Question 1

Which of the following is involved in direct finance?

Accepted Answer

A)  Securities dealers 
B)  Investment banks 
C)  Securities brokers 
D)  All of the above B

Question 2

Deficit units that utilize indirect means of finance do so because

Accepted Answer

A)  Cost is lower 
B)  It's a matter of taste (preference) 
C)  Asymmetric information discourages investors (surplus units) from advancing funds to such units through direct means 
D)  There are SEC regulations C

Question 3

The basic role of depository institutions is to

Accepted Answer

A)  Receive core deposits and make loans by addressing asymmetric information 
B)  Issue large CDs and buy stocks 
C)  Underwrite securities 
D)  Act as a broker A

Question 4

The interests of the owners of a corporation are represented by

Accepted Answer

A)  The government 
B)  Managers 
C)  The board of directors 
D)  The invisible hand

Question 5

Which is a platform for secondary market trading of financial instruments?

Accepted Answer

A)  Specialist system 
B)  Over-the-counter system 
C)  Electronic communications networks (ECNs) 
D)  All of the above

Question 6

Critical to a well-functioning financial system is

Accepted Answer

A)  A sound legal system 
B)  A sound payment system 
C)  Strong fiduciaries 
D)  All of the above

Question 7

A fiduciary system

Accepted Answer

A)  Characterizes the financial system in the United States and elsewhere 
B)  Is a system based on trust 
C)  Is used for making payments 
D)  Both a and b

Exam 2: Overview of the Financial System