Answer the following questions after reading this chapter (open the pdf version in a new browser tab to have it handy). 9.2 Reading - Functioning of Financial Markets CFA.pdf

QUESTION 1

Which of the following is not a characteristic of brokered markets?

Prices are set by market makers

Orders are executed at the best available price

There is a central marketplace

Trades are guaranteed

QUESTION 2

Which of the following is not a type of transaction cost?

Bidask spread.

Taxes.

Slippage.

Commission

QUESTION 3

Which of the following is not a type of transaction cost?

Bidask spread

Commission

Slippage

Taxes

QUESTION 4

What is the difference between primary and secondary markets?

Primary markets are for trading existing securities, while secondary markets are for trading new securities.

Primary markets are for trading new securities, while secondary markets are for trading existing securities.

Primary markets are for trading debt securities, while secondary markets are for trading equity securities.

Primary markets are for trading equity securities, while secondary markets are for trading debt securities.

QUESTION 5

Which of the following is not a type of transaction cost?

Explicit costs

Implicit costs

Transaction taxes

Bidask spreads

QUESTION 6

Which of the following is not a type of market efficiency?

Operational efficiency.

Information efficiency.

Allocation efficiency.

Liquidity efficiency.

QUESTION 7

Which of the following is not a type of market efficiency?

Operational efficiency

Information efficiency

Allocation efficiency

Liquidity efficiency

QUESTION 8

Which of the following is not a type of transaction cost?

Commission

Bid-ask spread

Brokerage fees

Taxes

QUESTION 9

Which of the following is not a role of an investment bank?

Helping issuers raise capital

Executing trades for clients

Providing investment advice

Clearing and settling trades

QUESTION 10

What is a seasoned offering?

A seasoned offering is a type of primary market transaction in which securities are sold directly to a small group of investors.

A seasoned offering is a type of secondary market transaction in which securities are sold directly to a small group of investors.

A seasoned offering is a type of primary market transaction in which securities are sold to the general public.

A seasoned offering is a type of secondary market transaction in which securities are sold to the general public.

QUESTION 11

Which of the following is not a characteristic of rights issues?

They are offered to existing shareholders.

They are typically made at a discount to the market price.

They are subject to the same regulations as public offerings.

They are often made to institutional investors.

QUESTION 12

The seller must deliver the security to the clearing house and the buyer must deliver cash. This process is called what?

Delivery versus payment

Payment versus delivery

Settlement versus delivery

Delivery versus settlement

QUESTION 13

Which of the following is not a primary market transaction?

Initial public offering (IPO)

Secondary market transaction

Private placement

Right issue

QUESTION 14

Which of the following is not a role of a clearing house?

Facilitating the exchange of securities and cash

Reducing counterparty risk

Ensuring that trades are executed at fair prices

Providing liquidity to the market

QUESTION 15

Which of the following is not a type of primary market transaction?

Initial public offering

Private placement

Secondary offering

Rights offering