Test Bank Ch 1

Chapter 1: Introduction

True/False

1. Primary markets are markets where users of funds raise cash by selling securities to funds suppliers.

Answer: True
Level: Easy

2. Secondary markets are markets used by corporations to raise cash by issuing securities for a short time period.

Answer: False
Level: Easy

3. In a private placement the issuer typically sells the entire issue to one or only a few institutional buyers.

Answer: True
Level: Easy

4. The NYSE is an example of a secondary market.

Answer: True
Level: Easy

5. Privately placed securities are usually sold to one or more investment bankers and then resold to the general public.

Answer: False
Level: Easy

6. Money markets are the markets for securities with an original maturity of 1 year or less.

Answer: True
Level: Easy

7. Eurodollar bonds are dollar denominated bonds issued outside the United States.

Answer: True
Level: Easy

8. Financial intermediaries such as banks typically have assets that are riskier than their liabilities.

Answer: True
Level: Easy

9. Spinning is the process of allocating shares in a ‘hot’ IPO to certain favored clients of investment banking firms in exchange for receiving additional investment banking business.

Answer: True
Level: Easy

10. Many stock research analysts of investment banking firms have been accused of issuing overly optimistic stock research reports on firms in order to help support the investment bankers’ underwriting business.

Answer: True
Level: Medium

11. There are three types of major financial markets today; primary, secondary and derivatives markets. The NYSE and NASDAQ are both examples of derivatives markets.

Answer: False
Level: Easy

12. Thrift accounts are primarily used by investors to fund retirement savings.

Answer: False
Level: Easy

Multiple Choice

13. What factors are encouraging financial institutions to offer overlapping financial