be = 1*(1+3.5%)^75
Amount would be = $ 13.20
Answer
e) $ 13.20
Question 11
Which of the following is an example of a capital market instrument?
Answer
a.Preferred stock.
Question 12
You recently sold 100 shares of Microsoft stock to your brother at a family reunion. At the reunion your brother gave you a check for the stock and you gave your brother the stock certificates. Which of the following best describes this transaction?
Answer
a.This is an example of a direct transfer of capital.
a.An increase in accounts receivable.
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