Chapter 2

Question 1

liabilities

Answer 1

IOUs or debts for a firm that issues securities

Question 2

capital

Answer 2

wealth (either financial or physical) that is employed to produce more wealth

Question 3

maturity

Answer 3

number of years (term) until that instrument’s expiration date

Question 4

short-term maturity

Answer 4

if the term is less than a year

Question 5

long-term maturity

Answer 5

if the term is 10 years or longer

Question 6

intermediate-term maturity

Answer 6

term is between one and ten years

Question 7

equities

Answer 7

common stock, which are claims to share in the net income

Question 8

dividends

Answer 8

periodic payments to shareholders, considered long-term securities because they have no maturity date

Question 9

primary market

Answer 9

financial market in which new issuers of a security, such as a bond or a stock, are sold to initial buyers by the corporation or government agency borrowing the funds

Question 10

secondary market

Answer 10

financial market in which securities that have been previously issued can be resold

Question 11

investment bank

Answer 11

financial institution that assists in the initial sale of securities in the primary market

Question 12

underwriting

Answer 12

guarantees a price for a corporation’s securities and then sells them to the public

Question 13

brokers

Answer 13

agents of investors who match buyers will sellers of securities

Question 14

dealers

Answer 14

link buyers and sellers by buying and selling securities at stated prices