Question 1

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 2

The primary liabilities of depository institutions are ________.

Accepted Answer

A)  premiums from policies 
B)  shares 
C)  deposits 
D)  bonds 
A)  premiums from policies 
B)  shares 
C)  deposits 
D)  bonds

Question 3

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 4

Which of the following can be described as direct finance?

Accepted Answer

A)  You take out a mortgage from your local bank. 
B)  You borrow $2500 from a friend. 
C)  You buy shares of common stock in the secondary market. 
D)  You buy shares in a mutual fund. 
A)  You take out a mortgage from your local bank. 
B)  You borrow $2500 from a friend. 
C)  You buy shares of common stock in the secondary market. 
D)  You buy shares in a mutual fund.

Question 5

The Canada Deposit Insurance Corporation regulates ________.

Accepted Answer

A)  brokerage firms 
B)  banks 
C)  credit unions 
D)  mutual funds 
A)  brokerage firms 
B)  banks 
C)  credit unions 
D)  mutual funds

Question 6

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 7

A breakdown of financial markets can result in ________.

Accepted Answer

A)  financial stability 
B)  rapid economic growth 
C)  political instability 
D)  stable prices 
A)  financial stability 
B)  rapid economic growth 
C)  political instability 
D)  stable prices

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

Depository institutions include ________.

Accepted Answer

A)  banks, mutual funds, and insurance companies 
B)  banks, trust and mortgage loan companies, 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)  banks, trust and mortgage loan companies, and credit unions 
C)  finance companies, mutual funds, and money market funds 
D)  pension funds, mutual funds, and banks

Question 11

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 12

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 13

Which of the following are not contractual savings institutions?

Accepted Answer

A)  Life insurance companies 
B)  Credit unions 
C)  Pension funds 
D)  Government retirement funds 
A)  Life insurance companies 
B)  Credit unions 
C)  Pension funds 
D)  Government retirement funds

Question 14

A liquid asset is ________.

Accepted Answer

A)  an asset that can easily and quickly be sold to raise cash 
B)  a share of an ocean resort 
C)  difficult to resell 
D)  always sold in an over-the-counter market 
A)  an asset that can easily and quickly be sold to raise cash 
B)  a share of an ocean resort 
C)  difficult to resell 
D)  always sold in an over-the-counter market

Question 15

The primary liabilities of a chartered bank are ________.

Accepted Answer

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

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

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 18

Which of the following is not a goal of financial regulation?

Accepted Answer

A)  Ensuring the soundness of the financial system 
B)  Reducing moral hazard 
C)  Reducing adverse selection 
D)  Ensuring that investors never suffer losses 
A)  Ensuring the soundness of the financial system 
B)  Reducing moral hazard 
C)  Reducing adverse selection 
D)  Ensuring that investors never suffer losses

Question 19

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 20

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 ________,and it creates the ________ problem.

Accepted Answer

A)  asymmetric information; risk sharing 
B)  asymmetric information; adverse selection 
C)  adverse selection; risk sharing 
D)  moral hazard; adverse selection 
A)  asymmetric information; risk sharing 
B)  asymmetric information; adverse selection 
C)  adverse selection; risk sharing 
D)  moral hazard; adverse selection

Exam 2: An Overview of the Financial System

Which of the following is a depository institution?

The primary liabilities of depository institutions are ________.

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

Which of the following can be described as direct finance?

The Canada Deposit Insurance Corporation regulates ________.

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

A breakdown of financial markets can result in ________.

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.

Depository institutions include ________.

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

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

Which of the following are not contractual savings institutions?

A liquid asset is ________.

The primary liabilities of a chartered bank are ________.

The principal lender-savers are ________.

The concept of diversification is captured by the statement ________.

Which of the following is not a goal of financial regulation?

Secondary markets make financial instruments more ________.

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 ________,and it creates the ________ problem.

Why Study Money, banking, and Financial Markets

What Is Money

Understanding Interest Rates

The Behaviour 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

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Nonbank Finance

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

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

Filters

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 ,and it creates the problem.