Question

Answer all of these questions with the right question number next to the correct choice (letter).

7)Which of the following is NOT considered to be an example of direct placement of securities?

A)You borrow $100 from your uncle Raymond and you write him an IOU for good measure.

B)You buy 100 shares of Dell stock from your broker.

C)Dell places a new bond issue in the market through Merryll-Lynch.

D)You borrow $25,000 from your bank to purchase a fully loaded Yugo.

8)

After a lengthy conversation with the CEO of Very Rich Corporation at a job fair, you come to an agreement. You will work for his corporation after you graduate in a year, and the CEO will pay you a salary in excess of any other job offer you receive plus a bonus of 100 shares of corporate stock. What type of market have you and the CEO created?

A capital secondary market

None of the answers are correct.

A private futures market

A public spot market

9)During recessionary periods there is a strong incentive for banks and corporations to remain liquid. This means that:

The demand for bonds increases.

The overall demand for Treasuries will increase

The demand for T-Bills increases.

The demand for risky stocks is likely to increase.

10)

You recently sold 200 shares of Disney stock to your brother. This is an example of:

A futures market transaction

Money market transaction.

A primary market transaction

A capital market transaction

Answer 1

7. (A) You borrow $100 from your uncle Raymond and you write him an IOU for good measure.

In case of direct placement securities are sold only to institutions such as mutual funds, banks and to good investors.

8. (A) Capital secondary market

Capital secondary market is also called aftermarket and follow on public offering.

9. (C) demand for T-bills increases.

T-bills are safest short term financial securities shall makes banks liquidity.

10 (C) a primary market transaction.

In primary market the company sell stocks to public for the first time as initial public offering.