Investments and Portfolio Management Zvi Bodie Alex Kane Alan Marcus 9th edition – Test Bank

Investments and Portfolio Management Zvi Bodie Alex Kane Alan Marcus 9th edition – 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. A and B.
E. B and C.

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. A and B.
E. B and C.

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.
E. C and D.

4. 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 bid and ask prices.
D. Specialists cannot trade in their own accounts.
E. A, B, and C are all true.

5. Investment bankers
A. act as intermediaries between issuers of stocks and investors.
B. act as advisors to companies in helping them analyze their financial needs and find buyers for newly issued securities.
C. accept deposits from savers and lend them out to companies.
D. A and B.
E. A, B, and C.

6. In a “firm commitment”
A. the investment banker buys the stock from the company and resells the issue to the public.
B. the investment banker agrees to help the firm sell the stock at a favorable price.
C. the investment banker finds the best marketing arrangement for the investment banking firm.
D. B and C.
E. A and B.