1. The principal differences between capital markets and money markets are that:
A. money and capital markets deal in the same securities, the only difference is term.
B. capital markets deal in long-term debt and equity securities, while money markets deal only in short-term debt.
C. money markets deal only in short-term government debt.
D. both markets deal in short-term debt securities; however, capital markets deal also in equity securities which have an indefinite term.
2. The primary function of financial markets is to:
A. facilitate the movement of cash from savers to companies that need money.
B. ensure that interest and dividend payments are made to stockholders and bondholders.
C. facilitate the payment for goods and services between producers and consumers.
D. financial markets perform all of these functions.
3. Which of the following best describes the concept of maturity matching?
A. Companies use funds from selling stocks to fund long-term projects and funds from selling bonds to fund short-term projects.
B. Companies use funds from selling bonds to fund long-term projects and funds from selling stocks to fund short-term projects.
C. Companies try to match the term of a project with the maturity of the financing that pays for it.
D. Companies always use bonds to finance both short- and long-term projects because stocks have no maturity and therefore cannot be matched to the length of projects.
E. None of these choices are describes the concept of maturity matching.
4. The sale of a 10-year bond by one investor to another investor would be considered a transaction that takes place in the:
primary money market.
secondary money market.
secondary capital market.
primary capital market.
None of these choices are correct.
5. Financial markets have the basic function of:
A. providing signaling and information.
B. providing liquidity.
C. matching savers and users of funds.
D. All of these choices are correct.