Exam 1 Study Guide

Question 1

Corporate owners earn a return ________

Answer 1

by realizing gains through increases in share price and interest earnings

Question 2

Duty of a financial manager in a business firm

Answer 2

Raising financial resources

Question 3

The wealth of the owners of a corporation is represented by ____________

Answer 3

share value

Question 4

The sale of a new security directly to an investor or group of investors is known as what?

Answer 4

Private Placement

Question 5

The key securities traded in the capital markets are __________

Answer 5

stocks and bonds

Question 6

Cash flows and risk are the key determinants in share price. Increased risk, other things remaining the same, results in _____

Answer 6

a lower share price

Question 7

Which of the following assists companies in raising capital, advise firms on major transactions such as mergers or financial restructuring, and engage in trading and market making activities?

Answer 7

Investment banks

Question 8

What is true about a dealer market?

Answer 8

Buyers and sellers are never brought together directly

Question 9

A market that establishes correct prices for the securities that firms sell and allocates funds to their most productive uses is called a(n) ___________.

Answer 9

efficient market

Question 10

The market in which corporations and government typically issue bonds denominated in dollars and sell them to investors located outside the United States is the what?

Answer 10

Eurobond market