Hey sorry if there are so many questions but I have an exam on Monday an in the study guide is of 200 questions, these are the only ones that I am not really sure which one is the correct answer. I tried to ask my professor in class before but he explains really badly so if you could please tell me which one is the correct one at least I would love you for that. Thank you

CHAPTER #3

1-In which form of informational efficiency would company insiders find it impossible to earn abnormal returns in the financial markets?

a. Economic efficiency

b. Weak-form efficiency

c. Strong-form efficiency

d. Semistrong-form efficiency

2-A return that is greater than is justified by the risk associated with an investment is known as a(an) _____.

a. inefficient return

b. risk-adjusted return

c. market return

d. abnormal return

3-The semistrong-form efficiency states that _____.

a. all information contained in past price movements is fully reflected in current market prices.

b. current market prices reflect all pertinent information, whether it is publicly available or privately held

c. current market prices reflect all publicly available information, whether it is historical or newly released

d. current market prices do not reflect any current information

5-An investment banker _____.

a. uses investors' funds to create loans and other financial instruments

b. pays an interest to attract funds from savers

c. receives fees from the investors in securities

d. receives fees from the issuer of securities

6-The market for newly issued stock in companies that were privately held till now is called a(an) _____.

a. seasoned equity market

b. secondary market

c. over-the-counter market

d. initial public offering market

8-Money markets are markets for _____.

a. trading of short-term debt securities

b. trading of long-term bonds

c. seasoned public offerings of common stock

d. initial public offerings of common stock

9-Which of the following statements about dual listing of stocks is correct?

a. Dual listing of a stock increases the capital gains from the stock.

b. Dual listing of a stock increases the dividend income from the stock.

c. Dual listing of a stock increases the operating leverage of the issuing company.

d. Dual listing of a stock increases its liquidity.

10-Which of the following factors have contributed to the competition among the major stock markets becoming increasingly fierce?

a. The shelf registration of securities with SEC

b. The dual listing of securities in various capital markets

c. The existence of money markets in addition to capital markets

d. The bifurcation of physical and over-the counter markets

11-Sam wants to invest in the shares of a company which was privately held till recently, but chooses to go public now. Sam is said to be transacting in the _____.

a. initial public offerings market

b. debt market

c. money market

d. derivatives market

12-Which of the following financial instruments are traded in capital markets?

a. Options

b. Corporate bonds

c. Treasury bills

d. Commercial papers

13-A call option allows the _____.

a. option seller to purchase a certain number of shares of stock (or some other security) from the buyer (owner) at a specific price

b. option buyer (owner) to sell a certain number of shares of stock (or some other security) to the option seller at a specific price

c. option buyer (owner) to purchase a certain number of shares of stock (or some other security) from the option seller at a specific price

d. option seller to sell a certain number of shares of stock (or some other security) to the buyer (owner) at a specific price

14-The difference between the bid and asked prices of a security is called the _____.

a. flotation cost

b. underwriter's spread

c. market maker's discount

d. dealer's spread

15-Which of the following statements is true about the trade-through rule used when trading in securities?

a. It can be used only in the money market.

b. It can be used only in a primary market.

c. It leads to decreased competition among stock markets.

d. It leads to increased competition among stock markets.

16-Which of the following organizations regulate the sale of new stocks and bonds as well as operations in the secondary markets?

a. NASDAQ

b. New York Stock Exchange

c. Securities and Exchange Commission

d. National Association of Securities Dealers

17-Which of the following statements is correct about the difference between primary markets and secondary markets?

a. Primary markets are used for trading in debts, whereas secondary markets are used for trading in equity.

b. Primary markets are used for trading in short-term debt, whereas secondary markets are used for trading in long-term debt.

c. Primary markets are used for raising new funds, whereas secondary markets are used for trading in previously issued securities.

d. Primary markets are used for trading in short-term equity, whereas secondary markets are used for trading in long-term equity.

18-Which of the following transactions takes place in a secondary market?

a. Auction of treasury securities by the government

b. Underwriting of shares by an investment bank

c. Sale of new stock in an initial public offering

d. Sale of stock by an insurance company to adjust its portfolio of assets

19-A group of investment banking firms formed to spread the risk associated with the purchase and distribution of a new issue of securities is called a(n) _____.

a. credit union

b. underwriting syndicate

c. supplemental liquidity provider

d. designated market maker

20-Identify the situation under which an investment bank is involved in raising the capital required by a company and bears significant risks related to the offering.

a. Best-efforts arrangement

b. Underwritten arrangement

c. Transfer of funds through a financial intermediary

d. Direct transfer of funds from investors to borrowers

21-Which of the following documents filed by the company issuing debt securities provides only the financial, legal, and technical information about the company?

a. Underwriting agreement

b. Prospectus

c. Shelf registration statement

d. Registration statement

22-An underwriting syndicate is _____.

a. a group of organizations that create various loans and investments from funds provided by depositors

b. a consortium of investment companies that use funds provided by savers to buy various types of financial assets, including stocks and bonds.

c. a group of investment banking firms formed to spread the risk associated with the purchase and distribution of a new issue of securities

d. is a depository institution that is owned by its depositors, who often are members of a common organization

23-Which of the following companies is in a position to use the competitive bid process when raising capital?

a. A distressed public company coming up with a seasoned offering of its stock

b. A privately held company coming up with an initial public offering of its stock

c. An established public company coming up with a seasoned public offering of its stock

d. A distressed public company coming up with a seasoned offering of its debt

24-Which of the following statements is correct about the Stage I decisions while raising capital?

a. The Stage I decisions include the selection of an investment banker, but whether to go for a competitive bid or negotiated deal with the investment bank is decided at a later stage.

b. The Stage I decisions include setting the offering price for the issue.

c. The Stage I decisions are made by the firm, without any inputs from the investment bank.

d. The Stage I decisions include whether to go for a best-efforts arrangement or an underwritten issue.

25-Which of the following statements is correct about the Stage I and Stage II decisions while raising capital?

a. The Stage II decisions include the determination of the flotation costs, but the type of securities to be issued is part of Stage I decisions

b. The Stage II decisions include the selection of an investment banker, but the decision whether to go for a competitive bid or negotiated deal with the investment bank is a part of Stage I decisions.

c. The Stage II decisions are made by the firm, without any inputs from the investment bank.

d. The Stage II decisions include the determination of the issue offer price, but deciding whether the company should have an underwritten arrangement, or a best efforts arrangement is a part of Stage I decisions.

26-Identify the true statement about the offering price of the stock of a company that is going public for the first time.

a. The investment banker and the company try to keep the price as low as possible.

b. If the offering price is set below the true equilibrium price, the stock price will rise sharply after issue.

c. The investment banker and the company try to keep the price as high as possible.

d. If the offering price is set above the true equilibrium price, the stock price will rise sharply after issue.

27-Which of the following statements is correct about the offering price of an issue?

a. The issuing company wants to keep the offering price as low as possible.

b. The investment banker will buy the issue from the company at a discount below the price at which the securities are to be offered to the public.

c. The investment banker handling the issue wants to keep the offering price as high as possible.

d. The investment banker will buy the issue from the company at a premium above the price at which the securities are to be offered to the public.

28-Flotation costs refer to the _____.

a. difference between the issuing price and the net proceeds received by the issuing firm

b. spread between the bid and the asked prices of a security

c. expenses incurred by a company in connection with taking the services of a financial intermediary

d. expenses incurred by a company in connection with issuing new stocks or bonds

39-Large, well-known public companies can reduce the time required to register and issue securities by using _____.

a. shelf registration

b. underwriting syndicate

c. secondary market registration

d. subchapter registration

30-A financial intermediary is an organization that _____.

a. helps corporations issue securities

b. creates various loans and investments from funds provided by depositors

c. regulates the issuance and trading of stocks and bonds

d. is responsible for establishing informational efficiency in the financial markets

31-A credit union is _____.

a. is an investment company that uses funds provided by savers to buy various types of financial assets, including stocks and bonds

b. a depository institution that is owned by its depositors, who are often members of a common organization or association.

c. is a traditional department store of financethat is, it offers a wide range of products and services to a variety of customers

d. an organization that underwrites and distributes new issues of securities

32-Which of the following financial intermediaries provides the cheapest source of funds for individual borrowers?

a. Mutual fund

b. Credit union

c. Commercial bank

d. Thrift institution

33-The organizations that pool investors' funds and invest that money in the capital and money markets are called _____.

a. commercial banks

b. credit unions

c. investment banks

d. mutual funds

34-Which of the following statements about whole-life insurance is correct?

a. The premium generally increases with each renewal.

b. The policy must be renewed each period to continue the protection.

c. These polices offer both insurance coverage and a savings feature.

d. It is administered primarily by the trust departments of commercial banks.

35-Which of the following financial institutions represents one of the largest types of financial intermediaries, and represents the primary source of business loans?

a. Commercial banks

b. Credit unions

c. Savings and loan associations

d. Mutual funds

36-Which of the following is administered primarily by the trust departments of commercial banks or by life insurance companies?

a. Credit union

b. Underwriting syndicate

c. Thrift institution

d. Pension fund

37-Which of the following is true about trading activity in exchanges in the United States?

a. Exchanges in the United States continue to account for the greatest numbers of trades, with respect to value, but not with respect to volume.

b. Exchanges in the United States continue to account for the greatest numbers of trades, with respect to both value and volume.

c. Exchanges in the United States continue to account for the greatest numbers of trades, with respect to volume, but not with respect to value.

d. U.S. trading activity accounts for nearly 80 percent of worldwide trading activity each year.

38-Under which of the following acts did the representatives from 27 countries agree to increase their banks' capital (owners' equity) requirements in an effort to reduce the risk that mega bank failures will cause future financial crises?

a. Troubled Asset Relief Program Act

b. Emergency Economic Stabilization Act of 2008

c. Basel III Accord (2010)

d. Dodd-Frank Wall Street Reform and Consumer Protection Act

39-Which of the following actions were taken as a part of the Emergency Economic Stabilization Act of 2008?

a. Requiring greater transparency for trading exotic securities, such as derivatives and hedge funds.

b. Agreeing to increase banks' capital (owners' equity) requirements in an effort to reduce the risk that mega bank failures will cause future financial crises

c. Putting restrictions on the ability of the U.S. government to use taxpayers' funds to bail out large financial institutions

d. Permitting the U.S. government to purchase up to $700 billion in troubled mortgages in an attempt to improve liquidity in the financial markets

40-Which of the following is the reason for the U.S. banking system to be traditionally characterized by a large number of independent financial institutions of various sizes, rather than few very large institutions?

a. The dominance of international banking activities by foreign banks

b. Permission to financial firms and commercial businesses to interact without restriction

c. Allowing the same institutions to own financial institutions and commercial firms

d. The existence of laws that restricted the ability of financial intermediaries to operate nationwide through branches

41-Which of the following is a provision of the Dodd-Frank Wall Street Reform and the Consumer Protection Act?

a. Strengthening the supervision of banks, savings and loan associations (S&Ls), and bank holding companies

b. Increasing the banks' capital (owners' equity) requirements in an effort to reduce the risk that mega bank failures will cause future financialcrises

c. Limiting salaries of executives whose companies received Troubled Asset Relief Program (TARP) funds

d. Extending certain tax incentives to encourage capital spending