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14 Cards in this Set

  • Front
  • Back
In addition to US corporations, what government groups compete for funds in the US capital market?
U.S. Treasury and Federal, State, and Local Governments
In which foreign industry has privatization been most important
How does foreign investment help the U.S. government?
It strengthens the U.S. economy.
What is a key tax characteristic associated with state and local (municipal) securities?
They are tax exempt.
What are three forms of corporate securities discussed in chapter 14?
Corporate bonds and common and preferred stock.
Do corporations rely more on external or internal funds as sources of financing?
External Funds
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?
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.
Why is secondary trading in the security markets important?
It provides liquidity to investors and keeps prices competitive among alternate security investments.
How would you define efficient security markets?
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.
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?
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.
What was the primary purpose of the Securities Act of 1933?
To provide full disclosure of all pertinent information whenever a corporation sold a new issue of securities.
What act of Congress created the Securities and Exchange Commission?
The Securities Exchange Act of 1934
What was the purpose of the Sarbanes-Oxley Act of 2002?
To restore confidence in the integrity of the financial markets by insuring accuracy in financial reporting.
Explain the role of financial intermediaries in the flow of funds through the three-sector economy.
These institutions indirectly invest excess funds in areas of the economy where funds are needed.