Introduction

You have studied the various financial markets and institutions in Chapter 6 of the textbook by Cornett, Adair, and Nofsinger. In this assignment, you will apply the knowledge you have gained by classifying market transactions and financial instruments and by describing how financial markets work.

Instructions

Answer the following questions and complete the following problems, as applicable.

• Question 1:
  • Proficient-level: “Classify the following transactions as taking place in the primary or secondary markets:
    • IBM issues $200 million of new common stock.
    • The New Company issues $50 million of common stock in an IPO.
    • IBM sells $5 million of GM preferred stock from its marketable securities portfolio.
    • The Magellan Fund buys $100 million of previously issued IBM bonds.
    • Prudential Insurance Co. sells $10 million of GM common stock” (Cornett, Adair, & Nofsinger, 2016, p. 154).
  • Distinguished-level: Provide five correct responses.
• Question 2:
  • Proficient-level: “Classify the following financial instruments as money market securities or capital market securities:
    • Federal Funds.
    • Common Stock.
    • Corporate Bonds.
    • Mortgages.
    • Negotiable Certificates of Deposit.
    • U.S. Treasury Bills.
    • U.S. Treasury Notes.
    • U.S. Treasury Bonds.
    • State and Government Bonds” (Cornett, Adair, & Nofsinger, 2016, p. 154).
  • Distinguished-level: Provide nine correct responses.
• Question 3:
  • Proficient-level: “What are the different types of financial institutions? Include a description of the main services offered by each” (Cornett, Adair, & Nofsinger, 2016, p. 154).
  • Distinguished-level: Provide a definition of the term, liquidity.
• Question 4:
  • Proficient-level: “List and provide the definitions of the six factors that determine the nominal interest rate on a security” (Cornett, Adair, & Nofsinger, 2016, p. 154).
  • Distinguished-level: Identify the two factors common to all financial securities.
• Question 5:
  • Proficient-level: Define the concept, term structure of interest rates. List and describe the three theories explaining the shape of the term structure of interest rates.
  • Distinguished-level: Identify the slope of the most common yield curve for a U.S. Treasury security.

Write your responses in a Microsoft Word document and submit it as an attachment in the assignment area. Prior to submitting your assignment, review the Financial Markets and Institutions Scoring Guide to ensure you have met all of the requirements and as a self-assessment of your work.

Reference

Cornett, M. M., Adair, T. A., & Nofsinger J. (2016). M: Finance (3rd ed.). New York, NY: McGraw-Hill.