D076 Module 2 Questions and Answers Rated A

D076 Module 2 Questions and Answers Rated A Corporate Bonds A debt instrument that is issued by a corporation in order to raise capital. stock A share of ownership in a corporation. money market a type of financial market used for short-term assets that are held for less than one year capital market a type of financial market used for long-term assets that are held for greater than a year primary market A financial market in which new issues of a security are sold to initial buyers. syndicate a group of intermediaries that is used to oversee the issuance of stock and/or bonds secondary market market for reselling financial assets What is the purpose of financial markets to determine the market price of financial securities based on supply and demand and to provide liquidity money market is for short-term borrowing/ lending capital market is for long-term borrowing/ lending A specialist provides liquidity and lowers the cost of trading stocks between sellers and buyers In which financial market are securities such as stocks and bonds are traded after their initial issuance? Secondary market Money circulates through financial institutions in 2 ways 1) individuals and organizations lend and borrow money 2) individuals and organizations purchase financial securities to provide capital to companies and receive dividends major types of financial institutions depository institutions non depository institutions securities and investment firms Central Bank Ensure that a nation's economy remains healthy by controlling the amount of money circulating in the economy Banks and credit unions Receive deposits and extend loans to individuals and businesses insurance charge premiums to invest bondsand stocks to pay claims mutual funds offer investments and buy financial securities and instruments on behalf of investors pension funds retirement funds contributed through companies to invest and provide retirement investment banks offer various services such as underwriting, facilitating mergers, and trading financial securities on behalf of large institutions and companies Private Equity receive money from institutional investors and wealthy individuals to buy high-potential companies or troubled companies to improve and earn returns by selling them or going public A large corporation is looking to merge with another large corporation. Which financial institution can help them do this? Investment bank leading indicators change before the economy changes and include yield curve and stock market return lagging indicators change after the economy changes and include unemployment rate and CPI Coincident indicators are collected and analyzed as economic shifts happen and include GDP and personal income Unemployment rate is which type of economic indicator? Lagging In what way are coincident indicators useful? They are analyzed during economic shifts to provide information about the current state of the economy. Yield curve is which type of economic indicator? Leading About a year ago, the short-term Treasury bill had 1.54% interest and the long-term Treasury note had 2.54% interest. This week, the 1-year Treasury bill has an interest rate of 3.13%, while the 10-year Treasury note has an interest rate of 2.28%. What does this information indicate about the future economy? It may indicate an economic downturn. Which responsibility is a focus of the U.S. Securities and Exchange Commission? To protect investors Which type of financial institution provides individuals and firms access to financial markets? Investment institutions Which financial institution includes entities that receive money from institutional investors and wealthy individuals to buy troubled companies to improve them and earn returns by selling them or going public? Private equity