Question 1

When Nissan sells a new Sentra and receives the proceeds,the transaction is similar to one market.When the same Sentra is traded in the used car market,the transaction is similar to another market.Which markets are we referring to,respectively?

Accepted Answer

The answer of When Nissan sells a new Sentra and...

Question 2

Futures contracts are best described by which of the following?

Accepted Answer

Futures contracts are agreements between two parties to buy or sell an underlying financial instrument or commodity at a predetermined price and date in the future. They do not pay dividends, as they are primarily used for hedging or trading purposes rather than for income generation.

Question 3

The secondary securities market is BEST described by which of the following?

Accepted Answer

The secondary securities market is a market in which previously issued securities are traded. This means that after the initial issuance in the primary market, the securities are subsequently traded in the secondary market. The secondary market provides liquidity to investors as they can buy and sell securities without affecting the issuer or the primary market pricing.

Question 4

Which of the following are agreements to buy or sell specified quantities of commodities or financial instruments at an agreed price at a future date?

Accepted Answer

Futures contracts are agreements to buy or sell specified quantities of commodities or financial instruments at an agreed price at a future date. Therefore, option A is the correct choice. Mutual debenture contracts, on-time contracts, and options contracts are not related to commodities trading and do not match the given definition.

Question 5

Which of the following are contracts that entitle holders to buy or sell specified quantities of common shares or other financial instruments at a set price during a specified time?

Accepted Answer

Options are contracts that entitle holders to buy or sell specified quantities of common shares or other financial instruments at a set price during a specified time. Futures contracts are similar, but they involve an obligation to buy or sell at a future date, while debentures and mutual securities are types of debt and equity securities, respectively.

Question 6

Which of the following institutions' primary activity is underwriting?

Accepted Answer

Investment bankers are the primary institutions involved in underwriting, which involves assuming the risk and guaranteeing the sale of new securities issued by corporations or government entities. The Toronto Stock Exchange, stockbrokers, and institutional investors may participate in underwriting, but it is not their primary activity.

Question 7

Which of the following BEST describes a mutual fund?

Accepted Answer

A mutual fund is a professionally managed investment vehicle that pools money from multiple investors to purchase a diversified portfolio of stocks, bonds, or other securities. The fund manager then makes investment decisions based on the fund's investment objectives, which are stated in its prospectus. Therefore, option B correctly describes a mutual fund as being professionally managed. The other options are incorrect - mutual funds do have stated investment goals, they may offer competitive returns, and they are a good way to hold a diversified stock portfolio.

Question 8

Blackwell Investments specializes in acting as an intermediary in taking companies public.This financial middleman is an example of which of the following roles?

Accepted Answer

Blackwell Investments specializes in taking companies public, which is one of the key roles of an investment banker. Choice A is incorrect because stockbrokers primarily buy and sell securities for their clients, while Blackwell Investments is facilitating the process of taking a company public. Choice B is incorrect because commercial bankers typically offer loans and other banking services to businesses and individuals, which is not related to taking a company public. Choice D is incorrect because transfer agents are responsible for maintaining accurate records of a company's shareholders and facilitating the transfer of ownership of shares, which is not related to taking a company public.

Question 9

As a security,options are BEST described by which of the following?

Accepted Answer

The answer of As a security,options are BEST described by...

Question 10

The primary securities market is which of the following?

Accepted Answer

The primary securities market is where new securities, such as stocks and bonds, are sold to the public for the first time. It is also known as the primary market or the new issue market.

Question 11

Which of the following is a financial service that pools its investors' funds to buy a selection of securities and provide professional investment management?

Accepted Answer

A mutual fund pools money from multiple investors to purchase a diversified portfolio of stocks, bonds, or other securities. Professional managers then make investment decisions for the fund, with the goal of generating returns for the investors.

Question 12

Standard and Poor's has evaluated Syntex Corporation's new issue of bonds as BB+.This is an example of which of the following?

Accepted Answer

The evaluation by Standard and Poor's of Syntex Corporation's new issue of bonds as BB+ is a bond rating.

Question 13

Organized stock exchanges operate in a similar manner to which of the following?

Accepted Answer

Organized stock exchanges operate like auction companies because they bring buyers and sellers together in a centralized location to trade securities. Just like how an auction company serves as a marketplace for buyers and sellers to come together and bid on items, stock exchanges provide a platform for investors to buy and sell securities in a transparent and regulated environment.

Question 14

Investors were amazed at how quickly the price of eBay shares rose during the first day it was offered for sale to the public.These shares were being sold in which of the following markets?

Accepted Answer

eBay shares were being sold for the first time, which means they were entering the primary market, where securities are offered for sale to the public for the first time, with the goal of raising capital. The other markets listed (Internet, speculative, institutional) are not relevant in this context.

Question 15

When Raven Asan sold 12 shares of Home Depot stock that her father had bought from a business acquaintance and given her as a graduation present,it was on which of the following markets?

Accepted Answer

The secondary market is where previously issued securities, like Raven's Home Depot stock, are bought and sold by investors. It is different from the primary market (where new securities are initially issued and sold) and institutional market (which refers to transactions between large financial institutions). The speculative market is not a commonly recognized term in finance.

Question 16

Which of the following is the process of buying securities from corporations and governments and reselling them to the public?

Accepted Answer

Underwriting is the process of buying securities from corporations and governments and reselling them to the public. Circuit breaking is a mechanism that halts trading if there is a significant drop in the market. Rounding up is a mathematical process of approximating a number to the nearest whole number or decimal place. Brokering is the act of arranging transactions between buyers and sellers for a commission or fee.

Question 17

A mutual fund serves which of the following functions?

Accepted Answer

A mutual fund pools the money of individual investors to buy a selection of securities that meet stated investment goals. It does not necessarily invest in companies with mutual interests or only in mutual insurance companies. While investors in a mutual fund may have a mutual interest in their investment, that is not the primary function of the fund itself.

Question 18

What is another name for a stockbroker?

Accepted Answer

While investment bankers, underwriters, and fiscal managers may also work in the world of finance, a stockbroker is commonly referred to as an account executive, who assists clients in buying and selling securities.

Question 19

Which of the following are the link between public companies and the investors interested in buying their stock?

Accepted Answer

Stockbrokers serve as intermediaries between investors and public companies by facilitating the buying and selling of stocks on behalf of their clients. Underwriters and investment bankers help public companies issue and sell new stocks, while account managers typically work with individual investors to manage their portfolios.

Question 20

Securities that are not traded on the organized stock exchanges are traded in which of the following markets?

Accepted Answer

Securities that are not traded on the organized stock exchanges are traded in the over-the-counter (OTC) market. The OTC market consists of a network of dealers who buy and sell securities directly among themselves or on behalf of clients through computer networks. Examples of securities traded on the OTC market include bonds, foreign currencies, and some stocks. The futures market (A) deals with standardized contracts for buying or selling a certain commodity, currency, or financial instrument at a predetermined price and time in the future. The dealers' market (B) is a type of OTC market where securities are bought and sold by dealers who act as principals rather than as brokers. The primary market (D) is where new securities are issued to the public, such as through an initial public offering (IPO).

Quiz 15: Understanding Money, financial Institutions, and the Securities Markets