Question 1

List and briefly describe the 4 key components of a good organized exchange?

Accepted Answer

Key components of a good organized excha...

Question 2

Corporations prefer bonds over preferred stock for financing their operations because:

Accepted Answer

A)   preferred stocks require a dividend.
B)   bond interest rates change with the economy while stock dividends remain constant.
C)   the after tax cost of debt is less than the cost of preferred stock.
D)   bond dividends are typically high yield.E) C) and D)
F) B) and D)

Question 3

Provincial and municipal governments account for approximately the same percentage of bond securities outstanding as the federal government.

Accepted Answer

A) True 
 B)False

Question 4

Ontario Securities Commission requires detailed financial disclosures before securities may be sold to the public.

Accepted Answer

A) True 
 B)False  True

Question 5

Capital markets consist of securities having maturities greater than one year.

Accepted Answer

A) True 
 B)False

Question 6

The efficient market hypothesis is based on the belief that the stock market is in short-run equilibrium.

Accepted Answer

A) True 
 B)False

Question 7

A random walk:

Accepted Answer

A)   suggests patterns from market cycles.
B)   allows for abnormal returns.
C)   suggests markets are not efficient.
D)   suggests non correlation between past and future price movements.E) A) and B)
F) B) and C)

Question 8

The strong form of the efficient market hypothesis states that prices reflect all information available to the public.

Accepted Answer

A) True 
 B)False

Question 9

The OTC market is a key market for international securities.

Accepted Answer

A) True 
 B)False

Question 10

The TSX competes with the NYSE for listings,to reduce the competitive advantage of the highly liquid NYSE,:

Accepted Answer

A)   the TSX has become Canada's sole equity exchange.
B)   the TSX has been urging a larger role for dealers acting as principals rather than brokers in stock trading.
C)   the TSX eliminated the open cry auction market.
D)   the TSX has eliminated "upstairs trading".E) A) and C)
F) B) and D) B

Question 11

Funds generated and retained from ongoing operations are considered:

Accepted Answer

A)   internally generated funds.
B)   needed for expansion.
C)   externally generated funds.
D)   to be part of the capital market.E) All of the above
F) B) and D)

Question 12

When examining the size and efficiency of financial markets,we want to distinguish between:

Accepted Answer

A)   the number of securities outstanding and the trading activity of the market (a measure of its liquidity) .
B)   the value of securities outstanding and the number of securities on the market.
C)   the number of brokers in the market and the trading activity of the market.
D)   the value of securities outstanding and the trading activity of the market.E) B) and C)
F) All of the above

Question 13

The increase in retained earnings during recent economic expansions caused a dramatic reduction in the need for external funds.

Accepted Answer

A) True 
 B)False

Question 14

Households and the government are mainly considered to be suppliers of funds while corporations are generally considered users of funds.

Accepted Answer

A) True 
 B)False

Question 15

External financing requires increased disclosure of the firms operations and its plans to the capital markets.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is not true with respect to organized securities exchanges?

Accepted Answer

A)   Organized exchanges have a physical location.
B)   Exchanges operate as "auction" markets.
C)   Stocks traded on exchanges are referred to as unlisted securities.
D)   Securities exchanges provide corporations and shareholders increased liquidity for their securities.E) A) and C)
F) A) and B)

Question 17

Security markets are efficient when each of the following exist except:

Accepted Answer

A)   security prices follow the leading indicators such as the S&P/TSX Composite very closely.
B)   the markets can absorb large dollar amounts of stock without destabilizing the price.
C)   prices adjust rapidly to new information.
D)   there is a continuous market where each successive trade is made at a price close to the previous trade.E) A) and C)
F) A) and D)

Question 18

The capital structure of the firm consists of long-term debt and equity.

Accepted Answer

A) True 
 B)False

Question 19

In an efficient market:

Accepted Answer

A)   all financial transactions have an NPV less than zero.
B)   the investor receives abnormal returns consistently.
C)   the investor is compensated properly for risk borne.
D)   prices adjust slowly to new information.E) B) and C)
F) A) and B)

Question 20

After the market failures as the new century began,further regulations were developed to:

Accepted Answer

A)   hold chief officers of a firm responsible for the accuracy of the financial statements.
B)   provide for independent auditors and boards of directors.
C)   restrict the accounting activities of audit firms in conflict of interest situations.
D)   implement new accounting standards to handle the expensing of stock options,disclosure of off-balance-sheet financial exposures,and the treatment of derivative securities.E) A) and B)
F) None of the above D

Exam 14: Capital Markets

List and briefly describe the 4 key components of a good organized exchange?

Correct AnswerverifiedKey components of a good organized excha...View AnswerShow Answer

Corporations prefer bonds over preferred stock for financing their operations because:

Correct AnswerverifiedShow Answer

Provincial and municipal governments account for approximately the same percentage of bond securities outstanding as the federal government.

Correct AnswerverifiedShow Answer

Ontario Securities Commission requires detailed financial disclosures before securities may be sold to the public.

Correct AnswerverifiedTrue

Capital markets consist of securities having maturities greater than one year.

Correct AnswerverifiedShow Answer

The efficient market hypothesis is based on the belief that the stock market is in short-run equilibrium.

Correct AnswerverifiedShow Answer

A random walk:

Correct AnswerverifiedShow Answer

The strong form of the efficient market hypothesis states that prices reflect all information available to the public.

Correct AnswerverifiedShow Answer

The OTC market is a key market for international securities.

Correct AnswerverifiedShow Answer

The TSX competes with the NYSE for listings,to reduce the competitive advantage of the highly liquid NYSE,:

Correct AnswerverifiedB

Funds generated and retained from ongoing operations are considered:

Correct AnswerverifiedShow Answer

When examining the size and efficiency of financial markets,we want to distinguish between:

Correct AnswerverifiedShow Answer

The increase in retained earnings during recent economic expansions caused a dramatic reduction in the need for external funds.

Correct AnswerverifiedShow Answer

Households and the government are mainly considered to be suppliers of funds while corporations are generally considered users of funds.

Correct AnswerverifiedShow Answer

External financing requires increased disclosure of the firms operations and its plans to the capital markets.

Correct AnswerverifiedShow Answer

Which of the following statements is not true with respect to organized securities exchanges?

Correct AnswerverifiedShow Answer

Security markets are efficient when each of the following exist except:

Correct AnswerverifiedShow Answer

The capital structure of the firm consists of long-term debt and equity.

Correct AnswerverifiedShow Answer

In an efficient market:

Correct AnswerverifiedShow Answer

After the market failures as the new century began,further regulations were developed to:

Correct AnswerverifiedD

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B

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D