Finance 3000 study guide
Finance Study Guide
These provide a forum in which demanders of funds raise funds by issuing new financial instruments, such as stocks and bonds.
primary markets
In the U.S., these financial institutions arrange most primary market transactions for businesses.
investment banks
Once firms issue financial instruments in primary markets, these same stocks and bonds are then traded in which of these?
secondary markets
These feature debt securities or instruments with maturities of one year or less.
money markets
Which of the following is NOT a money market instrument?
Treasury bills
Commercial paper
Corporate bonds
Banker's acceptances
Which of the following is NOT a capital market instrument?
U.S. Treasury notes and bonds
U.S. Treasury bills
U.S. government agency bonds
Corporate stocks and bonds
This is a security formalizing an agreement between two parties to exchange a standard quantity of an asset at a predetermined price on a specified date in the future.
Derivative Security
This is the ease with which an asset can be converted into cash.
liquidity
This is the interest rate that is actually observed in financial markets. nominal interest rates
Primary market financial instruments include stock issues from firms allowing their equity shares to be publicly traded on stock market for the first time. We usually refer to these first-time issues as which of the following?
initial public offerings
A particular security’s default risk premium is 2 percent. For all securities, the inflation risk premium is 1.75 percent and the real interest rate is 3.5 percent. The security’s liquidity risk premium is 0.25 percent and maturity risk premium is 0.85 percent. The security has no special covenants. Calculate the security’s equilibrium rate of return.
ij* = 1.75% + 3.50% + 2.00% + 0.25% +0.85% = 8.35%
Rate of Return : 8.35%
Dakota Corporation 15-year bonds have an
These provide a forum in which demanders of funds raise funds by issuing new financial instruments, such as stocks and bonds.
primary markets
In the U.S., these financial institutions arrange most primary market transactions for businesses.
investment banks
Once firms issue financial instruments in primary markets, these same stocks and bonds are then traded in which of these?
secondary markets
These feature debt securities or instruments with maturities of one year or less.
money markets
Which of the following is NOT a money market instrument?
Treasury bills
Commercial paper
Corporate bonds
Banker's acceptances
Which of the following is NOT a capital market instrument?
U.S. Treasury notes and bonds
U.S. Treasury bills
U.S. government agency bonds
Corporate stocks and bonds
This is a security formalizing an agreement between two parties to exchange a standard quantity of an asset at a predetermined price on a specified date in the future.
Derivative Security
This is the ease with which an asset can be converted into cash.
liquidity
This is the interest rate that is actually observed in financial markets. nominal interest rates
Primary market financial instruments include stock issues from firms allowing their equity shares to be publicly traded on stock market for the first time. We usually refer to these first-time issues as which of the following?
initial public offerings
A particular security’s default risk premium is 2 percent. For all securities, the inflation risk premium is 1.75 percent and the real interest rate is 3.5 percent. The security’s liquidity risk premium is 0.25 percent and maturity risk premium is 0.85 percent. The security has no special covenants. Calculate the security’s equilibrium rate of return.
ij* = 1.75% + 3.50% + 2.00% + 0.25% +0.85% = 8.35%
Rate of Return : 8.35%
Dakota Corporation 15-year bonds have an