Primary role of organized security exchanges

Question

Question 1: The primary role of organized security exchanges is to raise capital (money) for firms.

• TRUE
• FALSE

Question 2: In an "underwriting" the investment banker guarantees the firm selling the securities a specified amount.

• TRUE
• FALSE

Question 3: In a "best effort" sale of securities, the risk of the sale rests with the investment banker.

• TRUE
• FALSE

Question 4: The "syndicate's" role in an underwriting is to sell the new issue of securities.

• TRUE
• FALSE

Question 5: The preliminary prospectus ("red herring") does not include the offer price of a new stock issue.

• TRUE
• FALSE

Question 6: Which of the following is not a short-term, liquid asset?

a. negotiable certificate of deposit
b. U.S. Treasury bills
c. corporate stock
d. commercial paper

Question 7: Money market mutual funds invest in

1. commercial paper
2. repurchase agreements
3. corporate bonds

a. 1 and 2
b. 1 and 3
c. 2 and 3
d. All of these choices

Question 8: The deregulation of the banking system has

a. increased the growth of money market mutual funds
b. resulted in lower interest rates
c. blurred distinctions among financial intermediaries
d. reduced the power of the SEC

Question 9: Commercial paper is

a. a short-term unsecured debt of a corporation
b. a short-term secured debt of a corporation
c. a long-term unsecured debt of a corporation
d. a long-term secured debt of a corporation

Question 10: Which of the following does not have default risk?

a. money market mutual funds
b. commercial paper
c.  negotiable certificates of deposit
d. treasury bills