Question 1

Which of the following are NOT traded in a capital market?

Accepted Answer

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

Question 2

Financial markets have the basic function of

Accepted Answer

A) getting people with funds to lend together with people who want to borrow funds. 
B) assuring that the swings in the business cycle are less pronounced. 
C) assuring that governments need never resort to printing money. 
D) providing a risk-free repository of spending power. 
A) getting people with funds to lend together with people who want to borrow funds. 
B) assuring that the swings in the business cycle are less pronounced. 
C) assuring that governments need never resort to printing money. 
D) providing a risk-free repository of spending power.

Question 3

Government regulations to reduce the possibility of financial panic include all of the following EXCEPT

Accepted Answer

A) transactions costs. 
B) restrictions on assets and activities. 
C) disclosure. 
D) deposit insurance. 
A) transactions costs. 
B) restrictions on assets and activities. 
C) disclosure. 
D) deposit insurance.

Question 4

Thrift institutions include

Accepted Answer

A) banks,mutual funds,and insurance companies. 
B) savings and loan associations,mutual savings banks,and credit unions. 
C) finance companies,mutual funds,and money market funds. 
D) pension funds,mutual funds,and banks. 
A) banks,mutual funds,and insurance companies. 
B) savings and loan associations,mutual savings banks,and credit unions. 
C) finance companies,mutual funds,and money market funds. 
D) pension funds,mutual funds,and banks.

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

Which of the following can be described as involving indirect finance?

Accepted Answer

A) You make a loan to your neighbor. 
B) A corporation buys a share of common stock issued by another corporation in the primary market. 
C) You buy a U.S.Treasury bill from the U.S.Treasury at TreasuryDirect.gov. 
D) You make a deposit at a bank. 
A) You make a loan to your neighbor. 
B) A corporation buys a share of common stock issued by another corporation in the primary market. 
C) You buy a U.S.Treasury bill from the U.S.Treasury at TreasuryDirect.gov. 
D) You make a deposit at a bank.

Question 7

Collateral is ________ the lender receives if the borrower does not pay back the loan.

Accepted Answer

A) a liability 
B) an asset 
C) a present 
D) an offering 
A) a liability 
B) an asset 
C) a present 
D) an offering

Question 8

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 9

Securities are ________ for the person who buys them,but are ________ for the individual or firm that issues them.

Accepted Answer

A) assets;liabilities 
B) liabilities;assets 
C) negotiable;nonnegotiable 
D) nonnegotiable;negotiable 
A) assets;liabilities 
B) liabilities;assets 
C) negotiable;nonnegotiable 
D) nonnegotiable;negotiable

Question 10

The concept of diversification is captured by the statement

Accepted Answer

A) don't look a gift horse in the mouth. 
B) don't put all your eggs in one basket. 
C) it never rains,but it pours. 
D) make hay while the sun shines. 
A) don't look a gift horse in the mouth. 
B) don't put all your eggs in one basket. 
C) it never rains,but it pours. 
D) make hay while the sun shines.

Question 11

Bonds issued by state and local governments are called ________ bonds.

Accepted Answer

A) corporate 
B) Treasury 
C) municipal 
D) commercial 
A) corporate 
B) Treasury 
C) municipal 
D) commercial

Question 12

Which of the following do NOT provide charters?

Accepted Answer

A) the Office of the Comptroller of the Currency 
B) the Federal Reserve System 
C) the National Credit Union Administration 
D) state banking and insurance commissions 
A) the Office of the Comptroller of the Currency 
B) the Federal Reserve System 
C) the National Credit Union Administration 
D) state banking and insurance commissions

Question 13

________ are financial intermediaries that acquire funds by selling shares to many individuals and using the proceeds to purchase diversified portfolios of stocks and bonds.

Accepted Answer

A) Mutual funds 
B) Investment banks 
C) Finance companies 
D) Credit unions 
A) Mutual funds 
B) Investment banks 
C) Finance companies 
D) Credit unions

Question 14

A mutual fund that is organized as a limited partnership with high minimum investments is called a

Accepted Answer

A) hedge fund. 
B) investment bank. 
C) mutual savings bank. 
D) money market mutual fund. 
A) hedge fund. 
B) investment bank. 
C) mutual savings bank. 
D) money market mutual fund.

Question 15

Although the dominance of ________ over ________ is clear in all countries,the relative importance of bond versus stock markets differs widely.

Accepted Answer

A) financial intermediaries;securities markets 
B) financial intermediaries;government agencies 
C) government agencies;financial intermediaries 
D) government agencies;securities markets 
A) financial intermediaries;securities markets 
B) financial intermediaries;government agencies 
C) government agencies;financial intermediaries 
D) government agencies;securities markets

Question 16

The problem created by asymmetric information before the transaction occurs is called ________,while the problem created after the transaction occurs is called ________.

Accepted Answer

A) adverse selection;moral hazard 
B) moral hazard;adverse selection 
C) costly state verification;free-riding 
D) free-riding;costly state verification 
A) adverse selection;moral hazard 
B) moral hazard;adverse selection 
C) costly state verification;free-riding 
D) free-riding;costly state verification

Question 17

When an investment bank ________ securities,it guarantees a price for a corporation's securities and then sells them to the public.

Accepted Answer

A) underwrites 
B) undertakes 
C) overwrites 
D) overtakes 
A) underwrites 
B) undertakes 
C) overwrites 
D) overtakes

Question 18

Which of the following instruments is NOT traded in a money market?

Accepted Answer

A) residential mortgages 
B) U.S.Treasury Bills 
C) negotiable bank certificates of deposit 
D) commercial paper 
A) residential mortgages 
B) U.S.Treasury Bills 
C) negotiable bank certificates of deposit 
D) commercial paper

Question 19

Which of the following can be described as involving direct finance?

Accepted Answer

A) A corporation takes out loans from a bank. 
B) People buy shares in a mutual fund. 
C) A corporation buys a short-term corporate security in a secondary market. 
D) People buy shares of common stock in the primary markets. 
A) A corporation takes out loans from a bank. 
B) People buy shares in a mutual fund. 
C) A corporation buys a short-term corporate security in a secondary market. 
D) People buy shares of common stock in the primary markets.

Question 20

In the United States,loans from ________ are far ________ important for corporate finance than are securities markets.

Accepted Answer

A) government agencies;more 
B) government agencies;less 
C) financial intermediaries;more 
D) financial intermediaries;less 
A) government agencies;more 
B) government agencies;less 
C) financial intermediaries;more 
D) financial intermediaries;less

Exam 2: An Overview of the Financial System

Which of the following are NOT traded in a capital market?

Financial markets have the basic function of

Government regulations to reduce the possibility of financial panic include all of the following EXCEPT

Thrift institutions include

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

Which of the following can be described as involving indirect finance?

Collateral is ________ the lender receives if the borrower does not pay back the loan.

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

Securities are ________ for the person who buys them,but are ________ for the individual or firm that issues them.

The concept of diversification is captured by the statement

Bonds issued by state and local governments are called ________ bonds.

Which of the following do NOT provide charters?

________ are financial intermediaries that acquire funds by selling shares to many individuals and using the proceeds to purchase diversified portfolios of stocks and bonds.

A mutual fund that is organized as a limited partnership with high minimum investments is called a

Although the dominance of ________ over ________ is clear in all countries,the relative importance of bond versus stock markets differs widely.

The problem created by asymmetric information before the transaction occurs is called ________,while the problem created after the transaction occurs is called ________.

When an investment bank ________ securities,it guarantees a price for a corporation's securities and then sells them to the public.

Which of the following instruments is NOT traded in a money market?

Which of the following can be described as involving direct finance?

In the United States,loans from ________ are far ________ important for corporate finance than are securities markets.

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

Securities are for the person who buys them,but are for the individual or firm that issues them.

Although the dominance of over is clear in all countries,the relative importance of bond versus stock markets differs widely.

The problem created by asymmetric information before the transaction occurs is called ,while the problem created after the transaction occurs is called .

In the United States,loans from are far important for corporate finance than are securities markets.