Chapter 3 CENGAGE QUIZ (multiple choice) Flashcards
A return that is greater than is justified by the risk associated with an investment is known as a(an) _____.
abnormal return
The market for newly issued stock in companies that were privately held till now is called a(an) _____.
initial public offering market
Money markets are markets for ____.
trading of short-term debt securities
Which of the following factors have contributed to the competition among the major stock markets becoming increasingly fierce?
The dual listing of securities in various capital markets
A call option allows the _____.
option buyer (owner) to purchase a certain number of shares of stock (or some other security) from the option seller at a specific price
Which of the following statements is correct about the difference between primary markets and secondary markets?
primary markets are used for raising new funds, whereas secondary markets are used for trading in previously issued securities.
Identify the true statement about the offering price of the stock of a company that is going public for the first time.
If the offering price is set below the true equilibrium price, the stock price will rise sharply after issue.
Which of the following statements is correct about the offering price of an issue?
The investment banker will buy the issue from the company at a discount below the price at which the securities are to be offered to the public.
Flotation costs refer to the _____.
expenses incurred by a company in connection with issuing new stocks or bonds
Which of the following actions were taken as a part of the Emergency Economic Stabilization Act of 2008?
Permitting the U.S. government to purchase up to $700 billion in troubled mortgages in an attempt to improve liquidity in the financial markets
