Question 1

In order to reduce risk and increase the safety of financial institutions,commercial banks and other depository institutions are prohibited from

Accepted Answer

A) owning municipal bonds. 
B) making real estate loans. 
C) making personal loans. 
D) owning common stock. 
A) owning municipal bonds. 
B) making real estate loans. 
C) making personal loans. 
D) owning common stock. D

Question 2

U.S.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.

Accepted Answer

A) premium 
B) collateral 
C) default 
D) discount 
A) premium 
B) collateral 
C) default 
D) discount D

Question 3

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

Accepted Answer

A) corporate bonds 
B) U.S.Treasury bills 
C) negotiable bank CDs 
D) repurchase agreements 
A) corporate bonds 
B) U.S.Treasury bills 
C) negotiable bank CDs 
D) repurchase agreements A

Question 4

Increasing the amount of information available to investors helps to reduce the problems of ________ and ________ in the financial markets.

Accepted Answer

A) adverse selection;moral hazard 
B) adverse selection;risk sharing 
C) moral hazard;transactions costs 
D) adverse selection;economies of scale 
A) adverse selection;moral hazard 
B) adverse selection;risk sharing 
C) moral hazard;transactions costs 
D) adverse selection;economies of scale

Question 5

Which of the following is a contractual savings institution?

Accepted Answer

A) a life insurance company 
B) a credit union 
C) a savings and loan association 
D) a mutual fund 
A) a life insurance company 
B) a credit union 
C) a savings and loan association 
D) a mutual fund

Question 6

A goal of the Securities and Exchange Commission is to reduce problems arising from

Accepted Answer

A) competition. 
B) banking panics. 
C) risk. 
D) asymmetric information. 
A) competition. 
B) banking panics. 
C) risk. 
D) asymmetric information.

Question 7

An important source of short-term funds for commercial banks are ________ which can be resold on the secondary market.

Accepted Answer

A) negotiable CDs 
B) commercial paper 
C) mortgage-backed securities 
D) municipal bonds 
A) negotiable CDs 
B) commercial paper 
C) mortgage-backed securities 
D) municipal bonds

Question 8

The countries that have made the least use of securities markets are ________ and ________;in these two countries finance from financial intermediaries has been almost ten times greater than that from securities markets.

Accepted Answer

A) Germany;Japan 
B) Germany;Great Britain 
C) Great Britain;Canada 
D) Canada;Japan 
A) Germany;Japan 
B) Germany;Great Britain 
C) Great Britain;Canada 
D) Canada;Japan

Question 9

Because there is an imbalance of information in a lending situation,we must deal with the problems of adverse selection and moral hazard.Define these terms and explain how financial intermediaries can reduce these problems.

Accepted Answer

Adverse selection is the asymmetric info

Question 10

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 11

The purpose of the disclosure requirements of the Securities and Exchange Commission is to

Accepted Answer

A) increase the information available to investors. 
B) prevent bank panics. 
C) improve monetary control. 
D) protect investors against financial losses. 
A) increase the information available to investors. 
B) prevent bank panics. 
C) improve monetary control. 
D) protect investors against financial losses.

Question 12

Financial intermediaries provide customers with liquidity services.Liquidity services

Accepted Answer

A) make it easier for customers to conduct transactions. 
B) allow customers to have a cup of coffee while waiting in the lobby. 
C) are a result of the asymmetric information problem. 
D) are another term for asset transformation. 
A) make it easier for customers to conduct transactions. 
B) allow customers to have a cup of coffee while waiting in the lobby. 
C) are a result of the asymmetric information problem. 
D) are another term for asset transformation.

Question 13

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 14

U.S.Treasury bills are considered the safest of all money market instruments because there is a low probability of

Accepted Answer

A) defeat. 
B) default. 
C) desertion. 
D) demarcation. 
A) defeat. 
B) default. 
C) desertion. 
D) demarcation.

Question 15

Which of the following is a long-term financial instrument?

Accepted Answer

A) a negotiable certificate of deposit 
B) a repurchase agreement 
C) a U.S.Treasury bond 
D) a U.S.Treasury bill 
A) a negotiable certificate of deposit 
B) a repurchase agreement 
C) a U.S.Treasury bond 
D) a U.S.Treasury bill

Question 16

The principal lender-savers are

Accepted Answer

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

Question 17

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

Accepted Answer

A) commercial paper. 
B) a certificate of deposit. 
C) a municipal bond. 
D) federal funds. 
A) commercial paper. 
B) a certificate of deposit. 
C) a municipal bond. 
D) federal funds.

Question 18

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.

Question 19

In a(n)________ market,dealers in different locations buy and sell securities to anyone who comes to them and is willing to accept their prices.

Accepted Answer

A) exchange 
B) over-the-counter 
C) common 
D) barter 
A) exchange 
B) over-the-counter 
C) common 
D) barter

Question 20

Hedge funds require large minimum investments ranging from ________ to ________ or more.

Accepted Answer

A) $100,000;$1 million 
B) $1000;$10,000 
C) $100;$1000 
D) $$10,000;$25,000 
A) $100,000;$1 million 
B) $1000;$10,000 
C) $100;$1000 
D) $$10,000;$25,000

Exam 2: An Overview of the Financial System

In order to reduce risk and increase the safety of financial institutions,commercial banks and other depository institutions are prohibited from

U.S.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.

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

Increasing the amount of information available to investors helps to reduce the problems of ________ and ________ in the financial markets.

Which of the following is a contractual savings institution?

A goal of the Securities and Exchange Commission is to reduce problems arising from

An important source of short-term funds for commercial banks are ________ which can be resold on the secondary market.

The countries that have made the least use of securities markets are ________ and ________;in these two countries finance from financial intermediaries has been almost ten times greater than that from securities markets.

Because there is an imbalance of information in a lending situation,we must deal with the problems of adverse selection and moral hazard.Define these terms and explain how financial intermediaries can reduce these problems.

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

The purpose of the disclosure requirements of the Securities and Exchange Commission is to

Financial intermediaries provide customers with liquidity services.Liquidity services

Economies of scale enable financial institutions to

U.S.Treasury bills are considered the safest of all money market instruments because there is a low probability of

Which of the following is a long-term financial instrument?

The principal lender-savers are

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

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

In a(n)________ market,dealers in different locations buy and sell securities to anyone who comes to them and is willing to accept their prices.

Hedge funds require large minimum investments ranging from ________ to ________ or more.

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

Web 1:financial Crises in Emerging Market Economies

Web 2:the Islm Model

Web 3:nonbank Finance

Web 4:financial Derivatives

Web 5:conflicts of Interest in the Financial Services Industry

Filters

Increasing the amount of information available to investors helps to reduce the problems of and in the financial markets.

The countries that have made the least use of securities markets are and ;in these two countries finance from financial intermediaries has been almost ten times greater than that from securities markets.

Hedge funds require large minimum investments ranging from to or more.