Which of the following can be described as involving direct finance?______________
A corporation’s stocks are traded in an over-the-counter market
B. A corporation buys commercial paper issued by another corporation
C. A pension fund manager buys commercial paper from the issuing corporation
D. Both A and B of the above
A corporation acquires new funds only when its securities are sold in the _________________.
A. secondary market by an investment bank
B. primary market by an investment bank
C. secondary market by a stock exchange broker
D. secondary market by a commercial bank
Which of the following statements about the characteristics of debts and equities are true?
A. They both can be long-term financial instruments
B. They both involve a claim on the issuer’s income
C. They both enable a corporation to raise funds
D. All of the above
The primary reason that individuals and firms choose to borrow for a long term is to reduce the risk that interest rates will _________before they pay off their debts.
A. raise
B. fall
C. become more volatile
D. become more stable
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