WorksheetsFinancial Economics: Class 2
Total questions: 10
Worksheet time: 8mins
Short selling is to borrow a financial asset in order to sell it; the objective is to repurchase it later at a low price
True
False
An arbitrageur is an individual who deals with investment banks or investment funds and sets the level of return
True
False
The basic function of primary markets is:
To provide liquidity
To provide access to securities not available on standard exchanges
To allow firms raise funds
The basic function of secondary markets is:
To provide liquidity
To provide access to securities not available on standard exchanges
To allow firms raise funds
Mark the correct answer.
Institutional investors only trade in secondary markets.
Primary markets are not regulated.
Minor investors only trade in primary markets.
Companies must meet requirements by exchanges and the SEC to hold an IPO.
Generally speaking, financial assets can be classified in three groups,
Equity, debt and derivatives.
Commodities, debt and derivatives.
Equity, interest rates and Exchange rates.
Stocks, preferred stocks and debt.
If you short sell a stock, you are expecting that its price,
It will decrease.
It will increase.
It will keep constant.
The price is indifferent, because we have to return the borrowed asset.
The market value of a share is the price of the share in the primary market.
True
False
Arbitrage opportunities arise when an investor can obtain:
Risky benefit without the requirement of an initial investment
Risky benefit with the requirement of an initial investment
Riskless benefit without the requirement of an initial investment
Riskless benefit with the requirement of an initial investment
In the OTC markets:
Liquidity is high
Each operation is unique (no standardized)
The level of regulation is high
The financial contracts are standardized
