Investments 9Th Canadian Edition By Bodie – Test Bank

Investments 9Th Canadian Edition By Bodie – Test Bank

Chapter 03

How Securities Are Traded

Multiple Choice Questions

1. The trading of stock that was previously issued takes place
A. in the secondary market.
B. in the primary market.
C. usually with the assistance of an investment banker.
D. in the secondary and primary markets.

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Learning Objective: 03-01 How Firms Issue Securities.
Topic: 03-01 How Firms Issue Securities

2. A purchase of a new issue of stock takes place
A. in the secondary market.
B. in the primary market.
C. usually with the assistance of an investment banker.
D. in the secondary and primary markets.
E. in the primary market and usually with the assistance of an investment banker.

Funds from the sale of new issues flow to the issuing corporation, making this a primary market transaction. Investment bankers usually assist by pricing the issue and finding buyers.

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Learning Objective: 03-01 How Firms Issue Securities.
Topic: 03-01 How Firms Issue Securities

3. Firms raise capital by issuing stock
A. in the secondary market.
B. in the primary market.
C. to unwary investors.
D. only on days when the market is up.

Funds from the sale of new issues flow to the issuing corporation, making this a primary market transaction.

Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: Easy
Learning Objective: 03-01 How Firms Issue Securities.
Topic: 03-01 How Firms Issue Securities

4. Which of the following statements regarding the specialist are true?
A. Specialists maintain a book listing outstanding, unexecuted limit orders.
B. Specialists earn income from commissions and spreads in stock prices.
C. Specialists stand ready to trade at quoted bids and ask prices.
D. Specialists cannot trade in their own accounts.
E. Specialists maintain a book listing outstanding, unexecuted limit orders, earn income from commissions and spreads in stock prices, and stand ready to trade at quoted bid and ask prices.

Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: Medium
Learning Objective: 03-02 How Securities are Traded.
Topic: 03-02 Privately Held Firms