C214 Financial Management (VCC2 Terms) Questions and Answers 100% correct

C214 Financial Management (VCC2 Terms) Questions and Answers 100% correct Economics is a subfield of Finance False Which of the following is not an example of firm capital? Financial markets Capital is defined as a financial asset. True Corporate finance is devoted to understanding various types of financial instruments. False Which of the following is an example of firm capital? Cash Corporate finance focuses on the decision making by the management of the firm. True What are the three important areas of finance discussed in this section? Corporate Finance, Investments, and Banking/financial institutions Banks make money when interest rates they charge to borrowers are less than interest rates they pay depositors. False Stocks and bonds are two types of financial instruments. True Stock represents ownership in a particular company. True Companies can raise capital by issuing bonds or stocks. True A stock is a debt instrument issued by corporations. False A Treasury bond is a debt instrument issued by corporations. False A bond is a debt instrument issued by corporations or governments. True A stock is a share of ______________ in a particular company. ownership A bond is similar to a loan. True Primary financial markets are markets where issuers place new securities with investors. True What are the two ways a syndicate can place a bond? Competitive sale or negotiated sale An IPO is a seasoned equity offering. False An IPO occurs on the primary market. True Syndicates are generally made up of investment banks and other institutional investors. True While competitive sales allow underwriters to submit bids to purchase bonds, negotiated sales do not. False NASDAQ is the world's largest secondary financial market. False Auction markets have a physical location. True Dealer markets have a physical location. False Nasdaq is an example of an auction market. False Stocks that are listed on dealer markets generally have a single dealer for each stock. False When dealers have to compete with one another, transaction costs will generally ___________. Decrease Markets are where prices are determined. True The NYSE specialist has an objective to provide liquidity to the market. True The NYSE specialist will charge a higher price to sellers of the stock and a lower price to the buyer of the stock. False The ask price of stock A is $56.75 while the bid price for stock A is $56.71. What is the bid ask spread? .04 The ask price of stock A is $215.54 while the bid price for stock A is $215.14. What is the bid ask spread? .40 The bid-ask spread is compensation to the specialist for providing liquidity to the market. True What are the two types of orders that are used by investors? Market Orders and Limit Orders Market orders are __________ sensitive while limit orders are _____________ sensitive. time, price A market order to buy a stock would execute at the current ask price. True A market order to sell a stock would execute at the current ask price. False A limit order to buy a stock at $101.55 would execute at the current ask price. False A limit order to buy a stock at $101.55 would execute when the ask price is at or below $101.55. True Which of the following best explains the role of prices? All of these choices Efficient markets are those in which prices are volatile. False Efficient markets will often have mispriced securities. False Inefficient markets are those in which prices will respond quickly to new information. False Inefficient markets will often have mispriced securities. True Because in an efficient market all available information is built into the price of a stock - investment patterns and trends to "get rich quickly" are not easily discernable and it is difficult to predict the price True