1
FINA 3317 Exam 1 Questions with Correct
Answers | Updated (100% Correct Answers)
Primary markets are markets in which users of funds raise cash by
selling securities to funds' suppliers.
T or F Answer: T
Secondary markets are markets used by corporations to raise cash
by issuing securities for a short time period.
T or F Answer: F
Corporate security issuers are always directly involved in funds
transfers in the secondary market.
T or F Answer: F
The New York Stock Exchange (NYSE) is an example of a secondary
market.
T or F Answer: T
Central governments sometimes intervene in foreign exchange
markets by affecting foreign exchange rates indirectly through
raising or lowering interest rates.
T or F Answer: F
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,2
Money markets are the markets for securities with an original
maturity of one year or less.
T or F Answer: T
Financial intermediaries such as banks typically have assets that are
riskier than their liabilities.
T or F Answer: T
There are three types of major financial markets today: primary,
secondary, and derivatives markets. The NYSE and NASDAQ are
both examples of derivatives markets.
T or F Answer: F
What factors are encouraging financial institutions to offer
overlapping financial services such as banking, investment banking,
brokerage, etc.?
I. Regulatory changes allowing institutions to offer more services
II. Technological improvements reducing the cost of providing
financial services
III. Increasing competition from full-service global financial
institutions
IV. Reduction in the need to manage risk at financial institutions
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,3
A) I only
B) II and III only
C) I, II, and III only
D) I, II, and IV only
E) I, II, III, and IV Topic: Overview of Financial Institutions Answer: C)
I, II, and III only
IBM creates and sells additional stock to the investment banker
Morgan Stanley. Morgan Stanley then resells the issue to the U.S.
public.
This transaction is an example of a(n)
A) primary market transaction.
B) asset transformation by Morgan Stanley.
C) money market transaction.
D) foreign exchange transaction.
E) forward transaction. Topic: Overview of Financial Markets Answer:
A) primary market transaction.
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, 4
IBM creates and sells additional stock to the investment banker
Morgan Stanley. Morgan Stanley then resells the issue to the U.S.
public.
Morgan Stanley is acting as a(n)
A) asset transformer.
B) asset broker.
C) government regulator.
D) foreign service representative.
E) derivatives trader. Topic: Overview of Financial Institutions
Answer: A) asset transformer.
A corporation seeking to sell new equity securities to the public for
the first time in order to raise cash for capital investment would
most likely
A) conduct an IPO with the assistance of an investment banker.
B) engage in a secondary market sale of equity.
C) conduct a private placement to a large number of potential
buyers.
D) place an ad in the Wall Street Journal soliciting retail suppliers of
funds.
© 2025 All rights reserved
FINA 3317 Exam 1 Questions with Correct
Answers | Updated (100% Correct Answers)
Primary markets are markets in which users of funds raise cash by
selling securities to funds' suppliers.
T or F Answer: T
Secondary markets are markets used by corporations to raise cash
by issuing securities for a short time period.
T or F Answer: F
Corporate security issuers are always directly involved in funds
transfers in the secondary market.
T or F Answer: F
The New York Stock Exchange (NYSE) is an example of a secondary
market.
T or F Answer: T
Central governments sometimes intervene in foreign exchange
markets by affecting foreign exchange rates indirectly through
raising or lowering interest rates.
T or F Answer: F
© 2025 All rights reserved
,2
Money markets are the markets for securities with an original
maturity of one year or less.
T or F Answer: T
Financial intermediaries such as banks typically have assets that are
riskier than their liabilities.
T or F Answer: T
There are three types of major financial markets today: primary,
secondary, and derivatives markets. The NYSE and NASDAQ are
both examples of derivatives markets.
T or F Answer: F
What factors are encouraging financial institutions to offer
overlapping financial services such as banking, investment banking,
brokerage, etc.?
I. Regulatory changes allowing institutions to offer more services
II. Technological improvements reducing the cost of providing
financial services
III. Increasing competition from full-service global financial
institutions
IV. Reduction in the need to manage risk at financial institutions
© 2025 All rights reserved
,3
A) I only
B) II and III only
C) I, II, and III only
D) I, II, and IV only
E) I, II, III, and IV Topic: Overview of Financial Institutions Answer: C)
I, II, and III only
IBM creates and sells additional stock to the investment banker
Morgan Stanley. Morgan Stanley then resells the issue to the U.S.
public.
This transaction is an example of a(n)
A) primary market transaction.
B) asset transformation by Morgan Stanley.
C) money market transaction.
D) foreign exchange transaction.
E) forward transaction. Topic: Overview of Financial Markets Answer:
A) primary market transaction.
© 2025 All rights reserved
, 4
IBM creates and sells additional stock to the investment banker
Morgan Stanley. Morgan Stanley then resells the issue to the U.S.
public.
Morgan Stanley is acting as a(n)
A) asset transformer.
B) asset broker.
C) government regulator.
D) foreign service representative.
E) derivatives trader. Topic: Overview of Financial Institutions
Answer: A) asset transformer.
A corporation seeking to sell new equity securities to the public for
the first time in order to raise cash for capital investment would
most likely
A) conduct an IPO with the assistance of an investment banker.
B) engage in a secondary market sale of equity.
C) conduct a private placement to a large number of potential
buyers.
D) place an ad in the Wall Street Journal soliciting retail suppliers of
funds.
© 2025 All rights reserved
