Deck 15: Understanding Money, financial Institutions, and the Securities Markets

Question 1

Any object or objects that a group of people use to buy and sell goods and services are known as which of the following?

A) capital
B) money
C) countertrades
D) revenue

Answer 1

B

Question 2

The Canadian money supply comprises which of the following items?

A) chequing accounts,bonds,and savings accounts
B) coins,paper money,and treasury bills
C) currency,demand deposits,and time deposits
D) currency,demand deposits,and chequing accounts

Answer 2

C

Question 3

What are money market deposit accounts and certificates of deposit officially called?

A) investor deposits
B) demand deposits
C) time deposits
D) income deposits

Answer 3

C

Question 4

Which of the following is an activity performed by the Bank of Canada as it carries out its monetary policy?

A) insuring credit card balances
B) providing tax refunds
C) distributing currency
D) loaning money to consumers

Question 5

A savings account is also known as which of the following?

A) a time deposit
B) a demand deposit
C) a marketable security
D) a storage deposit

Question 6

Which of the following are deposits at a bank or other financial institution that pay interest but cannot be withdrawn on demand without penalty?

A) marketable securities
B) demand deposits
C) commercial deposits
D) time deposits

Question 7

Boulders,building tresses,and lead ingots would not make good mediums of exchange because they lack key characteristic?

A) durability
B) portability
C) scarcity
D) divisibility

Question 8

For money to be an acceptable medium of exchange which of the following are necessary?

A) It must be scarce,divisible,portable,and durable.
B) It must be distributable,durable,comparable,and valuable.
C) It must be portable,sortable,profitable,and divisible.
D) It must be compatible,durable,universal,sortable.

Question 9

Megan Voorhees recently inherited $200,000.She has invested the inherited money in real estate and government securities.Voorhees is using her money for which of the following purposes?

A) a store of value
B) a medium of exchange
C) a commodity of exchange
D) a measure of wealth

Question 10

Rocks,leaves,and glass shards would not make good mediums of exchange because they lack which of the following key characteristics?

A) portability
B) durability
C) scarcity
D) divisibility

Question 11

The most important function of the Bank of Canada is implementing which of the following policies?

A) monetary
B) fiscal
C) tax
D) spending

Question 12

Which of the following would be described as anything that is acceptable as payment for goods and services?

A) shareholders' equity
B) a fixed asset
C) money
D) capital

Question 13

What is another term for a chequing account?

A) a treasury account
B) a time deposit
C) a demand deposit
D) a certificate of deposit

Question 14

A ten-dollar bill can be changed into two five-dollar bills or ten loonies.This key characteristic of money is known as which of the following?

A) durability
B) divisibility
C) portability
D) scarcity

Question 15

Which of the following is one of the key characteristics required in order for money to be an acceptable medium of exchange?

A) portability
B) profitability
C) divisibility
D) distributability

Question 16

Suppose a six-year-old girl wants to buy a $30 Hello Kitty doll.The money she received for her birthday to buy the doll would be used for which of the following purposes?

A) a measure of wealth
B) a store of value
C) a commodity of exchange
D) a medium of exchange

Question 17

Cherries,ears of corn,and cookies would not make good mediums of exchange because they lack which key characteristic?

A) divisibility
B) durability
C) profitability
D) exchangeability

Question 18

Which of the following BEST describes credit cards?

A) They are sometimes referred to as funny money.
B) They replace money.
C) They are used as a substitute for cash but not cheques.
D) They defer payment to a later point in time.

Question 19

What is cash held in the form of coins and paper money?

A) revenue
B) treasury funds
C) currency
D) time deposits

Question 20

Kate Tankersly pays her bills each month by writing cheques.Tankersly is using which of the following type of account?

A) a certificate of deposit
B) a time deposit
C) a demand deposit
D) a federal deposit

Question 21

Which of the following are large pools of money set aside by corporations,unions,and governments for later use in paying retirement benefits to their employees or members?

A) pension funds
B) unemployment benefits
C) workers' compensation funds
D) slush funds

Question 22

The Canadian Deposit Insurance Corporation insures deposits in commercial banks.The CDIC was created as one of which of the following institutions?

A) an insurance company
B) a crown corporation
C) a finance company
D) a national bank

Question 23

Which of the following is an example of a depository financial institution?

A) a consumer finance company
B) a pension fund
C) a credit union
D) a commercial finance company

Question 24

Which of the following is a nonprofit,member-owned financial cooperative?

A) a savings and loan association
B) a credit union
C) a commercial bank
D) a savings bank

Question 25

Which of the following are a profit-oriented depository financial institutions that accept deposits,make business and consumer loans,invest in government and corporate securities,and provide other financial services?

A) credit unions
B) thrift institutions
C) chartered banks
D) finance companies

Question 26

ATMs let customers of banks make deposits and withdrawals while in a shopping centre or supermarket 24 hours a day.What do the letters ATM stand for?

A) accounting transfer machine
B) accounting transfer management
C) automatic transfer machine
D) automated teller machine

Question 27

Which of the following financial institutions is a not-for-profit institution?

A) a savings bank
B) a credit union
C) a commercial bank
D) a savings and loan association

Question 28

Darren Hicks owns 10 shares in Carolina Power,a utility company.He has voting rights and shares in the profits.What type of shares does Hicks own?.

A) preferred shares
B) common shares
C) dividend shares
D) market shares

Question 29

What is the Bank of Canada's most frequently used and most flexible tool?

A) open market operations
B) the discount rate
C) the reserve requirement
D) the prime rate

Question 30

Which of the following are investment certificates that represent either ownership of a corporation or a loan to the corporation?

A) deposits
B) capital funds
C) contracts
D) securities

Question 31

Which of the following statements BEST describes credit unions?

A) Credit unions are for-profit institutions.
B) Credit unions are not subject to provincial regulations.
C) Credit unions are usually small and locally owned.
D) Credit union members typically have nothing in common with each other.

Question 32

Gino Vocci buys and sells shares and bonds and provides advice on when to buy and when to sell to his clients.Vocci works for which of the following type of nondepository financial institution?

A) a commodity broker
B) a brokerage firm
C) a finance company
D) a shares insurance company

Question 33

Jayson Smith is a recent college graduate who found himself in debt as a result of credit card expenditures and is in need of dependable transportation.Smith recently purchased a new motorcycle from Watt Cycles.In financing the cycle,Smith found that he would be making payments to Beneficial Corp.,a company that deals in poor credit risks and short-term loans.Smith was dealing with which of the following?

A) a savings bank
B) a finance company
C) a savings and loan association
D) a commercial bank

Question 34

A security that represents direct ownership interest in a corporation and allows the owner to share in the profits is known as which of the following?

A) a mortgage bond
B) common shares
C) preferred shares
D) a convertible bond

Question 35

When Tiara Petark wanted to buy a new pickup truck,her credit rating was poor.Petark found that the only place she could get a loan was from which of the following?

A) a brokerage firm
B) a finance company
C) a,insurance company
D) a trust company

Question 36

Suppose Scotiabank borrows funds from the Bank of Canada.What is the rate the Bank of Canada charges Scotiabank?

A) the going rate
B) the bank rate
C) the prime rate
D) the commercial bank rate

Question 37

Which of the following represent profits from the operation of the corporation that are distributed to the shareholders?

A) dividends
B) contribution margins
C) net profits
D) shared earnings

Question 38

Which of the following is an example of a nondepository financial institution?

A) a finance company
B) a consulting firm
C) a savings bank
D) a credit union

Question 39

To stimulate the economy,the Bank of Canada can do which of the following?

A) Lower the reserve requirement.
B) Raise the prime rate.
C) Sell government bonds on the open market.
D) Buy shares listed on the Toronto Stock Exchange.

Question 40

Which of the following is Canada's most international bank?

A) CIBC
B) Scotiabank
C) Royal Bank
D) BMO

Question 41

Some corporations pay their shareholders in the form of more shares.Which of the following BEST describes this type of payment?

A) a stock dividend
B) a dividend windfall
C) a share distribution
D) a share reward

Question 42

Michaela Petty owns common shares in Procter & Gamble.Last quarter she received a cheque from P&G for $132,which is her share of P&G's distributed profits.Petty has received which of the following?

A) interest
B) a yield
C) dividends
D) a capital gain

Question 43

The class of equity securities that provides the most potential for growth and appreciation is known as which of the following?

A) preferred shares
B) common shares
C) convertible preferred shares
D) convertible bonds

Question 44

Tameika Wilson owns 100 shares of Telus Mobility.Last year Telus Mobility sent her four more shares instead of her usual cash dividend.Which of the following did Telus distribute to its shareholders?

A) a stock dividend
B) a dividend split
C) a share distribution
D) a share reward

Question 45

The interest rate specified on the bond that the company must pay the bondholder is known as which of the following?

A) the premium rate
B) the dividend
C) the coupon rate
D) the discount rate

Question 46

Which of the following type of bonds is an example of a secured bond?

A) premium bonds
B) debenture bonds
C) mortgage bonds
D) indenture bonds

Question 47

What are two types of equity securities?

A) common shares and preferred shares
B) common shares and debentures
C) debentures and convertible bonds
D) convertible bonds and preferred shares

Question 48

When the government of Canada issues money on a short-term basis,it issues which of the following?

A) certificates of deposit
B) notes
C) treasury bonds
D) treasury bills

Question 49

According to your text,which of the following type of bonds was issued by FedEx?

A) credit bonds
B) revenue bond bonds
C) premium bond bonds
D) debenture bonds

Question 50

Holders of preferred shares enjoy which of the following advantages?

A) They vote but stand last in line for dividends.
B) They elect the board of directors.
C) They receive a fixed dividend.
D) They receive dividends before bondholders receive interest.

Question 51

Dayton Manufacturing Company recently issued a bond to finance a new manufacturing plant in Brampton,Ontario.The land on which the plant will be built has been pledged as collateral.Which of the following type of bonds has the company issued?

A) indenture bonds
B) mortgage bonds
C) debenture bonds
D) revenue bonds

Question 52

Which of the following is a class of ownership interest that receives dividends first but does not have the right to vote?

A) pre-emptive shares
B) convertible shares
C) common shares
D) preferred shares

Question 53

Alli Kamal loaned Textron Corporation $1,000 in the form of a bond purchase.Textron must pay back the $1,000 on August 1,2015.The $1,000 is known as which of the following?

A) the premium amount
B) the market value
C) the principal
D) the book value

Question 54

Which of the following type of bonds are backed by specific assets of the company,which are pledged as collateral?

A) debenture bonds
B) holding bonds
C) conventional bonds
D) secured bonds

Question 55

Alli Kamal purchased a $1,000 bond from Textron,which Textron must pay back on August 1,2015.That date is known as which of the following?

A) the maturity date
B) the indenture date
C) the debenture date
D) the date of issue

Question 56

When a corporation issues a bond that can be exchanged for common shares at a later date,the company has issued which of the following type of bond?

A) convertible bonds
B) premium bonds
C) debenture bonds
D) preferred bonds

Question 57

Which of the following are long-term debt obligations of corporations?

A) assets
B) preferred liabilities
C) bonds
D) indentures

Question 58

Fleur Ott owns 100 shares of Armstrong Tool Company cumulative preferred shares.The dividend is $6 per share.Armstrong's board of directors omitted the preferred dividends in 2000,2001,and 2002.In 2003,the dividend was resumed.Which of the following represents the amount that Armstrong Tool owes Ott?

A) $600
B) $1,800
C) $1,200
D) $2,400

Question 59

Which of the following type of bonds are high-risk,high-return bonds that were often used to finance mergers and acquisitions in the 1980s?

A) takeover bonds
B) junk bonds
C) venture capital bonds
D) discount bonds

Question 60

Which of the following type of bonds is an example of an unsecured bond?

A) discount bonds
B) debenture bond
C) premium bond
D) indenture bond

Question 61

When Nissan sells a new Sentra and receives the proceeds,the transaction is similar to one market.When the same Sentra is traded in the used car market,the transaction is similar to another market.Which markets are we referring to,respectively?

A) private and public
B) seller's and buyer's
C) buyer's and seller's
D) primary and secondary

Question 62

Futures contracts are best described by which of the following?

A) They are a way to buy common shares on a margin.
B) They appeal to investors because they are sure providers of retirement income.
C) They do not pay dividends.
D) They are good investments for risk-aversive investors.

Question 63

The secondary securities market is BEST described by which of the following?

A) It is a substandard market.
B) It is a new issue market.
C) It is a market for securities that are not allowed in the primary market.
D) It is a market in which previously issued securities are traded.

Question 64

Which of the following are agreements to buy or sell specified quantities of commodities or financial instruments at an agreed price at a future date?

A) futures contracts
B) mutual debenture contracts
C) options contracts
D) on-time contracts

Question 65

Which of the following are contracts that entitle holders to buy or sell specified quantities of common shares or other financial instruments at a set price during a specified time?

A) options
B) futures contracts
C) debentures
D) mutual securities

Question 66

Which of the following institutions' primary activity is underwriting?

A) the Toronto Stock Exchange
B) investment bankers
C) stockbrokers
D) institutional investors

Question 67

Which of the following BEST describes a mutual fund?

A) It does not have a stated investment goal.
B) It is professionally managed.
C) It offers lower returns than individually managed accounts.
D) It is not a good way to hold a diversified stock portfolio.

Question 68

Blackwell Investments specializes in acting as an intermediary in taking companies public.This financial middleman is an example of which of the following roles?

A) a stockbroker
B) a commercial banker
C) an investment banker
D) a transfer agent

Question 69

As a security,options are BEST described by which of the following?

A) They have a very long maturity.
B) They can be a risky purchase for investors.
C) They do not legally obligate the holder to buy or sell.
D) They are not similar to futures contracts.

Question 70

The primary securities market is which of the following?

A) a place to trade bonds
B) a market in which new securities are sold to the public
C) a central location where securities are traded
D) a location for buying and selling primary futures

Question 71

Which of the following is a financial service that pools its investors' funds to buy a selection of securities and provide professional investment management?

A) a debenture
B) a blue-chip investment
C) a futures contract
D) a mutual fund

Question 72

Standard and Poor's has evaluated Syntex Corporation's new issue of bonds as BB+.This is an example of which of the following?

A) a leverage rating
B) a capital rating
C) a quality analysis
D) a bond rating

Question 73

Organized stock exchanges operate in a similar manner to which of the following?

A) an auction company
B) an indirect distribution channel
C) a retailer
D) a wholesaler

Question 74

Investors were amazed at how quickly the price of eBay shares rose during the first day it was offered for sale to the public.These shares were being sold in which of the following markets?

A) the primary market
B) Internet
C) the speculative market
D) the institutional market

Question 75

When Raven Asan sold 12 shares of Home Depot stock that her father had bought from a business acquaintance and given her as a graduation present,it was on which of the following markets?

A) the secondary market
B) the institutional market
C) the primary market
D) the speculative market

Question 76

Which of the following is the process of buying securities from corporations and governments and reselling them to the public?

A) circuit breaking
B) rounding up
C) brokering
D) underwriting

Question 77

A mutual fund serves which of the following functions?

A) It invests in companies that have mutual interests.
B) It brings together investors with a mutual interest.
C) It invests only in mutual insurance companies.
D) It pools investors' funds to buy a selection of securities that meet stated investment goals.

Question 78

What is another name for a stockbroker?

A) an investment banker
B) an underwriter
C) a fiscal manager
D) an account executive

Question 79

Which of the following are the link between public companies and the investors interested in buying their stock?

A) underwriters
B) investment bankers
C) account managers
D) stockbrokers

Question 80

Securities that are not traded on the organized stock exchanges are traded in which of the following markets?

A) the futures market
B) the dealers' market
C) the over-the-counter market
D) the primary market