Question 1

Bonds that are sold in a foreign country and are denominated in the country's currency in which they are sold are known as

Accepted Answer

A)  foreign bonds. 
B)  Eurobonds. 
C)  equity bonds. 
D)  country bonds. 
A)  foreign bonds. 
B)  Eurobonds. 
C)  equity bonds. 
D)  country bonds.

Question 2

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 3

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 4

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 5

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 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

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 8

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 9

________ work in the secondary markets matching buyers with sellers of securities.

Accepted Answer

A)  Dealers 
B)  Underwriters 
C)  Brokers 
D)  Claimants 
A)  Dealers 
B)  Underwriters 
C)  Brokers 
D)  Claimants

Question 10

Which of the following is a depository institution?

Accepted Answer

A)  A life insurance company 
B)  A credit union 
C)  A pension fund 
D)  A mutual fund 
A)  A life insurance company 
B)  A credit union 
C)  A pension fund 
D)  A mutual fund

Question 11

Assume that you borrow $2000 at 10% annual interest to finance a new business project.For this loan to be profitable,the minimum amount this project must generate in annual earnings is

Accepted Answer

A)  $400. 
B)  $201. 
C)  $200. 
D)  $199. 
A)  $400. 
B)  $201. 
C)  $200. 
D)  $199.

Question 12

Long-term debt has a maturity that is

Accepted Answer

A)  between one and ten years. 
B)  less than a year. 
C)  between five and ten years. 
D)  ten years or longer. 
A)  between one and ten years. 
B)  less than a year. 
C)  between five and ten years. 
D)  ten years or longer.

Question 13

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 14

The British Banker's Association average of interbank rates for dollar deposits in the London market is called the

Accepted Answer

A)  Libor rate. 
B)  federal funds rate. 
C)  prime rate. 
D)  Treasury Bill rate. 
A)  Libor rate. 
B)  federal funds rate. 
C)  prime rate. 
D)  Treasury Bill rate.

Question 15

________ 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 16

Which of the following is an example of an intermediate-term debt?

Accepted Answer

A)  A thirty-year mortgage. 
B)  A sixty-month car loan. 
C)  A six month loan from a finance company. 
D)  A Treasury bond. 
A)  A thirty-year mortgage. 
B)  A sixty-month car loan. 
C)  A six month loan from a finance company. 
D)  A Treasury bond.

Question 17

Secondary markets make financial instruments more

Accepted Answer

A)  solid. 
B)  vapid. 
C)  liquid. 
D)  risky. 
A)  solid. 
B)  vapid. 
C)  liquid. 
D)  risky.

Question 18

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 19

Savings and loan associations are regulated by the

Accepted Answer

A)  Federal Reserve System. 
B)  Securities and Exchange Commission. 
C)  Office of the Comptroller of the Currency. 
D)  Office of Thrift Supervision. 
A)  Federal Reserve System. 
B)  Securities and Exchange Commission. 
C)  Office of the Comptroller of the Currency. 
D)  Office of Thrift Supervision.

Question 20

The agency that was created to protect depositors after the banking failures of 1930-1933 is the

Accepted Answer

A)  Federal Reserve System. 
B)  Federal Deposit Insurance Corporation. 
C)  Treasury Department. 
D)  Office of the Comptroller of the Currency. 
A)  Federal Reserve System. 
B)  Federal Deposit Insurance Corporation. 
C)  Treasury Department. 
D)  Office of the Comptroller of the Currency.

Exam 2: An Overview of the Financial System

Bonds that are sold in a foreign country and are denominated in the country's currency in which they are sold are known as

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

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

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

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

Federal funds are

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

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?

________ work in the secondary markets matching buyers with sellers of securities.

Which of the following is a depository institution?

Assume that you borrow $2000 at 10% annual interest to finance a new business project.For this loan to be profitable,the minimum amount this project must generate in annual earnings is

Long-term debt has a maturity that is

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

The British Banker's Association average of interbank rates for dollar deposits in the London market is called the

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

Which of the following is an example of an intermediate-term debt?

Secondary markets make financial instruments more

The primary purpose of deposit insurance is to

Savings and loan associations are regulated by the

The agency that was created to protect depositors after the banking failures of 1930-1933 is the

Why Study Money, banking, and Financial Markets

What Is Money

Understanding 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

Financial Crises

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

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

The ISLM Model

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