Question 1

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 2

If bad credit risks are the ones who most actively seek loans and,therefore,receive them from financial intermediaries,then financial intermediaries face the problem of

Accepted Answer

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

Question 3

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 4

Equity instruments are traded in the ________ market.

Accepted Answer

A) money 
B) bond 
C) capital 
D) commodities 
A) money 
B) bond 
C) capital 
D) commodities

Question 5

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 6

Federal funds are

Accepted Answer

A) funds raised by the federal government in the bond market. 
B) loans made by the Federal Reserve System to banks. 
C) loans made by banks to the Federal Reserve System. 
D) loans made by banks to each other. 
A) funds raised by the federal government in the bond market. 
B) loans made by the Federal Reserve System to banks. 
C) loans made by banks to the Federal Reserve System. 
D) loans made by banks to each other.

Question 7

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

Accepted Answer

A) You make a loan to your neighbor. 
B) You buy shares in a mutual fund. 
C) You buy a U.S.Treasury bill from the U.S.Treasury at Treasury Direct.gov. 
D) You purchase shares in an initial public offering by a corporation in the primary market. 
A) You make a loan to your neighbor. 
B) You buy shares in a mutual fund. 
C) You buy a U.S.Treasury bill from the U.S.Treasury at Treasury Direct.gov. 
D) You purchase shares in an initial public offering by a corporation in the primary market.

Question 8

Every financial market has the following characteristic.

Accepted Answer

A) It determines the level of interest rates. 
B) It allows common stock to be traded. 
C) It allows loans to be made. 
D) It channels funds from lenders-savers to borrowers-spenders. 
A) It determines the level of interest rates. 
B) It allows common stock to be traded. 
C) It allows loans to be made. 
D) It channels funds from lenders-savers to borrowers-spenders.

Question 9

Corporations receive funds when their stock is sold in the primary market.Why do corporations pay attention to what is happening to their stock in the secondary market?

Accepted Answer

The existence of the secondary market ma

Question 10

The agency that restricts insider trading is the

Accepted Answer

A) Federal Reserve System. 
B) Securities and Exchange Commission. 
C) Office of the Comptroller of the Currency. 
D) Federal Deposit Insurance Corporation. 
A) Federal Reserve System. 
B) Securities and Exchange Commission. 
C) Office of the Comptroller of the Currency. 
D) Federal Deposit Insurance Corporation.

Question 11

The process where financial intermediaries create and sell low-risk assets and use the proceeds to purchase riskier assets is known as

Accepted Answer

A) risk sharing. 
B) risk aversion. 
C) risk neutrality. 
D) risk selling. 
A) risk sharing. 
B) risk aversion. 
C) risk neutrality. 
D) risk selling.

Question 12

Which of the following is NOT a contractual savings institution?

Accepted Answer

A) a life insurance company 
B) a pension fund 
C) a savings and loan association 
D) a fire and casualty insurance company 
A) a life insurance company 
B) a pension fund 
C) a savings and loan association 
D) a fire and casualty insurance company

Question 13

Which of the following is NOT a secondary market?

Accepted Answer

A) foreign exchange market 
B) futures market 
C) options market 
D) IPO market 
A) foreign exchange market 
B) futures market 
C) options market 
D) IPO market

Question 14

________ institutions are financial intermediaries that acquire funds at periodic intervals on a contractual basis.

Accepted Answer

A) Investment 
B) Contractual savings 
C) Thrift 
D) Depository 
A) Investment 
B) Contractual savings 
C) Thrift 
D) Depository

Question 15

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 16

A short-term debt instrument issued by well-known corporations is called

Accepted Answer

A) commercial paper. 
B) corporate bonds. 
C) municipal bonds. 
D) commercial mortgages. 
A) commercial paper. 
B) corporate bonds. 
C) municipal bonds. 
D) commercial mortgages.

Question 17

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.

Exam 2: An Overview of the Financial System

An investment intermediary that lends funds to consumers is

If bad credit risks are the ones who most actively seek loans and,therefore,receive them from financial intermediaries,then financial intermediaries face the problem of

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

Equity instruments are traded in the ________ market.

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

Federal funds are

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

Every financial market has the following characteristic.

Corporations receive funds when their stock is sold in the primary market.Why do corporations pay attention to what is happening to their stock in the secondary market?

The agency that restricts insider trading is the

The process where financial intermediaries create and sell low-risk assets and use the proceeds to purchase riskier assets is known as

Which of the following is NOT a contractual savings institution?

Which of the following is NOT a secondary market?

________ institutions are financial intermediaries that acquire funds at periodic intervals on a contractual basis.

The primary purpose of deposit insurance is to

A short-term debt instrument issued by well-known corporations is called

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

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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