Question 1

With direct finance,funds are channeled through the financial market from the ________ directly to the ________.

Accepted Answer

A) savers;spenders 
B) spenders;investors 
C) borrowers;savers 
D) investors;savers 
A) savers;spenders 
B) spenders;investors 
C) borrowers;savers 
D) investors;savers

Question 2

Which of the following statements about the characteristics of debt and equities is TRUE?

Accepted Answer

A) They can both be long-term financial instruments. 
B) Bond holders are residual claimants. 
C) The income from bonds is typically more variable than that from equities. 
D) Bonds pay dividends. 
A) They can both be long-term financial instruments. 
B) Bond holders are residual claimants. 
C) The income from bonds is typically more variable than that from equities. 
D) Bonds pay dividends.

Question 3

Which of the following are NOT contractual savings institutions?

Accepted Answer

A) life insurance companies 
B) credit unions 
C) pension funds 
D) state and local government retirement funds 
A) life insurance companies 
B) credit unions 
C) pension funds 
D) state and local government retirement funds

Question 4

Which of the following statements about financial markets and securities is TRUE?

Accepted Answer

A) A bond is a long-term security that promises to make periodic payments called dividends to the firm's residual claimants. 
B) A debt instrument is intermediate term if its maturity is less than one year. 
C) A debt instrument is intermediate term if its maturity is ten years or longer. 
D) The maturity of a debt instrument is the number of years (term)to that instrument's expiration date. 
A) A bond is a long-term security that promises to make periodic payments called dividends to the firm's residual claimants. 
B) A debt instrument is intermediate term if its maturity is less than one year. 
C) A debt instrument is intermediate term if its maturity is ten years or longer. 
D) The maturity of a debt instrument is the number of years (term)to that instrument's expiration date.

Question 5

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

Accepted Answer

A) the short terms to maturity for the securities. 
B) the heavy regulations in the industry. 
C) the price ceiling imposed by government regulators. 
D) the lack of competition in the market. 
A) the short terms to maturity for the securities. 
B) the heavy regulations in the industry. 
C) the price ceiling imposed by government regulators. 
D) the lack of competition in the market.

Question 6

You can borrow $5,000 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

Accepted Answer

A) 25%. 
B) 12.5%. 
C) 10%. 
D) 5%. 
A) 25%. 
B) 12.5%. 
C) 10%. 
D) 5%.

Question 7

Forty or so dealers establish a "market" in these securities by standing ready to buy and sell them.

Accepted Answer

A) secondary stocks 
B) surplus stocks 
C) U)S. government bonds 
D) common stocks 
A) secondary stocks 
B) surplus stocks 
C) U)S. government bonds 
D) common stocks

Question 8

An important financial institution that assists in the initial sale of securities in the primary market is the

Accepted Answer

A) investment bank. 
B) commercial bank. 
C) stock exchange. 
D) brokerage house. 
A) investment bank. 
B) commercial bank. 
C) stock exchange. 
D) brokerage house.

Question 9

The principal lender-savers are

Accepted Answer

A) governments. 
B) businesses. 
C) households. 
D) foreigners. 
A) governments. 
B) businesses. 
C) households. 
D) foreigners.

Question 10

An investment intermediary that lends funds to consumers is

Accepted Answer

A) a finance company. 
B) an investment bank. 
C) a finance fund. 
D) a consumer company. 
A) a finance company. 
B) an investment bank. 
C) a finance fund. 
D) a consumer company.

Question 11

Typically,borrowers have superior information relative to lenders about the potential returns and risks associated with an investment project. The difference in information is called

Accepted Answer

A) moral selection. 
B) risk sharing. 
C) asymmetric information. 
D) adverse hazard. 
A) moral selection. 
B) risk sharing. 
C) asymmetric information. 
D) adverse hazard.

Question 12

Which of the following instruments are traded in a capital market?

Accepted Answer

A) U)S. Government agency securities 
B) negotiable bank CDs 
C) repurchase agreements 
D) U)S. Treasury bills 
A) U)S. Government agency securities 
B) negotiable bank CDs 
C) repurchase agreements 
D) U)S. Treasury bills

Question 13

Equity of U.S. companies can be purchased by

Accepted Answer

A) U)S. citizens only. 
B) foreign citizens only. 
C) U)S. citizens and foreign citizens. 
D) U)S. mutual funds only. 
A) U)S. citizens only. 
B) foreign citizens only. 
C) U)S. citizens and foreign citizens. 
D) U)S. mutual funds only.

Question 14

The primary purpose of deposit insurance is to

Accepted Answer

A) improve the flow of information to investors. 
B) prevent banking panics. 
C) protect bank shareholders against losses. 
D) protect bank employees from unemployment. 
A) improve the flow of information to investors. 
B) prevent banking panics. 
C) protect bank shareholders against losses. 
D) protect bank employees from unemployment.

Question 15

Economies of scale enable financial institutions to

Accepted Answer

A) reduce transactions costs. 
B) avoid the asymmetric information problem. 
C) avoid adverse selection problems. 
D) reduce moral hazard. 
A) reduce transactions costs. 
B) avoid the asymmetric information problem. 
C) avoid adverse selection problems. 
D) reduce moral hazard.

Question 16

A financial market in which previously issued securities can be resold is called a ________ market.

Accepted Answer

A) primary 
B) secondary 
C) tertiary 
D) used securities 
A) primary 
B) secondary 
C) tertiary 
D) used securities

Question 17

If Microsoft sells a bond in London and it is denominated in dollars,the bond is a

Accepted Answer

A) Eurobond. 
B) foreign bond. 
C) British bond. 
D) currency bond. 
A) Eurobond. 
B) foreign bond. 
C) British bond. 
D) currency bond.

Question 18

Which of the following instruments are traded in a money market?

Accepted Answer

A) state and local government bonds 
B) U)S. Treasury bills 
C) corporate bonds 
D) U)S. government agency securities 
A) state and local government bonds 
B) U)S. Treasury bills 
C) corporate bonds 
D) U)S. government agency securities

Question 19

________ bonds allow the holder to change them into a specific number of shares of stock at any time up to the maturity date.

Accepted Answer

A) Convertible 
B) Treasury 
C) Municipal 
D) Commercial 
A) Convertible 
B) Treasury 
C) Municipal 
D) Commercial

Question 20

The limited memberships and high dollar minimums for hedge funds means that these funds are

Accepted Answer

A) subject to weaker regulation than other mutual funds. 
B) more stringently regulated for fear of collapse. 
C) limited in the types of assets they can purchase. 
D) under the control of the U.S. Treasury. 
A) subject to weaker regulation than other mutual funds. 
B) more stringently regulated for fear of collapse. 
C) limited in the types of assets they can purchase. 
D) under the control of the U.S. Treasury.

Exam 2: An Overview of the Financial System

With direct finance,funds are channeled through the financial market from the ________ directly to the ________.

Which of the following statements about the characteristics of debt and equities is TRUE?

Which of the following are NOT contractual savings institutions?

Which of the following statements about financial markets and securities is TRUE?

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

You can borrow $5,000 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

Forty or so dealers establish a "market" in these securities by standing ready to buy and sell them.

An important financial institution that assists in the initial sale of securities in the primary market is the

The principal lender-savers are

An investment intermediary that lends funds to consumers is

Typically,borrowers have superior information relative to lenders about the potential returns and risks associated with an investment project. The difference in information is called

Which of the following instruments are traded in a capital market?

Equity of U.S. companies can be purchased by

The primary purpose of deposit insurance is to

Economies of scale enable financial institutions to

A financial market in which previously issued securities can be resold is called a ________ market.

If Microsoft sells a bond in London and it is denominated in dollars,the bond is a

Which of the following instruments are traded in a money market?

________ bonds allow the holder to change them into a specific number of shares of stock at any time up to the maturity date.

The limited memberships and high dollar minimums for hedge funds means that these funds are

Why Study Money, banking, and Financial Markets

What Is Money

The Meaning of Interest Rates

The Behavior of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Financial Crises

Central Banks and the Federal Reserve System

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory, inflation and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

Financial Crises in Emerging Market Economies

The ISLM Model

Filters

With direct finance,funds are channeled through the financial market from the directly to the .