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20 Cards in this Set
- Front
- Back
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What are some examples of securities market institutions?
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investment banks, brokers and dealers, organized exchanges
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Why are securities market institutions not considered financial intermediaries?
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because they do not acquire funds from savers to invest in borrowers
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simply make it easier for investors to locate suitable borrowers and to reduce borrowers' costs in raising funds
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securities market institution
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reduce the costs of matching savers and borrowers and provide risk sharing, liquidity, and information services
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Securities market institutions
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changes in assets among financial intermediaries reflect
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competition, regulation, and financial innovation
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assist businesses in raising new capital in primary markets, and advise them on the best way to do so: either by recommending a stock issue or by structuring debt contracts to attract investors.
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investment banks
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what is one way in which investment bankers earn income?
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by underwriting a firms new stock or bond issue.
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underwriters guarantee a price to the issuing firm, sell the issue at a higher price, and keep the profit, known as the --------
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spread
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relatively small issues may be underwritten by a --------- investment banker, whereas large issues are sold by groups of underwriting investment bankers called -------
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single, syndicates
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what is the criteria for a junk bond?
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bonds with ratings of less than Baa (Moody's investors service) or BBB (standard and poor's)
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help raise new capital in primary markets.
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investment banks
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facilitate the exchange of securities in financial markets by locating buyers when sellers want to convert securities to cash.
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brokers and dealers
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earn commissions by matching ultimate buyers and sellers in a particular market.
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brokers
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trade between ultimate buyers and sellers; they hold inventories of securities and sell them for a price higher than they paid for them, earning spread between the bid and asked price.
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dealers
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acts as both brokers and dealers (and often as investment bankers as well)
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firms such as merrill lynch
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securities may be traded in one of which two ways?
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through exchanges or in over the counter markets
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a physical location at which securities are traded.
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exchange
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what are the best known US exchanges?
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new york stock exchange (NYSE), American Stock Exchange (Amex)
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broker dealers also match buyers and sellers in ----- --- ------ in which trading takes place over the telephone and by computer.
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over the counter markets (OTC)
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broker dealers help facilitate exchange in -----------.
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secondary markets
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