Equity Investments - Equity Investments Section 1

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11. Which of the following markets is most suitable for securities that are unique or illiquid?

  • Option : C
  • Explanation : Brokered markets are most suitable for securities that are unique or illiquid.
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13. A financial system characterized by liquid markets, low commissions and order price impacts is said to be which of the following?

  • Option : C
  • Explanation : Operationally efficient markets are liquid markets in which the costs of trading commissions, bid–ask spreads, and order price impacts are low.
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14. Markets that have high costs of trading in terms of dealer’s commissions, bid-ask spreads and order price impacts are most likely to be:

  • Option : C
  • Explanation : Cost of trading determines the operational efficiency of a financial market. If a market has high cost of trading, it is operationally inefficient. If filling orders is very costly, informed trading may not be possible.
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15. An economy that best utilizes its resources is most likely described as:

  • Option : A
  • Explanation : Economies that use resources in such a way that they are most valuable are allocationally efficient.
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