QUESTION 1 1 p Celestila Moonn, a GLBAAF 301 student at UMB, made the following

Question

QUESTION 1 1 p Celestila Moonn, a GLBAAF 301 student at UMB, made the following statements regarding primary and secondary markets: Statement 1: Secondary markets help support primary markets because secondary markets offer primary market purchasers liquidity for their holdings, update the price or value of the primary market claims. and reduce the cost of trading the primary market claims Statement 2: Once financial instruments such as stocks are issued in primary markets, they are then traded-that is, rebought and resold-in secondary markets With respect to above statements, is Moonn correct? O A Only statement 2 is correct Both statements are correct Neither statements is correct

Explanation / Answer

1) B - Both statements are correct. Secondary markets support primary markets by reducing cost and providing liquidity.

2) C - Both are incorrect. Dirty Price = Clean Price + Accrued Interest. With TIPS, coupon rate remains constant but par value changes

3) A - Both are correct. When coupon rate > YTM, Bond Price > Par Value

4) B - 7 is correct but 8 is not. Revenue bonds are backed by revenues of a particular project not the entire municipality.

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