Question 1

Banks can lower the cost of information production by applying one information resource to many different services.This process is called

Accepted Answer

A) economies of scale. 
B) asset transformation. 
C) economies of scope. 
D) asymmetric information. 
A) economies of scale. 
B) asset transformation. 
C) economies of scope. 
D) asymmetric information.

Question 2

The primary assets of a finance company are

Accepted Answer

A) municipal bonds. 
B) corporate stocks and bonds. 
C) consumer and business loans. 
D) mortgages. 
A) municipal bonds. 
B) corporate stocks and bonds. 
C) consumer and business loans. 
D) mortgages.

Question 3

The primary assets of credit unions are

Accepted Answer

A) municipal bonds. 
B) business loans. 
C) consumer loans. 
D) mortgages. 
A) municipal bonds. 
B) business loans. 
C) consumer loans. 
D) mortgages.

Question 4

The primary liabilities of a commercial bank are

Accepted Answer

A) bonds. 
B) mortgages. 
C) deposits. 
D) commercial paper. 
A) bonds. 
B) mortgages. 
C) deposits. 
D) commercial paper.

Question 5

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 6

The most liquid securities traded in the capital market are

Accepted Answer

A) corporate bonds. 
B) municipal bonds. 
C) U.S.Treasury bonds. 
D) mortgage-backed securities. 
A) corporate bonds. 
B) municipal bonds. 
C) U.S.Treasury bonds. 
D) mortgage-backed securities.

Question 7

An example of the problem of ________ is when a corporation uses the funds raised from selling bonds to fund corporate expansion to pay for Caribbean cruises for all of its employees and their families.

Accepted Answer

A) adverse selection 
B) moral hazard 
C) risk sharing 
D) credit risk 
A) adverse selection 
B) moral hazard 
C) risk sharing 
D) credit risk

Question 8

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 9

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

Accepted Answer

A) Many common stocks are traded over-the-counter,although the largest corporations usually have their shares traded at organized stock exchanges such as the New York Stock Exchange. 
B) As a corporation gets a share of the broker's commission,a corporation acquires new funds whenever its securities are sold. 
C) Capital market securities are usually more widely traded than shorter-term securities and so tend to be more liquid. 
D) Prices of capital market securities are usually more stable than prices of money market securities,and so are often used to hold temporary surplus funds of corporations. 
A) Many common stocks are traded over-the-counter,although the largest corporations usually have their shares traded at organized stock exchanges such as the New York Stock Exchange. 
B) As a corporation gets a share of the broker's commission,a corporation acquires new funds whenever its securities are sold. 
C) Capital market securities are usually more widely traded than shorter-term securities and so tend to be more liquid. 
D) Prices of capital market securities are usually more stable than prices of money market securities,and so are often used to hold temporary surplus funds of corporations.

Question 10

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 11

The time and money spent in carrying out financial transactions are called

Accepted Answer

A) economies of scale. 
B) financial intermediation. 
C) liquidity services. 
D) transaction costs. 
A) economies of scale. 
B) financial intermediation. 
C) liquidity services. 
D) transaction costs.

Question 12

Studies of the major developed countries show that when businesses go looking for funds to finance their activities they usually obtain these funds from

Accepted Answer

A) government agencies. 
B) equities markets. 
C) financial intermediaries. 
D) bond markets. 
A) government agencies. 
B) equities markets. 
C) financial intermediaries. 
D) bond markets.

Question 13

You can borrow $5000 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 14

With ________ finance,borrowers obtain funds from lenders by selling them securities in the financial markets.

Accepted Answer

A) active 
B) determined 
C) indirect 
D) direct 
A) active 
B) determined 
C) indirect 
D) direct

Question 15

Distinguish between a foreign bond and a Eurobond.

Accepted Answer

A foreign bond is sold in a fo

Question 16

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 17

When secondary market buyers and sellers of securities meet in one central location to conduct trades the market is called a(n)

Accepted Answer

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

Question 18

If the maturity of a debt instrument is less than one year,the debt is called

Accepted Answer

A) short-term. 
B) intermediate-term. 
C) long-term. 
D) prima-term. 
A) short-term. 
B) intermediate-term. 
C) long-term. 
D) prima-term.

Question 19

Equity and debt instruments with maturities greater than one year are called ________ market instruments.

Accepted Answer

A) capital 
B) money 
C) federal 
D) benchmark 
A) capital 
B) money 
C) federal 
D) benchmark

Question 20

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.

Exam 2: An Overview of the Financial System

Banks can lower the cost of information production by applying one information resource to many different services.This process is called

The primary assets of a finance company are

The primary assets of credit unions are

The primary liabilities of a commercial bank are

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

The most liquid securities traded in the capital market are

An example of the problem of ________ is when a corporation uses the funds raised from selling bonds to fund corporate expansion to pay for Caribbean cruises for all of its employees and their families.

Equity of U.S.companies can be purchased by

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

Which of the following are NOT contractual savings institutions?

The time and money spent in carrying out financial transactions are called

Studies of the major developed countries show that when businesses go looking for funds to finance their activities they usually obtain these funds from

You can borrow $5000 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

With ________ finance,borrowers obtain funds from lenders by selling them securities in the financial markets.

Distinguish between a foreign bond and a Eurobond.

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

When secondary market buyers and sellers of securities meet in one central location to conduct trades the market is called a(n)

If the maturity of a debt instrument is less than one year,the debt is called

Equity and debt instruments with maturities greater than one year are called ________ market instruments.

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

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

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