Which of the following does not apply to secondary markets? Group of answer choices Many investors might be unwilling to provide resources to corporations if there is no available mechanism for the future sale of their stocks and bonds to others. Transactions help to establish market prices for additional shares that may be issued in the future. Transactions are important to the efficient allocation of resources in our economy. New resources are provided when shares of stock are sold by the corporation to the initial owners.

Which of the following does not apply to secondary markets? Group of answer choices Many investors might be unwilling to provide resources to corporations if there is no available mechanism for the future sale of their stocks and bonds to others. Transactions help to establish market prices for additional shares that may be issued in the future. Transactions are important to the efficient allocation of resources in our economy. New resources are provided when shares of stock are sold by the corporation to the initial owners.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter18: Initial Public Offerings, Investment Banking, And Capital Formation

Section: Chapter Questions

Problem 4Q

See similar textbooks

Similar questions

Which of the following is an appropriate goal for the firm? Select one: a. All of these b. In secondary markets, outstanding shares of stock are bought and sold among investors. c. An active secondary market causes firms to sell their new debt or equity issues at a higher cost of funds. d. A secondary market allows investors to share their risk and return e. For an investor, the function of secondary markets is to provide profitability for the shares of securities they own.
1. Suppose many investors are still interested in acquiring the shares of Company ABC after the initial public offering, what kind of Financial market should they go to from whom would they purchase this shares? 2. What would happen if there are no Financial market in the Financial system?
How does a cost-efficient capital market help reduce the prices of goods and services? Describe the different ways in which capital can be transferred from suppliers of capital to those who are demanding capital. Is an initial public offering an example of a primary or a secondary market transaction? Indicate whether the following instruments are examples of money market or capital market securities. a. US Treasury bills b. Long-term corporate bonds c. Common stocks d. Preferred stocks e. Dealer commercial paper Briefly explain what is meant by the term efficiency continuum.
If a large group of investors tend to buy a company's stock, an individual might follow too. This statement is an example of: Select one: Self-attribution Mental Accounting Herd Behavior The disposition effects Anchoring
Your corporation needs additional capital to fund an expansion. Discuss the advantages and disadvantages of raising capital through the issuance of stock. Would debt be a better option? Why or why not?
Companies sell common stock to raise long-term capital. What are the pros and cons of selling stock? Is it better to sell common or preferred stock? Why?
a. What are the risks and rewards of investing in the stock market as compared to the bond market?b. “Because corporations do not actually raise any funds in secondary markets, they are less important to the economy than primary markets.” Comment.
Under which condition an external equity financing can be advantageous? Group of answer choices When a firm wishes to raise additional capital by selling a portion of the existing owners' stock while maintaining control of the firm When a firm's capital structure contains more equity than debt All of the above When common stock becomes less risky to the firm than fixed-income securities
Companies are more apt to choose repurchases over dividends if doing so will enable them to I. take advantage of a market undervaluation of their shares. II. maintain or increase the value of executive stock options. III. offset the dilution created by the exercise of executive stock options. IV. distribute revenue increases that are considered temporary or short-term in nature.
1. How do you think today's low interest rate environment is impacting the time value of money? How might this change the value of an asset or liability? 2. What is the relationship between the concepts of net present value and shareholder wealth maximization? 3. Offer some reasons that the intrinsic value that you might calculate with the methodologies learned might yield a price different than what the stock trades at in the stock market. You can reference any method of valuation models in offering thoughts on why there might be differences between intrinsic and market values.
Why is the cost of retained earnings cheaper than the cost of issuing new common stock? Group of answer choices Issuing new common stock may send a negative signal to the capital markets, which may depress the stock price. When a company issues new common stock they also have to pay flotation costs to the underwriter. Either Neither
Which of the following is a disadvantage of share ownership? Select one: a. Shares are liquid (can be converted to cash quickly). b. Information is widely available in the news and financial media. c. Transaction costs are low. d. Valuation is difficult.