Question 1

Which of the following is not a characteristic of corporate bonds?

Accepted Answer

A) short-term 
B) issued by corporations 
C) pay interest twice a year 
D) principal repaid at maturity 
A) short-term 
B) issued by corporations 
C) pay interest twice a year 
D) principal repaid at maturity A

Question 2

For investors living in the issuing state, a positive aspect of municipal bonds is that

Accepted Answer

A) the interest they earn is taxed deferred until the bonds are sold. 
B) they are considered tax-deductible losses. 
C) they have zero tractability. 
D) the interest they earn is exempt from federal and state income taxes. 
A) the interest they earn is taxed deferred until the bonds are sold. 
B) they are considered tax-deductible losses. 
C) they have zero tractability. 
D) the interest they earn is exempt from federal and state income taxes. D

Question 3

How can money be distinguished from other financial assets?

Accepted Answer

A) Money is unique because it is acceptable as a means of payment. 
B) Money is illiquid. 
C) Money can never lose value in real terms. 
D) Money pays no interest and other financial assets do. 
A) Money is unique because it is acceptable as a means of payment. 
B) Money is illiquid. 
C) Money can never lose value in real terms. 
D) Money pays no interest and other financial assets do. A

Question 4

Which of the following are not money market instruments?

Accepted Answer

A) Repurchase agreements 
B) Mortgages 
C) Bankers' acceptances 
D) Federal funds 
A) Repurchase agreements 
B) Mortgages 
C) Bankers' acceptances 
D) Federal funds

Question 5

The capital market is extremely important because

Accepted Answer

A) a smoothly functioning capital market influences how fast the economy grows. 
B) it raises the funds needed by net borrowers to carry out their spending and investment plans. 
C) it provides the only stage upon which capital goods can easily be traded. 
D) Both a and b are correct. 
A) a smoothly functioning capital market influences how fast the economy grows. 
B) it raises the funds needed by net borrowers to carry out their spending and investment plans. 
C) it provides the only stage upon which capital goods can easily be traded. 
D) Both a and b are correct.

Question 6

Which are not considered capital market instruments?

Accepted Answer

A) Municipal bonds 
B) Corporate bonds 
C) Bankers' acceptances 
D) Stocks 
A) Municipal bonds 
B) Corporate bonds 
C) Bankers' acceptances 
D) Stocks

Question 7

U.S. government securities

Accepted Answer

A) are short-term debt instruments only. 
B) have maturities ranging from 2 to 30 months only. 
C) finance the deficits of the federal government. 
D) All of the above are correct. 
A) are short-term debt instruments only. 
B) have maturities ranging from 2 to 30 months only. 
C) finance the deficits of the federal government. 
D) All of the above are correct.

Question 8

The money market includes those markets that trade securities with original maturities of __________.

Accepted Answer

A) 1 month or less 
B) 6 months or less 
C) 8 months or less 
D) 12 months or less 
A) 1 month or less 
B) 6 months or less 
C) 8 months or less 
D) 12 months or less

Question 9

Term to maturity refers to which of the following?

Accepted Answer

A) the length of time from the issuance of a financial security to its maturity 
B) net present value from the issuance of a security 
C) the length of time for expected depreciation of the security 
D) the time remaining on a Fed Governor's term 
A) the length of time from the issuance of a financial security to its maturity 
B) net present value from the issuance of a security 
C) the length of time for expected depreciation of the security 
D) the time remaining on a Fed Governor's term

Question 10

Treasury bills (T-bills) are

Accepted Answer

A) the most liquid of all the money market instruments. 
B) traded very actively in the secondary market. 
C) the safest of all money market instruments. 
D) All of the above 
A) the most liquid of all the money market instruments. 
B) traded very actively in the secondary market. 
C) the safest of all money market instruments. 
D) All of the above

Question 11

What is the difference between a broker and a dealer?

Accepted Answer

A) There is no difference. 
B) The broker takes a position in a transaction while a dealer for a fee merely arranges trades between buyers and sellers. 
C) The broker sells stocks and bonds, whereas the dealer only deals in bonds. 
D) The dealer sometimes takes a position (becomes a principal) in a transaction, in addition to arranging trades; the broker only arranges trades for a fee. 
A) There is no difference. 
B) The broker takes a position in a transaction while a dealer for a fee merely arranges trades between buyers and sellers. 
C) The broker sells stocks and bonds, whereas the dealer only deals in bonds. 
D) The dealer sometimes takes a position (becomes a principal) in a transaction, in addition to arranging trades; the broker only arranges trades for a fee.

Question 12

Which is an example of a financial instrument that is traded?

Accepted Answer

A) stocks 
B) corporate bonds 
C) Treasury bills 
D) Treasury bonds 
E) All of the above are financial instruments that are traded. 
A) stocks 
B) corporate bonds 
C) Treasury bills 
D) Treasury bonds 
E) All of the above are financial instruments that are traded.

Question 13

Overnight loans among depository institutions of their deposits at the Fed are called

Accepted Answer

A) discount loans. 
B) federal funds. 
C) demand on request loans. 
D) repurchase agreements. 
A) discount loans. 
B) federal funds. 
C) demand on request loans. 
D) repurchase agreements.

Question 14

In high quality secondary markets, securities are traded at relatively ___ cost and _____ inconvenience.

Accepted Answer

A) low, little 
B) high, little 
C) low, great 
D) high, great 
A) low, little 
B) high, little 
C) low, great 
D) high, great

Question 15

A broker

Accepted Answer

A) arranges transactions between buyers and sellers for a fee. 
B) is a principal in a transaction. 
C) holds an inventory of securities to be sold. 
D) All of the above 
A) arranges transactions between buyers and sellers for a fee. 
B) is a principal in a transaction. 
C) holds an inventory of securities to be sold. 
D) All of the above

Question 16

__________ are used to finance specific projects where the proceeds of those projects are used to pay off holders of the security.

Accepted Answer

A) Negotiable certificates of deposit 
B) General obligation bonds 
C) Revenue bonds 
D) Repurchase agreements 
A) Negotiable certificates of deposit 
B) General obligation bonds 
C) Revenue bonds 
D) Repurchase agreements

Question 17

The price at which a market maker is willing to buy securities is called the

Accepted Answer

A) asked price. 
B) bid price. 
C) equilibrium price. 
D) neutral price. 
A) asked price. 
B) bid price. 
C) equilibrium price. 
D) neutral price.

Question 18

The __________ market is where the trading of financial securities takes place instantaneously.

Accepted Answer

A) money 
B) spot 
C) primary 
D) secondary 
A) money 
B) spot 
C) primary 
D) secondary

Question 19

The capital market is notably important because

Accepted Answer

A) if properly run, the capital market increases the growth of the economy. 
B) capital markets raise funds for net borrowers. 
C) capital markets help net borrowers achieve investment plans. 
D) All of the above are correct. 
A) if properly run, the capital market increases the growth of the economy. 
B) capital markets raise funds for net borrowers. 
C) capital markets help net borrowers achieve investment plans. 
D) All of the above are correct.

Question 20

Bankers' acceptances are used in financing which of these?

Accepted Answer

A) interstate trade 
B) domestic trade 
C) international trade 
D) All of the above are correct. 
A) interstate trade 
B) domestic trade 
C) international trade 
D) All of the above are correct.

Exam 4: Financial Markets, Instruments, and Market Makers

Which of the following is not a characteristic of corporate bonds?

For investors living in the issuing state, a positive aspect of municipal bonds is that

How can money be distinguished from other financial assets?

Which of the following are not money market instruments?

The capital market is extremely important because

Which are not considered capital market instruments?

U.S. government securities

The money market includes those markets that trade securities with original maturities of __________.

Term to maturity refers to which of the following?

Treasury bills (T-bills) are

What is the difference between a broker and a dealer?

Which is an example of a financial instrument that is traded?

Overnight loans among depository institutions of their deposits at the Fed are called

In high quality secondary markets, securities are traded at relatively ___ cost and _____ inconvenience.

A broker

__________ are used to finance specific projects where the proceeds of those projects are used to pay off holders of the security.

The price at which a market maker is willing to buy securities is called the

The __________ market is where the trading of financial securities takes place instantaneously.

The capital market is notably important because

Bankers' acceptances are used in financing which of these?

Introduction and Overview

Money and Its Role in the Economy

The Overseer: the Federal Reserve System

Interest Rates and Bond Prices

The Structure of Interest Rates

Market Efficiency and the Flow of Funds Among Sectors

An Introduction to Financial Intermediaries and Risk

Commercial Banking Structure, Regulation, and Performance

Financial Innovation

Financial Instability and Strains on the Financial System

Regulation of the Banking System and the Financial Services Industry

The Debt Markets

The Stock Market

Securities Firms, Mutual Funds, and Financial Conglomerates

How Exchange Rates Are Determined

Forward, Futures, and Options Agreements

The International Financial System

The Fed, Depository Institutions, and the Money Supply Process

The Demand for Real Money Balances and Market Equilibrium

Financial Aspects of the Household, Business, Government, and Rest-Of-The-World Sectors

Aggregate Demand and Aggregate Supply

The Challenges of Monetary Policy

The Process of Monetary Policy Formation

Policy Implementation

Monetary Policy in a Globalized Financial System

Filters

In high quality secondary markets, securities are traded at relatively _ cost and ___ inconvenience.