Chapter 14: Long-Term Financing
Chapter 14
Long-Term Financing
Discussion Questions
14-1.
In addition to U.S. corporations, what government groups compete for funds in the U.S. capital markets?
The federal government, government agencies, and state and local governments all compete for funds.
What foreign industry has privatization been most important in?
Telecommunications
How does foreign investment help the U.S. government?
It helps finance the deficit.
What is a key tax characteristic associated with state and local (municipal) securities?
They are tax exempt, meaning the interest paid is normally exempt from federal income taxes and from state income taxes in the state of issue.
What are three forms of corporate securities discussed in the chapter?
Corporate bonds, preferred stock, and common stock are the three forms of corporate securities discussed in the chapter.
Do corporations rely more on external or internal funds as sources of financing?
Corporations rely more heavily on external funds as sources of financing. Sixty percent of corporate funds came from external sources during the time period under study.
Explain the role of financial intermediaries in the flow of funds through the three-sector economy.
In a three-sector economy consisting of business, households, and government, financial intermediaries such as commercial banks, mutual saving banks, insurance companies, mutual funds, pension funds, and credit unions provide the mechanism for reallocating funds from one surplus sector to a deficit sector. These institutions indirectly invest excess funds in areas of the economy where funds are needed.
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Chapter 14: Long-Term Financing
14-8.
What are electronic communication networks (ECNs)? Generally speaking, are they currently part of the operations of the New York Stock Exchange and the NASDAQ Stock Market?
ECNs are electronic trading systems that automatically match buy and sell orders at specific prices via computers. They are now part of the operations of the two major markets (at one time they competed with them).
Why is secondary trading in the security markets important?
It provides liquidity and keeps prices competitive among alternative investments.
How would you define efficient security markets?
Markets are efficient when (1) prices adjust rapidly to new information; (2) there is a continuous market in which each successive trade is made at a price close to the previous price; and (3) the market can absorb large dollar amounts of securities without destabilizing the price.
The efficient market hypothesis is interpreted in a weak form, a semistrong form, and a strong form. How can we differentiate its various forms?
The weak form of efficient markets simply states that past price information is unrelated to future prices and that since no trends are predictable, investors
cannot take advantage of them. The semistrong form states that prices reflect all public information, while the strong form states that all information, both public and private, is reflected in the stock prices.
What was the primary purpose of the Securities Act of 1933?
The primary purpose of the Securities Act of 1933 was to provide full
disclosure of all pertinent information whenever a corporation sold a new issue of securities.
What act of Congress created the Securities and Exchange Commission?
The Securities Exchange Act of 1934 created the Securities and Exchange Commission.
What was the purpose of the Sarbanes–Oxley Act of 2002?
The intent was to restore confidence in the integrity of the financial markets through insuring accuracy in financial reporting.
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金融管理基础英文版第16版人大版MGH版简答题附答案BHD_16e_SM_Chapter_14
