Finmar
Modules
My Progress
Answers for Module 3: Chapter 7-8
Review the correct answers and explanations for each question in this module.
Q1: What is the broad definition of a financial market?
Q2: What is the basic function of financial markets?
Q3: Which of the following is NOT an activity of the financial market?
Q4: What is "Arbitrage"?
Q5: What is the key difference between the debt market and the equity market?
Q6: An Initial Public Offering (IPO) is an example of which market?
Q7: When you buy shares of a publicly-traded company from another investor on the NYSE, you are participating in the:
Q8: What is a defining characteristic of an Organized Stock Exchange?
Q9: What is one of the two important functions of the secondary market?
Q10: What does "Liquidity" in a financial market refer to?
Q11: Which force of change in financial markets involves the worldwide trend of loosening tight controls?
Q12: What is "Consolidation" in financial markets a result of?
Q13: The Money Market is characterized by trading in:
Q14: What is Commercial Paper?
Q15: How are Treasury Bills (T-bills) sold?
Q16: What is a Repurchase Agreement (Repo)?
Q17: The Capital Market primarily deals with:
Q18: What does the "par value" of a bond represent?
Q19: What is "yield to maturity" (YTM) of a bond?
Q20: What is a "Debenture"?
Q21: What is the defining feature of a Mortgage Bond?
Q22: What are "Junk Bonds"?
Q23: What right do ordinary (common) equity shareholders typically have that preferred shareholders do not?
Q24: What does "cumulative voting" allow a shareholder to do?
Q25: What is the primary advantage of a cumulative preferred share?
Q26: A "call provision" on a preferred share gives the right to whom?
Q27: What is the primary purpose of a "Banker's Acceptance"?
Q28: In the case of bankruptcy, who gets paid first?
Q29: What does "liberalization" in financial markets refer to?
Q30: What are "Treasury Shares"?
Q31: What distinguishes an Over-the-Counter (OTC) exchange from an organized exchange?
Q32: Which type of bond requires interest payments only if the company earns a profit?
Q33: What is the "current yield" of a bond?
Q34: A "sinking fund" provision in a preferred share agreement requires the issuer to do what?
Q35: What is the primary function of a stock exchange?
Q36: What is a "participating feature" on a preferred share?
Q37: Why would a company use a Floating Rate or Variable Rate Bond?
Q38: What are "authorized shares"?
Q39: What does a bond "indenture" contain?
Q40: Which of these is NOT a key attribute investors look for in a financial market?
Q41: What is a key feature of a Eurobond?
Q42: What is the main purpose of "Risk Management" as a financial market activity?
Q43: A "Closed-end Mortgage Bond" has what restriction?
Q44: What is a Certificate of Deposit (CD)?
Q45: What is one of the main factors affecting a bond's rating?
Q46: What is a stockholder's "pre-emptive right"?
Q47: Subordinated debentures are considered riskier for investors because:
Q48: How do financial markets facilitate commercial transactions?
Q49: Interbank loans are:
Q50: What does it mean for a stock to be "listed"?
Q51: Which is an example of a capital market security issuer?
Q52: Which type of bond is considered among the safest fixed-income investments?
Q53: What is the book value per share of a company?
Q54: What is the main difference between cumulative and noncumulative preferred shares?
Q55: An investor who profits from dividends and a potential increase in stock price is participating in the:
Q56: What kind of bond would protect an investor from major swings in market value if interest rates change?
Q57: What has been a major impact of technology on financial markets?
Q58: What does "transparency" mean in the context of financial markets?
Q59: A First Mortgage Bond has what kind of claim on assets?
Q60: Why does a company need a high credit rating to issue commercial paper?