Question 1

A pension fund is not a contractual savings institution.

Accepted Answer

A) True 
 B)False

Question 2

Financial markets have the basic function of

Accepted Answer

A) bringing together people with funds to lend and people who want to borrow funds. 
B) assuring that the swings in the business cycle are less pronounced. 
C) assuring that governments need never resort to printing money. 
D) both A and B of the above. 
E) both B and C of the above. 
A) bringing together people with funds to lend and people who want to borrow funds. 
B) assuring that the swings in the business cycle are less pronounced. 
C) assuring that governments need never resort to printing money. 
D) both A and B of the above. 
E) both B and C of the above.

Question 3

Corporations that issue new securities to raise capital now conduct more of this business in financial markets in Europe and Asia than in the U.S.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) A bank buys a U.S. Treasury bill from one of its depositors. 
B) A corporation buys commercial paper issued by another corporation. 
C) A pension fund manager buys commercial paper in the primary market. 
D) Both A and C of the above. 
A) A bank buys a U.S. Treasury bill from one of its depositors. 
B) A corporation buys commercial paper issued by another corporation. 
C) A pension fund manager buys commercial paper in the primary market. 
D) Both A and C of the above.

Question 5

American investors pay attention to only the Dow Jones Industrial Average.

Accepted Answer

A) True 
 B)False

Question 6

Why can a financial intermediary's risk-sharing activities be described as asset transformation?

Accepted Answer

Financial intermediaries, such as banks,

Question 7

Fire and casualty insurance companies are what type of intermediary?

Accepted Answer

A) Contractual savings institution 
B) Depository institutions 
C) Investment intermediaries 
D) None of the above 
A) Contractual savings institution 
B) Depository institutions 
C) Investment intermediaries 
D) None of the above

Question 8

The New York Stock Exchange is an example of a primary market.

Accepted Answer

A) True 
 B)False

Question 9

The capital market is a financial market in which only short-term debt instruments (generally those with an original maturity of less than one year)are traded.

Accepted Answer

A) True 
 B)False

Question 10

An investor who puts all her funds into one asset ________ her portfolio's ________.

Accepted Answer

A) increases; diversification 
B) decreases; diversification 
C) increases; average return 
D) decreases; average return 
A) increases; diversification 
B) decreases; diversification 
C) increases; average return 
D) decreases; average return

Question 11

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

Accepted Answer

A) A corporation's stock is traded in an over-the-counter market. 
B) A corporation buys commercial paper issued by another corporation. 
C) A pension fund manager buys commercial paper from the issuing corporation. 
D) Both A and B of the above. 
E) Both B and C of the above. 
A) A corporation's stock is traded in an over-the-counter market. 
B) A corporation buys commercial paper issued by another corporation. 
C) A pension fund manager buys commercial paper from the issuing corporation. 
D) Both A and B of the above. 
E) Both B and C of the above.

Question 12

Foreign currencies that are deposited in banks outside the home country are known as

Accepted Answer

A) foreign bonds. 
B) Eurobond. 
C) Eurocurrencies. 
D) Eurodollars. 
A) foreign bonds. 
B) Eurobond. 
C) Eurocurrencies. 
D) Eurodollars.

Question 13

Most people's involvement with the financial system is through financial intermediaries rather than financial markets.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) foreign bonds. 
B) Eurobonds. 
C) Eurocurrencies. 
D) Eurodollars. 
A) foreign bonds. 
B) Eurobonds. 
C) Eurocurrencies. 
D) Eurodollars.

Question 15

Why are financial intermediaries so important to an economy?

Accepted Answer

The answer of Why are financial intermediaries so important to...

Question 16

Every financial market allows loans to be made.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following are primary markets?

Accepted Answer

A) The New York Stock Exchange 
B) The U.S. government bond market 
C) The over-the-counter stock market 
D) The options markets 
E) None of the above 
A) The New York Stock Exchange 
B) The U.S. government bond market 
C) The over-the-counter stock market 
D) The options markets 
E) None of the above

Question 18

Through risk-sharing activities, a financial intermediary ________ its own risk and ________ the risks of its customers.

Accepted Answer

A) reduces; increases 
B) increases; reduces 
C) reduces; reduces 
D) increases; increases 
A) reduces; increases 
B) increases; reduces 
C) reduces; reduces 
D) increases; increases

Question 19

Which of the following are investment intermediaries?

Accepted Answer

A) Finance companies 
B) Mutual funds 
C) Pension funds 
D) All of the above 
E) Only A and B of the above 
A) Finance companies 
B) Mutual funds 
C) Pension funds 
D) All of the above 
E) Only A and B of the above

Question 20

In financial markets, lenders typically have inferior information about potential returns and risks associated with any investment project. This difference in information is called

Accepted Answer

A) comparative informational disadvantage. 
B) asymmetric information. 
C) variant information. 
D) caveat venditor. 
A) comparative informational disadvantage. 
B) asymmetric information. 
C) variant information. 
D) caveat venditor.

Exam 2: Overview of the Financial System

A pension fund is not a contractual savings institution.

Financial markets have the basic function of

Corporations that issue new securities to raise capital now conduct more of this business in financial markets in Europe and Asia than in the U.S.

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

American investors pay attention to only the Dow Jones Industrial Average.

Why can a financial intermediary's risk-sharing activities be described as asset transformation?

Fire and casualty insurance companies are what type of intermediary?

The New York Stock Exchange is an example of a primary market.

The capital market is a financial market in which only short-term debt instruments (generally those with an original maturity of less than one year)are traded.

An investor who puts all her funds into one asset ________ her portfolio's ________.

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

Foreign currencies that are deposited in banks outside the home country are known as

Most people's involvement with the financial system is through financial intermediaries rather than financial markets.

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

Why are financial intermediaries so important to an economy?

Every financial market allows loans to be made.

Which of the following are primary markets?

Through risk-sharing activities, a financial intermediary ________ its own risk and ________ the risks of its customers.

Which of the following are investment intermediaries?

In financial markets, lenders typically have inferior information about potential returns and risks associated with any investment project. This difference in information is called

Why Study Financial Markets and Institutions

What Do Interest Rates Mean and What Is Their Role in Valuation

Why Do Interest Rates Change

How Do Risk and Term Structure Affect Interest Rates

Are Financial Markets Efficient

Why Do Financial Institutions Exist

Why Do Financial Crises Occur and Why Are They so Damaging to the Economy

Central Banks and the Federal Reserve System

Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics

The Money Markets

The Bond Market

The Stock Market

The Mortgage Markets

The Foreign Exchange Market

The International Financial System

Banking and the Management of Financial Institutions

Financial Regulation

Banking Industry: Structure and Competition

The Mutual Fund Industry

Insurance Companies and Pension Funds

Investment Banks, Security Brokers and Dealers, and Venture Capital Firms

Risk Management in Financial Institutions

Hedging With Financial Derivatives

Savings Associations and Credit Unions

Finance Companies

Filters

An investor who puts all her funds into one asset her portfolio's .

Through risk-sharing activities, a financial intermediary its own risk and the risks of its customers.