Exam 2: An Overview of the Financial System

In order to reduce risk and increase the safety of financial institutions,commercial banks and other depository institutions are prohibited from

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

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

The primary purpose of deposit insurance is to

Which of the following can be described as direct finance?

Because there is an imbalance of information in a lending situation,we must deal with the problems of adverse selection and moral hazard.Define these terms and explain how financial intermediaries can reduce these problems.

Financial markets improve economic welfare because

A financial market in which previously issued securities can be resold is called a ________ market.

U.S.dollar deposits in foreign banks outside the U.S.or in foreign branches of U.S.banks are called ________.

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

The concept of diversification is captured by the statement

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

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

Which of the following is not a secondary market?

Forty or so dealers establish a "market" in these securities by standing ready to buy and sell them.

The process of indirect finance using financial intermediaries is called

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?

Money market mutual fund shares function like

Distinguish between a foreign bond and a Eurobond.

The primary liabilities of depository institutions are