Question 1

The greater the number of buyers and sellers with access to securities markets, the

Accepted Answer

A)  higher the true equilibrium price will be. 
B)  higher the yields on securities will be. 
C)  lower the yields on securities will be. 
D)  closer securities prices will be to the true equilibrium price. 
A)  higher the true equilibrium price will be. 
B)  higher the yields on securities will be. 
C)  lower the yields on securities will be. 
D)  closer securities prices will be to the true equilibrium price. D

Question 2

The over-the-counter (OTC)market is an example of a(n)

Accepted Answer

A)  dealer market. 
B)  brokered market. 
C)  auction market. 
D)  equilibrium market. 
A)  dealer market. 
B)  brokered market. 
C)  auction market. 
D)  equilibrium market. A

Question 3

A market in which orders exist in large volume is said to have

Accepted Answer

A)  depth. 
B)  breadth. 
C)  resiliency. 
D)  efficiency. 
A)  depth. 
B)  breadth. 
C)  resiliency. 
D)  efficiency. B

Question 4

A narrow bid-asked spread indicates that a security has

Accepted Answer

A)  small price fluctuations. 
B)  high liquidity costs. 
C)  low transaction volume. 
D)  a thin market. 
A)  small price fluctuations. 
B)  high liquidity costs. 
C)  low transaction volume. 
D)  a thin market.

Question 5

Which of the following is likely to have the widest bid-asked spread?

Accepted Answer

A)  A U.S Treasury bill 
B)  A U.S. Treasury note 
C)  A U.S. Treasury bond 
D)  A municipal bond 
A)  A U.S Treasury bill 
B)  A U.S. Treasury note 
C)  A U.S. Treasury bond 
D)  A municipal bond

Question 6

A resilient market is one in which

Accepted Answer

A)  wide price swings occur when orders decline. 
B)  volume picks up quickly when prices change. 
C)  bid-asked spreads are large. 
D)  volume is large. 
A)  wide price swings occur when orders decline. 
B)  volume picks up quickly when prices change. 
C)  bid-asked spreads are large. 
D)  volume is large.

Question 7

When an investment bank guarantees an issuer of new securities a certain price it is acting as a(n)

Accepted Answer

A)  auctioneer. 
B)  underwriter. 
C)  broker. 
D)  dealer. 
A)  auctioneer. 
B)  underwriter. 
C)  broker. 
D)  dealer.

Question 8

If orders exist in large volume, then the market has

Accepted Answer

A)  depth. 
B)  breadth. 
C)  resiliency. 
D)  None of the above. 
A)  depth. 
B)  breadth. 
C)  resiliency. 
D)  None of the above.

Question 9

According to academic research, securities prices reflect new information

Accepted Answer

A)  within a few minutes. 
B)  within a day. 
C)  within a week. 
D)  within a month. 
A)  within a few minutes. 
B)  within a day. 
C)  within a week. 
D)  within a month.

Question 10

Which of the following is not true with respect to underwriting?

Accepted Answer

A)  Announcements of successful underwritings are called tombstones. 
B)  Often a number of investments banks band together in a syndicate to market a new issue. 
C)  Underwritings of new issues take place on the floor of the New York Stock Exchange. 
D)  The investment bank typically guarantees an issuer of securities a price on the new issue. 
A)  Announcements of successful underwritings are called tombstones. 
B)  Often a number of investments banks band together in a syndicate to market a new issue. 
C)  Underwritings of new issues take place on the floor of the New York Stock Exchange. 
D)  The investment bank typically guarantees an issuer of securities a price on the new issue.

Question 11

When investment bankers underwrite new stock, they

Accepted Answer

A)  sell them on one of the stock exchanges. 
B)  auction them off to the public. 
C)  sell them to commercial banks who in turn find buyers. 
D)  place them with ultimate investors and some intermediaries throughout the country. 
A)  sell them on one of the stock exchanges. 
B)  auction them off to the public. 
C)  sell them to commercial banks who in turn find buyers. 
D)  place them with ultimate investors and some intermediaries throughout the country.

Question 12

If it is easy to uncover buy and sell orders above and below current transactions prices, a market is said to

Accepted Answer

A)  be primary. 
B)  lack breadth. 
C)  be deep. 
D)  be resilient. 
A)  be primary. 
B)  lack breadth. 
C)  be deep. 
D)  be resilient.

Question 13

The type of market in which there is direct interaction between buyers and sellers is a(n)

Accepted Answer

A)  brokered market. 
B)  auction market. 
C)  dealer market. 
D)  primary market. 
A)  brokered market. 
B)  auction market. 
C)  dealer market. 
D)  primary market.

Question 14

High transactions costs are reflected in

Accepted Answer

A)  wide bid-asked spreads. 
B)  narrow bid-asked spreads. 
C)  high equilibrium prices. 
D)  low equilibrium prices. 
A)  wide bid-asked spreads. 
B)  narrow bid-asked spreads. 
C)  high equilibrium prices. 
D)  low equilibrium prices.

Question 15

A key difference between a Walrasian market and most auction markets is that in most auction markets

Accepted Answer

A)  transactions occur continuously. 
B)  bid prices exceed offer prices. 
C)  only dealers have complete information. 
D)  offer prices exceed bid prices. 
A)  transactions occur continuously. 
B)  bid prices exceed offer prices. 
C)  only dealers have complete information. 
D)  offer prices exceed bid prices.

Question 16

The spread between the bid price and the offer price is a measure of

Accepted Answer

A)  the underwriters' spread. 
B)  brokers' fees. 
C)  liquidity costs. 
D)  sunk costs. 
A)  the underwriters' spread. 
B)  brokers' fees. 
C)  liquidity costs. 
D)  sunk costs.

Question 17

The best known financial auction market is the

Accepted Answer

A)  New York Stock Exchange. 
B)  American Stock Exchange. 
C)  Pacific Stock Exchange. 
D)  Nasdaq. 
A)  New York Stock Exchange. 
B)  American Stock Exchange. 
C)  Pacific Stock Exchange. 
D)  Nasdaq.

Question 18

The effectiveness with which markets bring buyers and sellers together is called

Accepted Answer

A)  pricing efficiency. 
B)  operating efficiency. 
C)  the theory of efficient markets. 
D)  bid-asked spread efficiency. 
A)  pricing efficiency. 
B)  operating efficiency. 
C)  the theory of efficient markets. 
D)  bid-asked spread efficiency.

Question 19

If all information is reflected in current prices, the market is

Accepted Answer

A)  resilient. 
B)  deep. 
C)  primary. 
D)  efficient. 
A)  resilient. 
B)  deep. 
C)  primary. 
D)  efficient.

Question 20

The New York Stock Exchange is an auction market in which the role of auctioneers is played by

Accepted Answer

A)  brokers. 
B)  traders. 
C)  specialists. 
D)  agents. 
A)  brokers. 
B)  traders. 
C)  specialists. 
D)  agents.

Exam 6: The Structure and Performance of Securities Markets

The greater the number of buyers and sellers with access to securities markets, the

The over-the-counter (OTC)market is an example of a(n)

A market in which orders exist in large volume is said to have

A narrow bid-asked spread indicates that a security has

Which of the following is likely to have the widest bid-asked spread?

A resilient market is one in which

When an investment bank guarantees an issuer of new securities a certain price it is acting as a(n)

If orders exist in large volume, then the market has

According to academic research, securities prices reflect new information

Which of the following is not true with respect to underwriting?

When investment bankers underwrite new stock, they

If it is easy to uncover buy and sell orders above and below current transactions prices, a market is said to

The type of market in which there is direct interaction between buyers and sellers is a(n)

High transactions costs are reflected in

A key difference between a Walrasian market and most auction markets is that in most auction markets

The spread between the bid price and the offer price is a measure of

The best known financial auction market is the

The effectiveness with which markets bring buyers and sellers together is called

If all information is reflected in current prices, the market is

The New York Stock Exchange is an auction market in which the role of auctioneers is played by

Introducing Money, Banking, and Financial Markets

The Role of Money in the Macroeconomy

Financial Instruments, Markets, and Institutions

Interest Rate Measurement and Behavior

The Term and Risk Structure of Interest Rates

The Pricing of Risky Financial Assets

Money and Capital Markets

Demystifying Derivatives

Understanding Foreign Exchange

The Nature of Financial Intermediation

Depository Financial Institutions

Nondepository Financial Institutions

Understanding Financial Contracts

The Regulation of Markets and Institutions

Financial System Design

Who's in Charge Here?

Bank Reserves and the Money Supply

The Instruments of Central Bankin

Understanding Movements in Bank Reserves

Monetary Policy Strategy

The Classical Foundations

The Keynesian Framework

The ISLM World

Money and Economic Stability in the ISLM World

An Aggregate Supply and Demand Perspective on Money and Economic Stability

Rational Expectations: Theory and Policy Implications

Empirical Evidence on the Effectiveness of Monetary Policy

Tying It All Together

Filters