FINE 2000 Chapter Notes - Chapter 2: Opportunity Cost, Credit Union, Agency Cost

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24 May 2012

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Buyers of ipos are helping to finance firm"s investment in real assets. New issue of shares increases amount of cash held and number of shares held. Money that corporations invest in real assets comes ultimately from saving by investors. Reinvesting means additional savings by existing shareholders. See figure 2. 1, pg. 32 flow of savings to corporate investments and figure 2. 2 flow of savings to a large public. Financial market: market where securities are issues and traded. First issue is called initial public offering (ipo) Issuance of shares after ipo is called seasoned equity offers or follow-on offers. Primary market: market for the sale of new securities by corporations. Secondary market: market in which already issued securities are traded among investors. Stock markets are also called equity markets. Trading shares of smaller and emerging canadian companies is done through tsx venture exchange and the cnq (canada"s new stock exchange for emerging companies)

Related Questions

1. Which of the following statements about the OTC market istrue?

A. An OTC market is an organized exchange where there is acentral trading location.

B.	OTC security transactions are made on the floor of an exchangeby traders.

C.	Securities that are not listed on an organized exchange arebought and sold on the OTC market.

D.	Securities that are listed on an organized exchange are boughtand sold in the OTC market.

2. Which of the following theories states that security pricesreflect all information, whether public or private?

A. Weak-form efficiency.

B.	Semistrong-form efficiency.

C.	Nominal-form efficiency.

D.	Strong-form efficiency.

3. Which of the following is a primary investment vehicle forthe funds in which life insurance companies must invest?

A.Both equity securities and long-term corporate bonds.

CDs.

C.	Equity securities.

D.	Long-term corporate bonds.

4. Large firms are most likely to use money markets for thefollowing reason:

A. To make long term investments.

B.	To buy commercial paper at lower interest rates than it couldsell through a bank.

C.	To finance long term investments.

D.	To adjust their liquidity position.

5. Which of the following is true of the New York StockExchange?

A. It is an organized exchange.

B.	It has no central trading location.

C.	It is an over-the-counter exchange.

D.	It can be used by all U.S citizens.

6. Which of the following is true of an efficient market?

A. Market prices of securities of companies in the same industryare all same.

B.	Market prices adjust quickly to new information as it becomesavailable.

C. All information contained in past prices of a security isreflected in its current price but that there is both public andprivate information that is not.

D.	Securities have no systematic risk.

tealgoose402

Existing securities are traded

A. in the primary markets

B. in the secondary markets

C. only on organized exchanges

D. only over-the-counter

peachpig592

One of the major functions of the securities markets is to:

A) advertise the sale of stocks and bonds of major corporations.

B) provide long-term funding for investors.

C) assist businesses in funding long-term funding to finance business expansion.

D) provide investors with information and advice regarding the value of stock and bond issues offered by major corporations.

viridiankoala364

FINE 2000 Chapter Notes - Chapter 2: Opportunity Cost, Credit Union, Agency Cost

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