Question 1

The regulatory structure in the United States is largely the result of ________.

Accepted Answer

A)  the first IPO bubble in the 20th century. 
B)  the boom in the stock market experienced in the 1990s. 
C)  bull markets that have occurred at various times. 
D)  financial crises that have occurred at various times. 
A)  the first IPO bubble in the 20th century. 
B)  the boom in the stock market experienced in the 1990s. 
C)  bull markets that have occurred at various times. 
D)  financial crises that have occurred at various times.

Question 2

Financial activity regulation is the form of regulation that requires issuers of securities to make public a large amount of financial information to actual and potential investors.

Accepted Answer

A) True 
 B)False

Question 3

Which of the below is NOT a factor that has led to the integration of financial markets?

Accepted Answer

A)  A factor is liberalization of markets and the activities of market participants in key financial centers of the world. 
B)  A factor is deregulation of markets and the activities of market participants in key financial centers of the world. 
C)  A factor is technological advances for monitoring world markets, executing orders, and analyzing financial opportunities. 
D)  A factor is decreased institutionalization of financial markets. 
A)  A factor is liberalization of markets and the activities of market participants in key financial centers of the world. 
B)  A factor is deregulation of markets and the activities of market participants in key financial centers of the world. 
C)  A factor is technological advances for monitoring world markets, executing orders, and analyzing financial opportunities. 
D)  A factor is decreased institutionalization of financial markets.

Question 4

What are the two principal economic functions of financial assets? Give an illustration.

Accepted Answer

Financial assets have two principal econ

Question 5

The two basic types of derivative instruments are futures/forward contracts and options contracts. Describe these two basic types.

Accepted Answer

A futures or forward contract is an agre

Question 6

The third economic function of a financial market is that it reduces the cost of transacting. Name and describe the two costs associated with this economic function.

Accepted Answer

There are two costs associated with redu

Question 7

Governments in most developed economies have created elaborate systems of regulation for financial markets, in part because the markets themselves are complex and in part because financial markets are so important to the general economies in which they operate. The numerous rules and regulations are designed to serve several purposes. These rules and regulations fall into the various categories. Provide at least three of these categories.

Accepted Answer

The numerous rules and regulations for f

Question 8

Financial markets provide three economic functions. Which of the below is NOT one of these?

Accepted Answer

A)  The interactions of buyers and sellers in a financial market determine the price of the traded asset. 
B)  Financial markets provide a mechanism for an investor to sell a financial asset. 
C)  Financial markets increases the cost of transacting. 
D)  The interactions of buyers and sellers in a financial market determine the required return on a financial asset. 
A)  The interactions of buyers and sellers in a financial market determine the price of the traded asset. 
B)  Financial markets provide a mechanism for an investor to sell a financial asset. 
C)  Financial markets increases the cost of transacting. 
D)  The interactions of buyers and sellers in a financial market determine the required return on a financial asset.

Question 9

From the perspective of a given country, financial markets can be classified as either internal or external. The internal market is composed of two parts: the domestic market and the foreign market. The domestic market is ________.

Accepted Answer

A)  where the securities of issuers not domiciled in the country are sold and traded. 
B)  where issuers domiciled in a country issue securities and where those securities are subsequently traded. 
C)  where securities are offered simultaneously to investors in a number of countries. 
D)  where issuers domiciled in a country issue securities and where those securities are NOT subsequently traded. 
A)  where the securities of issuers not domiciled in the country are sold and traded. 
B)  where issuers domiciled in a country issue securities and where those securities are subsequently traded. 
C)  where securities are offered simultaneously to investors in a number of countries. 
D)  where issuers domiciled in a country issue securities and where those securities are NOT subsequently traded.

Question 10

Which of the below statements is TRUE?

Accepted Answer

A)  Because of differences in culture and history, different countries regulate financial markets and financial institutions in varying ways, emphasizing some forms of regulation more than others. 
B)  The standard explanation or justification for governmental regulation of a market is that the market, left to itself, will produce its particular goods or services in an efficient manner and at the lowest possible cost. 
C)  Governments in most developed economies have created elaborate systems of regulation for financial markets, in part because the markets themselves are simple and in part because financial markets are unimportant to the general economies in which they operate. 
D)  Financial activity regulation are free of rules about traders of securities and trading on financial markets. 
A)  Because of differences in culture and history, different countries regulate financial markets and financial institutions in varying ways, emphasizing some forms of regulation more than others. 
B)  The standard explanation or justification for governmental regulation of a market is that the market, left to itself, will produce its particular goods or services in an efficient manner and at the lowest possible cost. 
C)  Governments in most developed economies have created elaborate systems of regulation for financial markets, in part because the markets themselves are simple and in part because financial markets are unimportant to the general economies in which they operate. 
D)  Financial activity regulation are free of rules about traders of securities and trading on financial markets.

Question 11

The domestic market in any country is the market where the securities of issuers not domiciled in the
country are sold and traded.

Accepted Answer

A) True 
 B)False

Question 12

Derivative contracts provide ________.

Accepted Answer

A)  issuers and investors an expensive but efficient way of controlling some major risks. 
B)  issuers and investors an inexpensive way of controlling some major risks. 
C)  issuers and investors an inexpensive but inefficient way of controlling all major risks. 
D)  issuers and investors an expensive way of controlling some minor risks. 
A)  issuers and investors an expensive but efficient way of controlling some major risks. 
B)  issuers and investors an inexpensive way of controlling some major risks. 
C)  issuers and investors an inexpensive but inefficient way of controlling all major risks. 
D)  issuers and investors an expensive way of controlling some minor risks.

Question 13

When the option grants the owner of the option the right to buy a financial asset from the other party, the option is called a put option.

Accepted Answer

A) True 
 B)False

Question 14

Global competition has forced governments to exercise control various aspects of their financial markets so that their financial enterprises can compete effectively around the world.

Accepted Answer

A) True 
 B)False

Question 15

Business entities include nonfinancial and financial enterprises. ________ manufacture products such as cars and computers and/or provide nonfinancial services such as transportation and utilities.

Accepted Answer

A)  Financial enterprises 
B)  Nonfinancial enterprises 
C)  Both financial and nonfinancial enterprises 
D)  None of these 
A)  Financial enterprises 
B)  Nonfinancial enterprises 
C)  Both financial and nonfinancial enterprises 
D)  None of these

Question 16

Liquidity-generating innovations can increase the liquidity of the market, allow borrowers to draw upon new sources of funds, and permit market participants to circumvent capital constraints imposed by regulations.

Accepted Answer

A) True 
 B)False

Question 17

The shifting of the financial markets from dominance by retail investors to institutional investors is referred to as the ________ of financial markets.

Accepted Answer

A)  globalization 
B)  institutionalization 
C)  securitization 
D)  diversification 
A)  globalization 
B)  institutionalization 
C)  securitization 
D)  diversification

Question 18

Financial assets have two principal economic functions. Which of the below is ONE of these?

Accepted Answer

A)  A principal economic function is to transfer funds from those who have surplus funds to borrow to those who need funds to invest in intangible assets. 
B)  A principal economic function is to transfer funds in such a way as to redistribute the avoidable risk associated with the cash flow generated by intangible assets among those seeking and those providing the funds. 
C)  A principal economic function is to transfer funds in such a way as to redistribute the unavoidable risk associated with the cash flow generated by tangible assets among those seeking and those providing the funds. 
D)  A principal economic function is to transfer funds from those who have surplus funds to invest to those who need funds to invest in intangible assets. 
A)  A principal economic function is to transfer funds from those who have surplus funds to borrow to those who need funds to invest in intangible assets. 
B)  A principal economic function is to transfer funds in such a way as to redistribute the avoidable risk associated with the cash flow generated by intangible assets among those seeking and those providing the funds. 
C)  A principal economic function is to transfer funds in such a way as to redistribute the unavoidable risk associated with the cash flow generated by tangible assets among those seeking and those providing the funds. 
D)  A principal economic function is to transfer funds from those who have surplus funds to invest to those who need funds to invest in intangible assets.

Question 19

The market stability regulator would take on the traditional role of the Federal Reserve by giving it the responsibility and authority to ensure overall financial market stability.

Accepted Answer

A) True 
 B)False

Question 20

Derivative instruments play a critical role in global financial markets.

Accepted Answer

A) True 
 B)False

Exam 1: Introduction

The regulatory structure in the United States is largely the result of ________.

Financial activity regulation is the form of regulation that requires issuers of securities to make public a large amount of financial information to actual and potential investors.

Which of the below is NOT a factor that has led to the integration of financial markets?

What are the two principal economic functions of financial assets? Give an illustration.

The two basic types of derivative instruments are futures/forward contracts and options contracts. Describe these two basic types.

The third economic function of a financial market is that it reduces the cost of transacting. Name and describe the two costs associated with this economic function.

Financial markets provide three economic functions. Which of the below is NOT one of these?

From the perspective of a given country, financial markets can be classified as either internal or external. The internal market is composed of two parts: the domestic market and the foreign market. The domestic market is ________.

Which of the below statements is TRUE?

The domestic market in any country is the market where the securities of issuers not domiciled in the country are sold and traded.

Derivative contracts provide ________.

When the option grants the owner of the option the right to buy a financial asset from the other party, the option is called a put option.

Global competition has forced governments to exercise control various aspects of their financial markets so that their financial enterprises can compete effectively around the world.

Business entities include nonfinancial and financial enterprises. ________ manufacture products such as cars and computers and/or provide nonfinancial services such as transportation and utilities.

Liquidity-generating innovations can increase the liquidity of the market, allow borrowers to draw upon new sources of funds, and permit market participants to circumvent capital constraints imposed by regulations.

The shifting of the financial markets from dominance by retail investors to institutional investors is referred to as the ________ of financial markets.

Financial assets have two principal economic functions. Which of the below is ONE of these?

The market stability regulator would take on the traditional role of the Federal Reserve by giving it the responsibility and authority to ensure overall financial market stability.

Derivative instruments play a critical role in global financial markets.

Financial Institutions, Financial Intermediaries, and Asset Management Firms

Depository Institutions: Activities and Characteristics

The U.S. Federal Reserve and the Creation of Money

Monetary Policy in the United States

Insurance Companies

Investment Companies and Exchange Traded Funds

Pension Funds

Properties and Pricing of Financial Assets

The Level and Structure of Interest Rates

The Term Structure of Interest Rates

Risk/Return and Asset Pricing Models

Primary Markets and the Underwriting of Securities

Secondary Markets

Treasury and Agency Securities Markets

Municipal Securities Markets

Markets for Common Stock: The Basic Characteristics

Markets for Common Stock: Structure and Organization

Markets for Corporate Senior Instruments: I

Markets for Corporate Senior Instruments: II

The Markets for Bank Obligations

The Residential Mortgage Market

Mortgage-Backed Securities Market

Market for Commercial Mortgage Loans and Commercial Mortgage-Backed Securities

Market for Asset-Backed Securities

Financial Futures Markets

Options Markets

Pricing of Futures and Options Contracts

The Applications of Futures and Options Contracts

OTC Interest Rate Derivatives: Forward Rate Agreements, Swaps, Caps, and Floors

Market for Credit Risk Transfer Vehicles: Credit Derivatives and Collateralized Debt Obligations

The Market for Foreign Exchange and Risk Control Instruments

Filters