Question 1

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

Accepted Answer

A) 1 month or less. 
B) 6 months or less. 
C) 12 months or less. 
D) more than 1 year 
A) 1 month or less. 
B) 6 months or less. 
C) 12 months or less. 
D) more than 1 year

Question 2

A primary market is which of these?

Accepted Answer

A) Where stocks are sold and resold. 
B) Where bonds are sold and resold. 
C) Where intermediaries are the buyers and sellers. 
D) Where a security is initially sold for the first time. 
A) Where stocks are sold and resold. 
B) Where bonds are sold and resold. 
C) Where intermediaries are the buyers and sellers. 
D) Where a security is initially sold for the first time.

Question 3

General obligation bonds are backed by

Accepted Answer

A) the full faith and credit of the purchaser. 
B) The full faith and credit of issuing state; taxes that can be raised to pay the interest and principal. 
C) households in high tax brackets. 
D) All of the above 
A) the full faith and credit of the purchaser. 
B) The full faith and credit of issuing state; taxes that can be raised to pay the interest and principal. 
C) households in high tax brackets. 
D) All of the above

Question 4

A person who arranges trades between buyers and sellers and who stands ready to be a principal in the transaction is a

Accepted Answer

A) dealer. 
B) broker. 
C) market maker. 
D) Both a and c are correct. 
A) dealer. 
B) broker. 
C) market maker. 
D) Both a and c are correct.

Question 5

The bid price refers to

Accepted Answer

A) the future selling price. 
B) the previous selling price. 
C) the price at which a market maker is willing to purchase a security. 
D) the buying at one price and selling at a lower price. 
A) the future selling price. 
B) the previous selling price. 
C) the price at which a market maker is willing to purchase a security. 
D) the buying at one price and selling at a lower price.

Question 6

__________ markets are markets where the terms of a transaction, including price, are agreed upon today for a transaction that will take place on a specified date in the future.

Accepted Answer

A) Money 
B) Fed funds 
C) Capital 
D) Financial futures 
A) Money 
B) Fed funds 
C) Capital 
D) Financial futures

Question 7

Which are not considered money market instruments?

Accepted Answer

A) Mortgages 
B) Commercial paper 
C) Fed funds 
D) U.S. T-bills 
A) Mortgages 
B) Commercial paper 
C) Fed funds 
D) U.S. T-bills

Question 8

The spot market is where

Accepted Answer

A) future trading of financial instruments takes place. 
B) future trading of options takes place. 
C) instantaneous trading of financial instruments takes place. 
D) All of the above are true. 
A) future trading of financial instruments takes place. 
B) future trading of options takes place. 
C) instantaneous trading of financial instruments takes place. 
D) All of the above are true.

Question 9

__________ are municipal bonds paid out of the general revenues of the issuer and backed by the full faith and credit of the issuer.

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 10

The Standard and Poor's Stock Index is based upon

Accepted Answer

A) 30 stocks. 
B) 50 stocks. 
C) 300 stocks. 
D) 500 stocks. 
A) 30 stocks. 
B) 50 stocks. 
C) 300 stocks. 
D) 500 stocks.

Question 11

Trading of financial securities for delivery on some date in the future at a price determined today is done in the

Accepted Answer

A) spot markets. 
B) financial futures market. 
C) money market. 
D) fed funds market. 
A) spot markets. 
B) financial futures market. 
C) money market. 
D) fed funds market.

Question 12

Revenue bonds are

Accepted Answer

A) used to finance specified projects. 
B) issued at yields that are usually below taxable bonds of similar maturity. 
C) paid off with the proceeds of specific projects. 
D) All of the above 
A) used to finance specified projects. 
B) issued at yields that are usually below taxable bonds of similar maturity. 
C) paid off with the proceeds of specific projects. 
D) All of the above

Question 13

Commercial paper was developed to

Accepted Answer

A) ease the wear and tear of paper currency. 
B) interest consumers in the stock market. 
C) finance corporations' short-term borrowing needs. 
D) finance the government's short-term borrowing needs. 
A) ease the wear and tear of paper currency. 
B) interest consumers in the stock market. 
C) finance corporations' short-term borrowing needs. 
D) finance the government's short-term borrowing needs.

Question 14

The separation of the money market from the capital market is based on the ______ of the instruments traded there.

Accepted Answer

A) SEC registration number 
B) length of term 
C) rate of return 
D) All of the above are correct. 
A) SEC registration number 
B) length of term 
C) rate of return 
D) All of the above are correct.

Question 15

Treasury bills (T-bills) are

Accepted Answer

A) long-term debt instruments with maturities of 6 to 24 months. 
B) long-term debt instruments with maturities of 3 to 12 months. 
C) short-term debt instruments with maturities of 4 weeks to 12 months. 
D) short-term debt instruments with maturities of 6 to 24 months. 
A) long-term debt instruments with maturities of 6 to 24 months. 
B) long-term debt instruments with maturities of 3 to 12 months. 
C) short-term debt instruments with maturities of 4 weeks to 12 months. 
D) short-term debt instruments with maturities of 6 to 24 months.

Question 16

What are the basic functions of financial futures and forward markets?

Accepted Answer

A) reduction of risk associated with price changes that occurred in the past 
B) speculation in hopes of profiting from past price changes and mistakes that were made 
C) elimination of future price changes 
D) reduction of risk associated with future price changes and speculation in hopes of profiting from future price changes 
A) reduction of risk associated with price changes that occurred in the past 
B) speculation in hopes of profiting from past price changes and mistakes that were made 
C) elimination of future price changes 
D) reduction of risk associated with future price changes and speculation in hopes of profiting from future price changes

Question 17

Which of the following are not capital market instruments?

Accepted Answer

A) Eurodollars 
B) Stocks 
C) Corporate bonds 
D) Mortgages 
A) Eurodollars 
B) Stocks 
C) Corporate bonds 
D) Mortgages

Question 18

The __________ is the market for financial assets with an original maturity of one year or less.

Accepted Answer

A) money market 
B) commercial paper market 
C) capital market 
D) Eurodollar market 
A) money market 
B) commercial paper market 
C) capital market 
D) Eurodollar market

Question 19

Which of the following classification pairs best describes financial markets based on their term to maturity?

Accepted Answer

A) money vs. capital 
B) primary vs. secondary 
C) spot vs. future 
D) Both a and b are correct. 
A) money vs. capital 
B) primary vs. secondary 
C) spot vs. future 
D) Both a and b are correct.

Question 20

__________ markets are markets where the terms of a transaction, including price, are agreed upon today for a transaction that will take place on a specified date in the future.

Accepted Answer

A) Money 
B) Fed funds 
C) Capital 
D) Financial futures 
A) Money 
B) Fed funds 
C) Capital 
D) Financial futures

Exam 4: Financial Markets, Instruments, and Market Makers

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

A primary market is which of these?

General obligation bonds are backed by

A person who arranges trades between buyers and sellers and who stands ready to be a principal in the transaction is a

The bid price refers to

__________ markets are markets where the terms of a transaction, including price, are agreed upon today for a transaction that will take place on a specified date in the future.

Which are not considered money market instruments?

The spot market is where

__________ are municipal bonds paid out of the general revenues of the issuer and backed by the full faith and credit of the issuer.

The Standard and Poor's Stock Index is based upon

Trading of financial securities for delivery on some date in the future at a price determined today is done in the

Revenue bonds are

Commercial paper was developed to

The separation of the money market from the capital market is based on the ______ of the instruments traded there.

Treasury bills (T-bills) are

What are the basic functions of financial futures and forward markets?

Which of the following are not capital market instruments?

The __________ is the market for financial assets with an original maturity of one year or less.

Which of the following classification pairs best describes financial markets based on their term to maturity?

__________ markets are markets where the terms of a transaction, including price, are agreed upon today for a transaction that will take place on a specified date in the future.

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