Exam 2: An Overview of the Financial System

A debt instrument sold by a bank to its depositors that pays annual interest of a given amount and at maturity pays back the original purchase price is called ________.

An important function of secondary markets is to ________.

Equity and debt instruments with maturities greater than one year are called ________ market instruments.

The primary liabilities of depository institutions are ________.

Explain why only the largest and most trustworthy corporations issue the financial instruments known as commercial paper?

An investment intermediary that lends funds to consumers is ________.

Describe the two methods of organizing a secondary market.

Financial intermediaries provide customers with liquidity services. Liquidity services ________.

A corporation acquires new funds only when its securities are sold in the ________.

Which of the following is a contractual savings institution?

Securities are ________ for the person who buys them, but are ________ for the individual or firm that issues them.

Corporations receive funds when their stock is sold in the primary market. Why do corporations pay attention to what is happening to their stock in the secondary market?

Prices of money market instruments undergo the least price fluctuations because of ________.

When I purchase ________, I own a portion of a firm and have the right to vote on issues important to the firm and to elect its directors.

________ are short-term loans in which Treasury bills serve as collateral.

Distinguish between a foreign bond and a Eurobond.

You can borrow $5000 to finance a new business venture. This new venture will generate annual earnings of $251. The maximum interest rate that you would pay on the borrowed funds and still increase your income is ________.

How do financial intermediaries play an important role in the economy?

Which of the following is not a contractual savings institution?

Treasury bills pay no interest but are sold at a ________. That is, you will pay a lower purchase price than the amount you receive at maturity.