Stock Jobs Stock Institutions and Financial Markets 2 — Questions and Answers
Question 1: What is the primary function of a stock exchange?
- To provide a regulated marketplace for buying and selling securities (Correct answer)
- To set interest rates for the economy
- To print currency for the government
- To directly lend money to consumers
Correct answer: To provide a regulated marketplace for buying and selling securities
A stock exchange provides an organized, regulated venue where securities are bought and sold between investors.
Question 2: Which market is where companies first sell shares to the public?
- Primary market (Correct answer)
- Secondary market
- Money market
- Forex market
Correct answer: Primary market
The primary market is where new securities are issued and sold to investors for the first time, such as in an IPO.
Question 3: What does SEC stand for in U.S. financial regulation?
- Securities and Exchange Commission (Correct answer)
- Stock Exchange Council
- State Economic Committee
- Securities Enforcement Corporation
Correct answer: Securities and Exchange Commission
The Securities and Exchange Commission is the U.S. agency that regulates securities markets and protects investors.
Question 4: A broker-dealer acts as an agent when it:
- Executes trades on behalf of a client (Correct answer)
- Buys securities for its own inventory
- Issues new shares of stock
- Sets the Federal Reserve discount rate
Correct answer: Executes trades on behalf of a client
Acting as an agent (broker) means executing trades on behalf of clients rather than trading from its own account.
Question 5: What is the secondary market?
- Where investors trade previously issued securities among themselves (Correct answer)
- Where companies file IPOs
- Where the government auctions new bonds
- Where banks set deposit rates
Correct answer: Where investors trade previously issued securities among themselves
In the secondary market, existing securities are traded between investors without the issuing company receiving proceeds.
Question 6: Which institution serves as the central bank of the United States?
- The Federal Reserve (Correct answer)
- The New York Stock Exchange
- The SEC
- The U.S. Treasury Department
Correct answer: The Federal Reserve
The Federal Reserve is the U.S. central bank, responsible for monetary policy and overseeing the banking system.
Question 7: What is market liquidity?
- The ease with which an asset can be bought or sold without affecting its price (Correct answer)
- The total cash held by a company
- The amount of dividends paid annually
- The interest charged on margin loans
Correct answer: The ease with which an asset can be bought or sold without affecting its price
Liquidity describes how quickly and easily an asset can be converted to cash with minimal price impact.
Stock Jobs Stock Institutions and Financial Markets 2
What is the primary function of a stock exchange?