All of the following show interactions between markets except: a. Purchase of a
ID: 2755192 • Letter: A
Question
All of the following show interactions between markets except:
a. Purchase of a mortgage issued by Freddie Mac by the Federal Reserve Bank.
b. Sale of stock to raise equity for a new company to an insurance provider.
c. Increase in short term target rates by the Fed on the bond market resulting in stock market increases when announced in the press.
d. Restrictions in bank lending as the result of increasing capital requirements resulting in lower real estate prices and fewer sales on the real estate market.
e. All of these are examples of market interactions.
Explanation / Answer
Answer is b. Sale of stock to raise equity for a new company to an insurance provider.
All the cases indicate interactions between various types of market except sale of stock to insurance provider. Sale of stock to insurance provider is an example of private placement wherein the company issued the stocks to another company (insurance provider) with no effect on the money flow in the market.