16. Which of the following is NOT a characteristic of a well-functioning capital market?
a. High liquidity
b. Efficient price discovery
c. Low volatility
d. Limited investor participation
17. The process of selling securities directly to institutional investors without an intermediary is called:
a. Private placement
b. Initial public offering (IPO)
c. Rights offering
d. Secondary offering
18. What is the role of a trustee in bond issuances?
a. Setting the interest rate on the bond
b. Marketing and distributing the bonds to investors
c. Protecting the interests of bondholders and enforcing bond covenants
d. Rating the creditworthiness of the bond issuer
19. Which of the following is NOT a type of debt market instrument?
a. Mortgage-backed security
b. Commercial paper
c. Certificate of deposit (CD)
d. Mutual fund share
20. What is the purpose of a prospectus in capital market transactions?
a. Assessing the creditworthiness of borrowers and issuers
b. Establishing the interest rate of a bond
c. Providing information to investors about a security offering
d. Determining the market value of a stock
