FINA 3317 ANSWERS AND QUESTIONS SET A+
✔✔In May 2007, 200 million card numbers were stolen from TJX Company. This is an
example of:
A. regulatory risk
B. operational risk
C. technological risk
D. liquidity risk
E. credit risk - ✔✔Operational risk.
Theft or misuse of customer data is an operational risk involving failures in systems,
controls, security, or processes.
✔✔ Primary markets are markets in which users of funds raise cash by selling securities
to funds suppliers.
True
False - ✔✔True.
Primary markets are where new securities are issued, often with investment banks
providing underwriting services.
✔✔Secondary markets are markets used by corporations to raise cash by issuing
securities for a short time period.
True
False - ✔✔False.
Secondary markets are where investors trade securities that have already been issued;
corporations raise new funds in primary markets.
✔✔Corporate security issuers are always directly involved in funds transfers in the
secondary market.
, True
False - ✔✔False.
Issuers sell new securities in primary markets. Secondary-market trading occurs among
investors after issuance.
✔✔The NYSE is an example of a secondary market.
True
False - ✔✔True.
Stock exchanges such as the NYSE are secondary markets where investors buy and
sell already-issued stocks.
✔✔Money markets are the markets for securities with an original maturity of one year or
less.
True
False - ✔✔True.
Money-market instruments have original maturities of one year or less. A long-term
bond with less than a year remaining is still a capital-market instrument.
✔✔Financial intermediaries rather than financial systems are the most common agents
to channel funds from the suppliers to the users of funds.
True
False - ✔✔True.
Although funds can flow directly, most surplus capital is channeled indirectly through
financial intermediaries.
✔✔Asset transformation by financial intermediaries involves increasing the risk
attributes of securities such as mortgages, bonds, and stocks.
True
False - ✔✔False.
Asset transformation means converting one financial asset into another with different
characteristics such as maturity, rate, or payment structure; it does not simply mean
increasing risk.
✔✔One factor responsible for globalization of financial markets and institutions is
deregulation.
✔✔In May 2007, 200 million card numbers were stolen from TJX Company. This is an
example of:
A. regulatory risk
B. operational risk
C. technological risk
D. liquidity risk
E. credit risk - ✔✔Operational risk.
Theft or misuse of customer data is an operational risk involving failures in systems,
controls, security, or processes.
✔✔ Primary markets are markets in which users of funds raise cash by selling securities
to funds suppliers.
True
False - ✔✔True.
Primary markets are where new securities are issued, often with investment banks
providing underwriting services.
✔✔Secondary markets are markets used by corporations to raise cash by issuing
securities for a short time period.
True
False - ✔✔False.
Secondary markets are where investors trade securities that have already been issued;
corporations raise new funds in primary markets.
✔✔Corporate security issuers are always directly involved in funds transfers in the
secondary market.
, True
False - ✔✔False.
Issuers sell new securities in primary markets. Secondary-market trading occurs among
investors after issuance.
✔✔The NYSE is an example of a secondary market.
True
False - ✔✔True.
Stock exchanges such as the NYSE are secondary markets where investors buy and
sell already-issued stocks.
✔✔Money markets are the markets for securities with an original maturity of one year or
less.
True
False - ✔✔True.
Money-market instruments have original maturities of one year or less. A long-term
bond with less than a year remaining is still a capital-market instrument.
✔✔Financial intermediaries rather than financial systems are the most common agents
to channel funds from the suppliers to the users of funds.
True
False - ✔✔True.
Although funds can flow directly, most surplus capital is channeled indirectly through
financial intermediaries.
✔✔Asset transformation by financial intermediaries involves increasing the risk
attributes of securities such as mortgages, bonds, and stocks.
True
False - ✔✔False.
Asset transformation means converting one financial asset into another with different
characteristics such as maturity, rate, or payment structure; it does not simply mean
increasing risk.
✔✔One factor responsible for globalization of financial markets and institutions is
deregulation.
