Equity Stock Markets: Concepts and Instruments

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What is the primary characteristic that distinguishes short-term markets from long-term markets?

Mode of trading, i.e., OTC or exchange-traded

Type of financial instruments traded

Maturity period of the instruments (correct)

Holding period by the investor

Which of the following markets is NOT classified as a short-term market?

Equity stock market (correct)

Treasury bills market

Commercial paper market

Call money market

What is the term for the marketplace where financial instruments are traded?

Financial market (correct)

Money market

Capital market

Monetary market

Which of the following instruments is typically traded in a long-term market?

Government securities Signup and view all the answers

What is the term for the market where instruments with maturities up to 180 days are issued and traded?

Short-term market Signup and view all the answers

What is the primary difference between OTC and exchange-traded financial markets?

Mode of trading, i.e., formal exchange or bilateral contract Signup and view all the answers

Which of the following is an example of a long-term market instrument?

Equity stock Signup and view all the answers

What is the term for the market where instruments with maturities from one year to perpetuity are issued and traded?

Long-term market Signup and view all the answers

What is a primary responsibility of the exchange in an 'Exchange Traded' transaction?

Bearing the counterparty risk Signup and view all the answers

What is a characteristic of Product Markets?

The cost is a reality within the control of the company Signup and view all the answers

What type of market is an example of a Factor Market?

Labor Market Signup and view all the answers

Who bears the counterparty risk in an Over-the-Counter (OTC) transaction?

The two entities participating in the transaction Signup and view all the answers

What is the primary difference between Product Markets and Factor Markets?

The nature of the transaction (goods and services vs. pre-requisites for production) Signup and view all the answers

What is the role of the market forces in Product Markets?

Driving the price of goods and services Signup and view all the answers

What type of market is characterized by transactions executed through an exchange?

Exchange Traded Market Signup and view all the answers

What is the primary distinction between Equity Stock Markets and Product Markets?

The nature of the transaction (equities vs. goods and services) Signup and view all the answers

What is the basis of the return earned by equity investors in a firm?

Profit after tax Signup and view all the answers

Why are equity investments considered riskier than bond investments?

Equity investments are volatile and risky due to dependence on profit after tax Signup and view all the answers

What is the ranking of claim on assets of a firm in the event of insolvency or shutdown?

Lenders, bondholders, and other creditors, equity shareholders Signup and view all the answers

What is the liability of equity shareholders limited to?

The extent of their investments in the equity stock Signup and view all the answers

What characteristic of preference stocks distinguishes them from equity stocks?

Fixed dividend Signup and view all the answers

What is the ranking of claim on assets of preference shareholders compared to equity shareholders and bondholders?

Higher than equity shareholders but lower than bondholders Signup and view all the answers

When are dividends paid out to preference shareholders?

Out of profit after tax Signup and view all the answers

What is the key difference in the dividend structure between preference and equity stocks?

Fixed dividend for preference, variable for equity Signup and view all the answers

What is the concept used to estimate the price of an equity stock?

Time value of money Signup and view all the answers

What is the similarity between the formula to estimate the price of equity stocks and bonds?

Both use the concept of present value Signup and view all the answers

What is the purpose of a privately held firm going public?

To raise equity capital Signup and view all the answers

What is the additional resource available to students to learn more about estimating the price of a stock?

A downloadable document Signup and view all the answers

What is the outcome of a privately held firm going public?

Its equity stocks can be traded publicly Signup and view all the answers

What is the principle used to estimate the price of equity stocks?

Present value of all future cash flows Signup and view all the answers

What is the primary difference between the price of equity stocks and bonds?

The type of cash flows Signup and view all the answers

What is the purpose of the concept of time value of money?

To estimate the present value of future cash flows Signup and view all the answers

What term is used for the first issuance of equity stocks?

Initial Public Offer (IPO) Signup and view all the answers

Which entities act as intermediaries between firms issuing equity stocks and prospective investors?

Investment Banks Signup and view all the answers

What additional role can intermediaries sometimes perform during the equity stock issuance process?

Underwriting the offer Signup and view all the answers

What is the correct term for subsequent rounds of issuing equity stocks after the initial round?

Follow-on Public Offer (FPO) Signup and view all the answers

Which term describes the process of buying and selling equity stocks?

Equity Trading Signup and view all the answers

Who typically pays an additional fee to the intermediaries in the equity stock issuance process?

Firms issuing the equity stocks Signup and view all the answers

What is NOT included as a permitted use of the document by Prof P C Narayan?

Reading the document during the course Signup and view all the answers

Which course is associated with the document authored by Prof P C Narayan?

Equity Stock Market: Concepts, Instruments, Risks and Derivatives Signup and view all the answers