Exam 2: The Financial System and the Level of Interest Rates

A primary market is any financial market in which owners of outstanding securities can resell them to other investors.

The role of the financial system is to gather money from people, businesses and government that have funds to invest and to channel that money to those who need it.

You loaned $100 to a friend for one year at a nominal rate of interest of 3 percent. Inflation during that year was 2 percent. How much did the purchasing power of your money change (an increase is positive and a decrease is negative)?

The financial market where a new security is sold for the first time is:

The NYSE is an example of:

A highly liquid financial instrument with a maturity of 90 days would be traded in:

Which of the following is a process by which investment bankers purchase new securities directly from the issuing company and resell them to the investors?

Governments are the principal lender-savers in the economy.

Financial markets and financial institutions are both part of:

Large firms are most likely to use money markets for the following reason:

During an economic expansion, we would expect:

The presence of a financial market increases the marketability of a financial security by:

The ease with which a security can be sold and converted into cash is called:

Which of the following is responsible for rolling back many of the rules against commercial banks offering investment banking activities?

Direct financing occurs when:

Secondary financial markets are similar to:

Equities with maturity of greater than one year generally are traded in the capital market.

The general level of interest rates tends to follow:

Which of the following is a major participant in the direct financial market?

If a firm needs to finance a new corporate headquarters building, then it would most likely seek the funds in the: