-Categorize each of the following transactions as taking place in either the primary or secondary market:
Supercorp issues $180 million of new common stock.
HiTech, Inc. issues $30 million of common stock in an IPO.
Megaorg sells $10 million of HiTech preferred stock from its marketable securities portfolio.
The XYA Fund buys $220 million of previously issued Supercorp bonds.
A. B. Corporation sells $15 million of XYZ common stock.
-Identify whether the following financial instruments are capital market securities or money market securities:
U.S. Treasury bills.
U.S. Treasury notes.
U.S. Treasury bonds.
Mortgages.
Federal funds.
Negotiable certificates of deposit.
Common stock.
State and government bonds.
Corporate bonds.
-Identify the different types of financial institutions. What are the main services each of these financial institutions offers?
-Define the six factors that determine the nominal interest rate on a security.
-Define the concept of term structure of interest rates. What are three theories that explain the future yield curve of interest rates?
Sample Solution