ENG106: Academic Oral Communication for Managerial Ethics (BU103)                                                                                               Name _____________
Ch. Bauer-Ramazani

Securities/Capital Markets

Directions:                  Use your notes to answer the questions about the lecture.  T/F, MC, and fill-in-the blank questions are 2 points each.  Essay questions are weighted according to the points in parentheses.

What are securities?  What is capital?  What is a securities market?


1.  T/F   If you lived in Cuba, you would be able to buy and sell stock at a stock exchange.

2.  T/F   A stock exchange is a major component of the free/private enterprise system.

3.   The function of a stock market is to

  1. transfer capital (money) from those who have excess capital to those who don't have enough/need it.

  2. Transfer capital from suppliers to users.

  3. Transfer capital from investors to corporations.

  4. All of the above

  5. None of the above

4.  T/F   In a free market economy, the financial/capital markets fulfill the need for allocating capital.

5.  T/F   Corporations or governments go to the capital markets to finance their operations (e.g. purchases, expansion).

6.  What do companies do with excess capital?

  1. Find a way to get rid of it.

  2. Find places to invest it.

  3. Give it away.

  4. Hide it.

7.  In the U.S. economy, an initial public stock offering (IPO)  is made

  1. through a stockbroker

  2. through an investment bank

  3. in the primary market

  4. in the secondary market

  5. a and d

  6. b and c

8.   T/F   Corporations are generally suppliers of capital.

9.   T/F   Banks and insurance companies are generally users of capital. 

10. T/F   The primary market generally involves transactions on a stock exchange.

11. T/F   The secondary market involves transactions between the corporations and private investors.

12. T/F   Corporations receive the capital for financing their daily operations from transactions in the primary market.

13. T/F    Underwriters are large investment banks like Merrill Lynch, Morgan Stanley, J.P. Morgan, Goldman/Sachs, etc.

14. T/F    In an initial public offering, one or more investment bank(s) have acquired and paid for the new shares offered by a corporation.

15. The announcement of an initial public offering in the newspaper is called a ________________.

16. T/F    Only U.S. firms can conduct primary stock offers.

17.  T/F   Large investors are large institutions that manage pools of money for other people.

18. Examples of large investors are

  1. banks

  2. savings and loan institutions (S&L)

  3. insurance companies

  4. all of the above

  5. none of the above

19. T/F    The secondary market involves the trading of shares between individual investors via a stock exchange.

20. T/F    Corporations generally receive money from trading their stock on a stock exchange. 

21.  T/F   The purpose of the New York Stock Exchange (NYSE) is to facilitate transactions of capital.

22. The activities on the NYSE can be characterized as

  1. organized chaos

  2. an auction market

  3. loud

  4. a flurry of "buy and sell" slips

  5. all of the above

  6. none of the above

23.  T/F    The NYSE is the name for a network of transactions, but it is not a physical place.

24.  T/F    The proportion of shares traded on the New York Stock Exchange is decreasing, compared to the proportion of shares
traded on the NASDAQ.

25. T/F    A broker can buy and sell securities on the NYSE directly, i.e. without any intermediaries.

26. Another name for the specialist is market  _________________.

27. T/F    There is only one specialist per stock (company).

28. T/F    Each specialist can only trade one stock.

29. Keeping an orderly liquid market means that

  1. Specialists on the floor of the NYSE must match buy & sell orders.

  2. Specialists have to purchase the stock themselves if they cannot find a buyer, thus putting their own money at risk

  3. Specialists want to buy high and sell low.

  4. Specialists need to drink a lot of liquid during these heated transactions.

  5. A and b

  6. C and d

30. Companies list their stock on the NYSE because

  1. it is prestigious to do so

  2. they like to deal with only one person who knows the buyers and sellers

  3. it consists of younger companies

  4. it consists of larger companies

  5. a and b

  6. c and d

31.  T/F    Each stock listed on a stock exchange has a symbol.

32.  T/F    The NASDAQ is a network of brokers and dealers who match buy and sell orders electronically (through computers) or over the phone.

33. T/F     Companies listed on the NASDAQ are older, well-established, non-experimental firms.

34.  T/F    The NASDAQ is a physical place that you can visit.

35. The trading for the NASDAQ takes place

  1. in New York

  2. all over the nation and the world

  3. at brokerage firms or investment banks

  4. in Chicago

  5. a and d

  6. b and c

36.  T/F    On the NASDAQ there is only one market maker per stock.

37. Brokerage firms that trade on the NASDAQ make money by ___________ low and _______________ high.

38. Companies list their stock on the NASDAQ because

  1. It is prestigious to do so.

  2. There are many market makers that can sell the company's stock.

  3. There is more capital backing up the stocks listed.

  4. All of the above

  5. None of the above

39.  T/F    Brokerage firms employ analysts to research company stocks.

40.  When quoting stock prices from the newspaper, one should always look at the

  1. 52-week high price

  2. 52-week low price

  3. the change in price (+ or -)

  4. the closing price (close)

41.  The U.S. securities market is one of the largest in the world because

  1. it has strict disclosure laws

  2. it is regulated by a government agency

  3. it is illegal to trade on information that is not publicly known

  4. all of the above

  5. none of the above

42.  The disclosure laws of the U.S. obligate public companies to

  1. publish quarterly financial reports

  2. publish annual financial reports

  3. publish company information through press releases

  4. all of the above

  5. none of the above

43.  Trading on information that is not publicly known is called _______________________ and is illegal.

44.  Someone accused of insider trading may face

  1. a jail term

  2. a stiff fine

  3. both a and b

  4. no such consequences

45.  T/F    The SEC has sophisticated surveillance mechanisms to track any irregular movements in stock prices.

Christine Bauer-Ramazani   This page was last updated: Wednesday, March 27, 2013