[i]. Trades on the NYSE are generally completed by having a brokerage firm acting as a “dealer” buy securities and adding them to its inventory or selling from its inventory. The Nasdaq, on the other hand, operates as an auction market, where buyers offer to buy, and sellers to sell, and the price is negotiated on the floor of the exchange.
a. True
b. False
(2-4) Stock market F H
[ii]. The “over-the-counter” market received its name years ago because brokerage firms would hold inventories of stocks and then sell them by literally passing them over the counter to the buyer.
a. True
b. False
(2-5) Stock market transactions F H
[iii]. If you decide to buy 100 shares of Google, you would probably do so by calling your broker and asking him or her to execute the trade for you. This would be defined as a secondary market transaction, not a primary market transaction.
a. True
b. False
(2-5) Stock market transactions F H
[iv]. The term IPO stands for “individual purchase order,” as when an individual (as opposed to an institution) places an order to buy a stock.
a. True
b. False
(2-5) Stock market transactions F H
[v]. In a “Dutch auction” for new stock individual investors place bids for shares directly. Each potential bidder indicates the price he or she is willing to pay and how many shares he or she will purchase at that price. The highest price that permits the company to sell all the shares it wants to sell is determined, and this is the “market clearing price.” All bidders who specified this price or higher are allowed to purchase their shares at the market clearing price.
a. True
b. False
(2-5) Closely held stock F H
[vi]. When a corporation’s shares are owned by a few individuals who are associated with the firm’s management, we say that the stock is closely held.
a. True
b. False
(2-5) Public company F H
[vii]. A publicly owned corporation is a company whose shares are held by the investing public, which may include other corporations as well as institutional investors.
a. True
b. False
(2-6) Stock market returns F H
[viii]. If you wanted to know what rate of return stocks have provided in the past, you could examine data on the Dow Jones Industrial Index, the S&P 500 Index, or the Nasdaq Index.
a. True
b. False