Question 13 One disadvantage of common stock as a source of funds is that the un
ID: 2794519 • Letter: Q
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Question 13 One disadvantage of common stock as a source of funds is that the underw of common stock are usually much lower than those for debt. riting and distribution costs True False The debt markets are segmented based on the maturity of the debt instruments, the type of debt instruments, and the participants in the market. True False that the pool of funds One of the benefits from financial intermediation is risk diversification in collected can be spread across a variety of investments True, False Economic efficiency is when the prices of investments reflect existing information and adjust quickly when new information enters the markets False_ True Question 17 A corporate stock that was issued last year would now trade in the market. a) primary b) secondary c) money d) debt e) government securities Capital markets are markets for a) commercial paper. b) short-term debt securities. c) long-term debt securities. d) Treasury notes. e) none of the above. Which of the following transactions takes place in secondary markets? a) New stock sold in an initial public offering. b) Treasury securities auctioned off by the government. c) Stock sold by an insurance company to adjust its portfolio of assets'. d) Stock sold in a seasoned equity offering. e) None of the above.Explanation / Answer
13) False , there is no underwriting cost, in case of issuing debt because it is directly issued to investors unlike shares
14) True ,This process is called market segment theory,in which debts are segmented on the basis of their characteristics
15) True , Pooling of funds collected can be spread across a variety of investments in order to escape from default risk
16) True , It is economic efficiency because its a process of informational efficiency
17) b) secondary , Secondary market is the market for reissued shares ,that means previously issued shares are traded
18) c) Long term debt securities , captial markets provides capital funds as in debt and equities for more than 1 year
19) e) None of the above , In Secondary markets, share are reissued through third party to potential investors
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