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Multiple Choice Quiz
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1

Financial markets are used for trading:
A)both real assets and financial assets.
B)the goods and services produced by a firm.
C)securities, such as shares of BCE.
D)the raw materials used in manufacturing.
2

The term "capital structure" refers to:
A)the choice between equity and debt financing
B)the length of time needed to repay debt.
C)whether the firm invests in capital budgeting projects.
D)which specific assets the firm should invest in.
3

The primary distinction between securities sold in the primary and secondary markets is the:
A)riskiness of the securities.
B)price of the securities.
C)previous issuance of the securities.
D)profitablity of the issuing corporation.
4

The money market is a(an) ______ market, while the capital market is a(an) ______ market.
A)investment; liquidity
B)short-term; long-term
C)liquidity; financial institution
D)long-term; short-term
5

The minimum, acceptable rate of return on corporate investments is determined by:
A)investors in financial markets.
B)information from accounting statements.
C)the financial manager.
D)the senior managers of the company.
6

All but one of the following is a service provided to corporations by financial markets and intermediaries?
A)payments services
B)contracts to manage risk
C)liquidity
D)real investments
7

While corporations provide shareholders returns from _______, capital markets provide returns to shareholders from ______?
A)capital gains; dividends
B)appreciation; capital gains
C)dividends; capital gains
D)earnings; capital appreciation
8

Owners of mutual funds own ______ and are called _______?
A)deposits; depositors
B)bonds; bondholders
C)shares; shareholders
D)IOU's of mutual funds; creditors
9

The first time a security is sold it is in the _______ market; subsequent trading of the security is in the ______ market.
A)money; capital
B)capital; money
C)banking; secondary
D)primary; secondary
10

Common stock of corporations may be listed on stock exchanges or traded:
A)over-the-counter.
B)by brokers who own an inventory of shares from which they buy/sell.
C)between directors of the corporation.
D)between insiders of companies.
11

All but one of the following is known as a financial market?
A)foreign exchange market
B)pension fund market
C)money market
D)fixed-income market
12

Financial markets evaluate the performance of publicly traded corporations
A)constantly.
B)quarterly when financial statements are filed with the OSC.
C)annually, when the annual report is issued.
D)as requested by the managers of the corporations.
13

As new information is available, financial markets
A)reflect this new information immediately in the prices of securities traded.
B)publish this information.
C)provide the information to financial intermediaries.
D)decide how best to tell the public.
14

When shareholder A sells its Nortel stock to shareholder B in the secondary market, such as on the Toronto Stock Exchange, how much money is received by Nortel?
A)Nortel will receive most of the funds, except for commissions.
B)Nortel will receive nothing.
C)Nortel will receive only the commissions on the sale of stock.
D)Nortel will receive a portion of the funds for every stock traded on the secondary market.
15

The most important service provided by mutual funds to mutual fund investors is:
A)the opportunity to buy corporate securities at a discounted price.
B)high expenses and trading costs which increase the rate of return for investors.
C)diversification.
D)a higher than average rate of return.





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