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Are the following statements true or false, please justify your answer? A) “When corporation XYZ decides to borrow from the public through issuing new Stocks they rely on primary money market”
Are the following statements true or false, please justify your answer? A) “When corporation XYZ decides to borrow from the public through issuing new Stocks they rely on primary money market”. (6 marks) B) Money market financial instruments are less risky than capital market financial instruments. (3 marks) C) The market price of a bond (P)-that pays periodic coupon interest - should always equal the fair value (PV) of the same bond. (4 marks) D) When market participants have more Near-Term Spending Needs, then the equilibrium interest rate increases.
Expert Solution
A. FALSE-- Issuance of new stock is always done in the primary stock market not in the primary money market.
B. TRUE- money market instruments are highly liquid and they are having lower degree of risk than the capital market instruments because capital market instruments are for longer period.
C. FALSE- Market price of Bond should not be always equal to the fair value.
D. TRUE- Equilibrium interest rate will be increasing due to more demand.
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