Stock Jobs Stock Institutions and Financial Markets 3

Question 1

What is an Initial Public Offering (IPO)?

Accepted Answer

The first sale of a company's shares to the public

Answer

An IPO is the process by which a private company offers its shares to the public for the first time.

Question 2

Which index tracks 500 large-cap U.S. companies?

Accepted Answer

S&P 500

Answer

The S&P 500 is a market index tracking 500 of the largest publicly traded U.S. companies.

Question 3

What is the role of an investment bank in financial markets?

Accepted Answer

Underwriting and facilitating the issuance of new securities

Answer

Investment banks help companies raise capital by underwriting and distributing new stock and bond issues.

Question 4

What is a bid-ask spread?

Accepted Answer

The difference between the highest buy price and lowest sell price

Answer

The bid-ask spread is the gap between the highest price buyers will pay and the lowest price sellers will accept.

Question 5

What is a market maker?

Accepted Answer

A firm that quotes both buy and sell prices to provide liquidity

Answer

Market makers stand ready to buy and sell securities, providing liquidity and continuous two-sided quotes.

Stock Jobs Practice Test