Financial Markets Chapter 13 Exam Questions With Verified Answers.
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Course
Financial MKT
Institution
Financial MKT
Financial Markets Chapter 13 Exam
Questions With Verified Answers.
(I) A share of common stock in a firm represents an ownership interest in that firm.
(II) A share of preferred stock is as much like a bond as it is like common stock. - answerBoth
are true
Preferred stockholders hold a claim o...
Financial Markets Chapter 13 Exam
Questions With Verified Answers.
(I) A share of common stock in a firm represents an ownership interest in that firm.
(II) A share of preferred stock is as much like a bond as it is like common stock. - answer✔Both
are true
Preferred stockholders hold a claim on assets that has priority over the claims of -
answer✔common stockholders, but after that of bondholders.
(I) Preferred stockholders hold a claim on assets that has priority over the claims of common
stockholders, but after that of bondholders.
(II) Firms issue preferred stock in far greater amounts than common stock. - answer✔(I) is true,
(II) false.
(I) Preferred stockholders hold a claim on assets that has priority over the claims of common
stockholders. (II) Bondholders hold a claim on assets that has priority over the claims of
preferred stockholders. - answer✔Both are true
(I) Firms issue common stock in far greater amounts than preferred stock.
(II) In a given year, the total volume of stock issued is much less than the volume of bonds
issued. - answer✔Both are true
The riskiest capital market security is - answer✔common stock
(I) The largest of the organized stock exchanges in the United States is the New York Stock
Exchange.
(II) To be listed on the NYSE, a firm must have a minimum of $100 million in market value or
$10 million in revenues. - answer✔(I) is true, (II) false.
To list on the NYSE, a firm must - answer✔meet have earnings of at least $10 million per year
and have a total of $100 million in market value requirements.
A share of common stock in a firm represents an ownership interest in that firm and allows
stockholders to - answer✔vote and receive dividends.
Securities not listed on one of the exchanges trade in the over-the-counter market. In this
exchange, dealers "make a market" by - answer✔-buying stocks for inventory when investors
want to sell
-selling stocks from inventory when investors want to buy
The most active stock exchange in the world is the - answer✔A) Nikkei Stock Exchange.
Which of the following statements about trading operations in an organized exchange is correct?
- answer✔In most trades, specialists match buy and sell orders.
What is NOT an advantage of Electronic Communications Networks (ECNs)? - answer✔ECNs
work well for thinly traded stocks.
What is FALSE regarding Electronic Communications Networks (ECNs)? - answer✔ECNs
allow institutional investors, but not individuals, to trade after hours.
What is an advantage of Electronic Communications Networks (ECNs)? - answer✔-all unfilled
orders are available for review by ECN traders
-transactions costs are lower for ECN trades
-trades are made and confirmed faster
What is true regarding Electronic Communications Networks (ECNs)? - answer✔-archipelago
and Instinet are two examples of ECNs
-competition from ECNs has forced NASDAQ to cut its fees
-traders benefit from lower trading costs and faster service
What is the primary disadvantage of an ETF? - answer✔Investors have to pay a broker
commission each time they buy or sell shares.
In 2013, the NYSE traded ________ shares on an average trading day. - answer✔4 billion
Exchange traded funds (ETFs) have which of the following features? - answer✔-they are listed
and traded as individual stocks on a stock exchange
-they are indexed rather than actively managed
-their value is based on the underlying net asset value of the stocks held in the index basket
A basic principle of finance is that the value of any investment is - answer✔The present value of
all future net cash flows generated by the investment
A high price earnings ratio (PE) gives what interpretation? - answer✔The market expects the
earnings to rise in the future.
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