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14 Cards in this Set
- Front
- Back
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In addition to US corporations, what government groups compete for funds in the US capital market?
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U.S. Treasury and Federal, State, and Local Governments
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In which foreign industry has privatization been most important
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Telecommunications
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How does foreign investment help the U.S. government?
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It strengthens the U.S. economy.
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What is a key tax characteristic associated with state and local (municipal) securities?
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They are tax exempt.
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What are three forms of corporate securities discussed in chapter 14?
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Corporate bonds and common and preferred stock.
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Do corporations rely more on external or internal funds as sources of financing?
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External Funds
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What are electronic communication networks (ECNs)? Generally speaking, are they currently part of the operations of the New York Stock Exchange and the Nasdaq Stock Market?
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ENCs automatically match, buy, and sell orders at specific prices.
They are also now part of the two majors market, whereas, they used to compete against them. |
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Why is secondary trading in the security markets important?
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It provides liquidity to investors and keeps prices competitive among alternate security investments.
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How would you define efficient security markets?
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Markets are efficient when:
(1) prices adjust rapidly to new information; (2) there is a continuous market (3) the market can absorb large dollar amounts of securities without destabilizing the price. |
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The efficient market hypothesis is interpreted in a weak form, a semi strong form, and a strong form. How can we differentiate its various forms?
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The weak form: Past price information is unrelated to future prices.
The semi-strong form: Prices reflect all public information. The strong form: All information is reflected in the stock prices. |
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What was the primary purpose of the Securities Act of 1933?
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To provide full disclosure of all pertinent information whenever a corporation sold a new issue of securities.
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What act of Congress created the Securities and Exchange Commission?
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The Securities Exchange Act of 1934
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What was the purpose of the Sarbanes-Oxley Act of 2002?
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To restore confidence in the integrity of the financial markets by insuring accuracy in financial reporting.
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Explain the role of financial intermediaries in the flow of funds through the three-sector economy.
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These institutions indirectly invest excess funds in areas of the economy where funds are needed.
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