CHAPTER 14-1

SIX MC QUESTIONS

Q: Which of the following levels of market efficiency is based on past price information being unrelated to future prices?

Illegal form

Weak form

Strong form

Insider trading

Q: When government deficits occur, what steps may be taken to finance the shortfall?

Money supply may be reduced.

Issue stocks only.

The government may sell long-term and/or short-term government securities.

Interest rates may be reduced.

Q: In an efficient market,

not all relevant and available information are reflected in the stock prices.

there will be a lot of abnormal return.

financial managers should not believe that the price they receive as true reflections of value.

stock prices adjust quickly to new information.

Q: One of the main purposes of capital markets is:

to set various interest rates.

to provide access to long-term funds.

to allocate capital to the most efficient user.

to provide access to short-term funds.

Q: Which of the following is not one of the four pillars of finance:

Multiple Choice

banks.

insurance companies.

trust companies.

crown corporations.

Q: The difference between a broker and a dealer is that:

Multiple Choice

a broker owns inventories of securities and acts as a wholesaler.

a dealer is a registered member of the exchange by purchasing a "seat" whereas a broker does not have a "seat".

a dealer owns inventories of securities and acts as a wholesaler.

buyers and sellers of securities contact dealers to act as their agents.