Question 1

Which of the following benefit directly from any increase in the corporation's profitability?

Accepted Answer

A) a bond holder 
B) a commercial paper holder 
C) a shareholder 
D) a T-bill holder 
A) a bond holder 
B) a commercial paper holder 
C) a shareholder 
D) a T-bill holder

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

Equity holders are a corporation's ________.That means the corporation must pay all of its debt holders before it pays its equity holders.

Accepted Answer

A) debtors 
B) brokers 
C) residual claimants 
D) underwriters 
A) debtors 
B) brokers 
C) residual claimants 
D) underwriters

Question 4

Studies of the major developed countries show that when businesses go looking for funds to finance their activities they usually obtain these funds from

Accepted Answer

A) government agencies. 
B) equities markets. 
C) financial intermediaries. 
D) bond markets. 
A) government agencies. 
B) equities markets. 
C) financial intermediaries. 
D) bond markets.

Question 5

Which of the following are investment intermediaries?

Accepted Answer

A) Life insurance companies 
B) Mutual funds 
C) Pension funds 
D) State and local government retirement funds 
A) Life insurance companies 
B) Mutual funds 
C) Pension funds 
D) State and local government retirement funds

Question 6

Which of the following are not contractual savings institutions?

Accepted Answer

A) Life insurance companies 
B) Credit unions 
C) Pension funds 
D) State and local government retirement funds 
A) Life insurance companies 
B) Credit unions 
C) Pension funds 
D) State and local government retirement funds

Question 7

Equity of U.S.companies can be purchased by

Accepted Answer

A) U.S.citizens only. 
B) foreign citizens only. 
C) U.S.citizens and foreign citizens. 
D) U.S.mutual funds only. 
A) U.S.citizens only. 
B) foreign citizens only. 
C) U.S.citizens and foreign citizens. 
D) U.S.mutual funds only.

Question 8

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

Accepted Answer

A) A corporation takes out loans from a bank. 
B) People buy shares in a mutual fund. 
C) A corporation buys a short-term corporate security in a secondary market. 
D) People buy shares of common stock in the primary markets. 
A) A corporation takes out loans from a bank. 
B) People buy shares in a mutual fund. 
C) A corporation buys a short-term corporate security in a secondary market. 
D) People buy shares of common stock in the primary markets.

Question 9

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 10

Government regulations to reduce the possibility of financial panic include all of the following except

Accepted Answer

A) transactions costs. 
B) restrictions on assets and activities. 
C) disclosure. 
D) deposit insurance. 
A) transactions costs. 
B) restrictions on assets and activities. 
C) disclosure. 
D) deposit insurance.

Question 11

The primary liabilities of a commercial bank are

Accepted Answer

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

Question 12

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

Accepted Answer

A) U.S.Government agency securities. 
B) Negotiable bank CDs. 
C) Repurchase agreements. 
D) U.S.Treasury bills. 
A) U.S.Government agency securities. 
B) Negotiable bank CDs. 
C) Repurchase agreements. 
D) U.S.Treasury bills.

Question 13

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 14

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 15

Which of the following statements about financial markets and securities is true?

Accepted Answer

A) A bond is a long-term security that promises to make periodic payments called dividends to the firm's residual claimants. 
B) A debt instrument is intermediate term if its maturity is less than one year. 
C) A debt instrument is intermediate term if its maturity is ten years or longer. 
D) The maturity of a debt instrument is the number of years (term)to that instrument's expiration date. 
A) A bond is a long-term security that promises to make periodic payments called dividends to the firm's residual claimants. 
B) A debt instrument is intermediate term if its maturity is less than one year. 
C) A debt instrument is intermediate term if its maturity is ten years or longer. 
D) The maturity of a debt instrument is the number of years (term)to that instrument's expiration date.

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

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 19

Which of the following instruments is not traded in a money market?

Accepted Answer

A) Residential mortgages. 
B) U.S.Treasury Bills. 
C) Negotiable bank certificates of deposit. 
D) Commercial paper. 
A) Residential mortgages. 
B) U.S.Treasury Bills. 
C) Negotiable bank certificates of deposit. 
D) Commercial paper.

Question 20

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.

Exam 2: An Overview of the Financial System

Which of the following benefit directly from any increase in the corporation's profitability?

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

Equity holders are a corporation's ________.That means the corporation must pay all of its debt holders before it pays its equity holders.

Studies of the major developed countries show that when businesses go looking for funds to finance their activities they usually obtain these funds from

Which of the following are investment intermediaries?

Which of the following are not contractual savings institutions?

Equity of U.S.companies can be purchased by

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

Federal funds are

Government regulations to reduce the possibility of financial panic include all of the following except

The primary liabilities of a commercial bank are

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

A liquid asset is

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

Which of the following statements about financial markets and securities is true?

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

Secondary markets make financial instruments more

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

Which of the following instruments is not traded in a money market?

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

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 and the Subprime Meltdown

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 for Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

The Demand for Money

The Islm Model

Monetary and Fiscal Policy in the ISLM Model

Aggregate Demand and Supply Analysis

Transmission Mechanisms of Monetary Policy: The Evidence

Money and Inflation

Rational Expectations: Implications for Policy

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