Answered: 1) What id the essential purpose for…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter18: Initial Public Offerings, Investment Banking, And Capital Formation

Section: Chapter Questions

Problem 15MC

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Question

1) What id the essential purpose for financial markets?
2) Which is more important, the primary market for stocks of the secondary market? Why?

3) How does a ponzi scheme work? 4) Discuss some of the forces that help make markets efficient?

5) What are institutional investors? Why are they needed in our economy?

6) What are some of the differences between a forward contract and a future contract?

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

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