Exam 16: The Financial System

MATCHING Complete the following using the terms listed. -The _____ is sometimes referred to as the Big Board, the most famous and one of the oldest stock markets in the world, having been founded in 1792.

Municipal bonds are bonds issued by the federal government.

The number of banks has declined dramatically in recent years because bank mergers have become increasingly common.

Explain the process of underwriting.

The Treasury sells bonds that mature in 2, 5, 10, and 30 years from the date of issue.

Deposit insurance means that, in the event the bank fails, depositors are paid in full by the FDIC, up to $250,000.

The National Association of Securities Dealers (NASD) purpose is to ensure that brokers perform their basic functions honestly and fairly, under constant supervision.

MATCHING Complete the following using the terms listed. -The _______ sets most policies concerning monetary policy and interest rates.

All of the following are included in M1 EXCEPT ________.

If the Fed reduced reserve requirements, _____.

Purchasers of preferred stock are the true owners of a corporation.

Bondholders are creditors, and therefore they have a claim on the firm's assets that must be satisfied before any claims of stockholders in the event of the firm's bankruptcy, reorganization, or liquidation.

Tom just bought a bond from United Pet Group. This bond is only backed by the financial reputation of the company. What type of bond did Tom buy?

Secured bonds are backed by a specific pledge of company assets.

Commercial banks obtain most of their funds from ________.

The credit crisis came about partly because of subprime mortgages.

Regulation of U.S. financial markets is primarily a function of the federal government; states do not regulate them in any way.

MATCHING Complete the following using the terms listed. -____ are the largest and probably most important financial institutions in the United States and in most other countries as well.

Other things being equal, as interest rate rises, the price of a bond _____.

Preferred stockholders receive fixed dividends.