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Financial Markets and Business Organizations

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Financial Markets and Business Organizations

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Questions and Answers

What are the primary types of financial securities?

Derivatives, commodities, and bonds
Debt, equity, and derivatives (correct)
Stocks, bonds, and options
Equity, commodities, and futures

What is a required rate of return from an investor’s perspective?

The time preferences for consumption
The prospect of more money in the future (correct)
The cost of money from the user’s point of view
The risk associated with an investment

What are spot markets and futures markets based on?

Whether the assets are bought or sold for on-the-spot delivery or for delivery at some future date (correct)
The type of investors participating in the markets
The location where the assets are bought or sold
The type of assets being traded

What are primary markets?

Markets in which corporations raise new capital (C) Signup and view all the answers

What is a trading venue?

A site where secondary market trading occurs (D) Signup and view all the answers

What is the primary objective of management according to the text?

Maximizing stockholders’ wealth (A) Signup and view all the answers

What is the initial public offering (IPO) related to?

Selling shares to the general public for the first time (B) Signup and view all the answers

What does free cash flow (FCF) represent?

Cash flow available for distribution to investors after sustaining operations (C) Signup and view all the answers

What determines the weighted average cost of capital (WACC)?

The firm’s capital structure, interest rates, and market share (B) Signup and view all the answers

What are financial markets primarily used for according to the text?

Connecting providers of cash with users of cash (B) Signup and view all the answers