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Exam 2: The Financial Market Environment

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Question 21

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Money markets are markets for long term funds such as bonds and equity.

A) True
B) False

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Question 22

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Primary and secondary markets are markets for short-term and long-term securities, respectively.

A) True
B) False

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Question 23

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In a ________ market, the buyer and seller are brought together to trade securities in an organization called ________.

The ________ market is where securities are initially issued and the ________ market is where pre-owned securities (not new issues) are traded.

Most businesses raise money by selling their securities in a

Financial markets are intermediaries that channel the savings of individuals, businesses and government into loans or investments.

In the OTC market, the ask price is the highest price offered by a dealer to purchase a given security.

Dividends received by a corporation on an investment in the common and preferred stock of another corporation (where ownership in the dividend paying corporation is less than 20%) is subject to 70 percent exclusion for tax purposes.

Which of the following is NOT a financial institution?

Sub-prime mortgages are mortgage loans made to borrowers the high incomes and better than average credit histories.

In an efficient market if a company announced sales of a new product are lower than expected, what would you expect to happen to the stock price?

Trading is carried out on the floor of the New York Stock Exchange by

Tax laws often are used to accomplish economic goals such as providing incentives for corporate investment in certain types of assets.

In the year 2000, real estate loans accounted for less than 40% of the total loan portfolios of large banks, but by 2007 real estate loans grew to more than half of all loans made by large banks.

Securitization is the process of pooling mortgages or other types of loans and selling the claims or securities against that pool in the secondary market.

The shadow banking system describes a group of institutions that engage in lending activities, much like traditional banks, but these institutions do not accept deposits and are therefore not subject to the same regulations as traditional banks.

Congress allows corporations to exclude from taxes 70 to 100 percent of dividends received from other corporations. Congress did this to

The ________ is created by a financial relationship between suppliers and demanders of short-term funds.

A primary market is a financial market in which pre-owned securities are traded.

The marginal tax rate represents the rate at which additional income is taxed.