Which of the following statements is CORRECT?
A) Capital market instruments include both long-term debt and common stocks.
B) An example of a primary market transaction would be your uncle transferring 100 shares of Wal-Mart stock to you as a birthday gift.
C) The NYSE does not exist as a physical location; rather, it represents a loose collection of dealers who trade stocks electronically.
D) If your uncle in New York sold 100 shares of Microsoft through his broker to an investor in Los Angeles, this would be a primary market transaction.
E) While the two frequently perform similar functions, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise large blocks of capital from investors.

Question

Quizplus · Accepted Answer

Capital market instruments refer to financial instruments which have long-term maturity, usually more than one year. It includes long-term debt, such as bonds, and common stocks.

Answer: B 
 A primary market transaction involves the issuance of new securities. The transfer of shares from your uncle to you is a secondary market transaction, as the shares are already in existence and are simply changing ownership.

Answer: C 
 The NYSE (New York Stock Exchange) is a physical location where trading takes place, with designated areas for floor traders to buy and sell securities.

Answer: D 
 A primary market transaction involves the issuance of new securities, so if your uncle sold 100 shares of Microsoft to an investor in Los Angeles, it would be a secondary market transaction.

Answer: E 
 Investment banks and commercial banks have different roles. Investment banks generally specialize in underwriting and issuing securities, while commercial banks typically focus on taking deposits and providing loans to individuals and businesses.

Which of the Following Statements Is CORRECT