Question 1

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

Accepted Answer

A) bank commercial loans 
B) commercial paper 
C) state and local government bonds 
D) residential mortgages 
A) bank commercial loans 
B) commercial paper 
C) state and local government bonds 
D) residential mortgages B

Question 2

Which of the following statements about the characteristics of debt and equity is FALSE?

Accepted Answer

A) They can both be long-term financial instruments. 
B) They can both be short-term financial instruments. 
C) They both involve a claim on the issuer's income. 
D) They both enable a corporation to raise funds. 
A) They can both be long-term financial instruments. 
B) They can both be short-term financial instruments. 
C) They both involve a claim on the issuer's income. 
D) They both enable a corporation to raise funds. B

Question 3

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. B

Question 4

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 5

________ 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 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

Adverse selection is a problem associated with equity and debt contracts arising from

Accepted Answer

A) the lender's relative lack of information about the borrower's potential returns and risks of his investment activities. 
B) the lender's inability to legally require sufficient collateral to cover a 100% loss if the borrower defaults. 
C) the borrower's lack of incentive to seek a loan for highly risky investments. 
D) the borrower's lack of good options for obtaining funds. 
A) the lender's relative lack of information about the borrower's potential returns and risks of his investment activities. 
B) the lender's inability to legally require sufficient collateral to cover a 100% loss if the borrower defaults. 
C) the borrower's lack of incentive to seek a loan for highly risky investments. 
D) the borrower's lack of good options for obtaining funds.

Question 8

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 9

Mortgage-backed securities are similar to ________ but the interest and principal payments are backed by the individual mortgages within the security.

Accepted Answer

A) bonds 
B) stock 
C) repurchase agreements 
D) negotiable CDs 
A) bonds 
B) stock 
C) repurchase agreements 
D) negotiable CDs

Question 10

Well-functioning financial markets

Accepted Answer

A) cause inflation. 
B) eliminate the need for indirect finance. 
C) cause financial crises. 
D) allow the economy to operate more efficiently. 
A) cause inflation. 
B) eliminate the need for indirect finance. 
C) cause financial crises. 
D) allow the economy to operate more efficiently.

Question 11

Contractual savings institutions include

Accepted Answer

A) mutual savings banks. 
B) money market mutual funds. 
C) commercial banks. 
D) life insurance companies. 
A) mutual savings banks. 
B) money market mutual funds. 
C) commercial banks. 
D) life insurance companies.

Question 12

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 13

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 14

The countries that have made the least use of securities markets are ________ and ________;in these two countries finance from financial intermediaries has been almost ten times greater than that from securities markets.

Accepted Answer

A) Germany;Japan 
B) Germany;Great Britain 
C) Great Britain;Canada 
D) Canada;Japan 
A) Germany;Japan 
B) Germany;Great Britain 
C) Great Britain;Canada 
D) Canada;Japan

Question 15

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 16

A corporation acquires new funds only when its securities are sold in the

Accepted Answer

A) primary market by an investment bank. 
B) primary market by a stock exchange broker. 
C) secondary market by a securities dealer. 
D) secondary market by a commercial bank. 
A) primary market by an investment bank. 
B) primary market by a stock exchange broker. 
C) secondary market by a securities dealer. 
D) secondary market by a commercial bank.

Question 17

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 18

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 19

Bonds that are sold in a foreign country and are denominated in a currency other than that of the country in which it is 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 20

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.

Exam 2: An Overview of the Financial System

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

Which of the following statements about the characteristics of debt and equity is FALSE?

The agency that restricts insider trading is the

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

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

The most liquid securities traded in the capital market are

Adverse selection is a problem associated with equity and debt contracts arising from

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

Mortgage-backed securities are similar to ________ but the interest and principal payments are backed by the individual mortgages within the security.

Well-functioning financial markets

Contractual savings institutions include

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

Every financial market has the following characteristic.

The countries that have made the least use of securities markets are ________ and ________;in these two countries finance from financial intermediaries has been almost ten times greater than that from securities markets.

Federal funds are

A corporation acquires new funds only when its securities are sold in the

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

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

Bonds that are sold in a foreign country and are denominated in a currency other than that of the country in which it is sold are known as

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

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

Nonbank Finance

Financial Derivatives

Conflicts of Interest in the Financial Industry

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

Aggregate Demand and Supply Analysis

Monetary Policy Theory

Transmission Mechanisms of Monetary Policy

Financial Crises in Emerging Market Economies

The IS Curve

The Monetary Policy and Aggregate Demand Curves

The Role of Expectations in Monetary Policy

The ISLM Model

Filters

The countries that have made the least use of securities markets are and ;in these two countries finance from financial intermediaries has been almost ten times greater than that from securities markets.

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