Question 1

Financial intermediaries participate in the money and capital markets as

Accepted Answer

A)  lenders only. 
B)  borrowers only. 
C)  both lenders and borrowers. 
D)  trustees only. 
A)  lenders only. 
B)  borrowers only. 
C)  both lenders and borrowers. 
D)  trustees only.

Question 2

All financial intermediaries acquire funds by

Accepted Answer

A)  selling bonds. 
B)  selling stocks. 
C)  issuing their own liabilities. 
D)  charging interest. 
A)  selling bonds. 
B)  selling stocks. 
C)  issuing their own liabilities. 
D)  charging interest.

Question 3

An investor who anticipates that Treasury bond prices will fall should

Accepted Answer

A)  buy a variable-rate bond. 
B)  buy preferred corporate stock. 
C)  buy a bond futures contract. 
D)  sell a bond futures contract. 
A)  buy a variable-rate bond. 
B)  buy preferred corporate stock. 
C)  buy a bond futures contract. 
D)  sell a bond futures contract.

Question 4

__________ are never borrower-spenders.

Accepted Answer

A)  Governmental bodies 
B)  Business firms 
C)  Households 
D)  All of the above can be borrower-spenders. 
A)  Governmental bodies 
B)  Business firms 
C)  Households 
D)  All of the above can be borrower-spenders.

Question 5

An example of direct finance would be when

Accepted Answer

A)  a person purchases a certificate of deposit from a bank. 
B)  a person buys a life insurance policy. 
C)  a person buys 100 shares of stock from a corporation. 
D)  a bank makes a loan to a customer. 
A)  a person purchases a certificate of deposit from a bank. 
B)  a person buys a life insurance policy. 
C)  a person buys 100 shares of stock from a corporation. 
D)  a bank makes a loan to a customer.

Question 6

Consumer finance companies specialize in

Accepted Answer

A)  consumer loans. 
B)  residential mortgages. 
C)  corporate stock. 
D)  financial disintermediation. 
A)  consumer loans. 
B)  residential mortgages. 
C)  corporate stock. 
D)  financial disintermediation.

Question 7

Saver-lenders often choose to invest in financial intermediaries because the intermediaries

Accepted Answer

A)  reduce transactions costs for saver-lenders. 
B)  increase risk by diversification. 
C)  produce information on saver-lenders. 
D)  engage in direct finance. 
A)  reduce transactions costs for saver-lenders. 
B)  increase risk by diversification. 
C)  produce information on saver-lenders. 
D)  engage in direct finance.

Question 8

__________ are concentrated on the East Coast and have a relatively long history of making nonmortgage consumer loans.

Accepted Answer

A)  Savings and loan associations (S&Ls) 
B)  Commercial banks 
C)  Credit unions 
D)  Savings banks 
A)  Savings and loan associations (S&Ls) 
B)  Commercial banks 
C)  Credit unions 
D)  Savings banks

Question 9

Savings banks are very similar to

Accepted Answer

A)  finance companies. 
B)  savings and loan associations (S&Ls). 
C)  bond mutual funds. 
D)  money market mutual funds. 
A)  finance companies. 
B)  savings and loan associations (S&Ls). 
C)  bond mutual funds. 
D)  money market mutual funds.

Question 10

An efficient financial system

Accepted Answer

A)  must disseminate information to lenders about the quality of financial claims issued. 
B)  provides minimal information about financial markets. 
C)  provides perfect information regarding investment opportunities to savers. 
D)  does not provide any information to borrowers. 
A)  must disseminate information to lenders about the quality of financial claims issued. 
B)  provides minimal information about financial markets. 
C)  provides perfect information regarding investment opportunities to savers. 
D)  does not provide any information to borrowers.

Question 11

The largest group of saver-lenders in the financial system is

Accepted Answer

A)  businesses. 
B)  government. 
C)  households. 
D)  financial intermediaries. 
A)  businesses. 
B)  government. 
C)  households. 
D)  financial intermediaries.

Question 12

Some mortgage pools are referred to as

Accepted Answer

A)  municipal securities. 
B)  pass-through securities. 
C)  preferred mortgages. 
D)  common securities. 
A)  municipal securities. 
B)  pass-through securities. 
C)  preferred mortgages. 
D)  common securities.

Question 13

A market in which stock prices are rising is called a

Accepted Answer

A)  bull market. 
B)  bear market. 
C)  pig market. 
D)  primary market. 
A)  bull market. 
B)  bear market. 
C)  pig market. 
D)  primary market.

Question 14

Which of the following is not a major purpose of financial intermediaries?

Accepted Answer

A)  Transaction costs 
B)  Diversification 
C)  Information 
D)  All of the above are major purposes of financial intermediaries. 
A)  Transaction costs 
B)  Diversification 
C)  Information 
D)  All of the above are major purposes of financial intermediaries.

Question 15

Traditionally, the largest asset held by savings-and-loan associations has been

Accepted Answer

A)  NOW deposits. 
B)  business loans. 
C)  residential mortgages. 
D)  consumer loans. 
A)  NOW deposits. 
B)  business loans. 
C)  residential mortgages. 
D)  consumer loans.

Question 16

The most popular and widely followed stock index is the

Accepted Answer

A)  New York Stock Exchange Composite Index. 
B)  S&P 500 Index. 
C)  Dow Jones Industrial Average. 
D)  Nasdaq Composite Index. 
A)  New York Stock Exchange Composite Index. 
B)  S&P 500 Index. 
C)  Dow Jones Industrial Average. 
D)  Nasdaq Composite Index.

Question 17

Bonds without a maturity date are called

Accepted Answer

A)  zero-coupon bonds. 
B)  preferred bonds. 
C)  common bonds. 
D)  consols. 
A)  zero-coupon bonds. 
B)  preferred bonds. 
C)  common bonds. 
D)  consols.

Question 18

An example of a financial instrument in the money market is a

Accepted Answer

A)  residential mortgage. 
B)  corporate bond. 
C)  negotiable bank CD. 
D)  U.S. government agency security. 
A)  residential mortgage. 
B)  corporate bond. 
C)  negotiable bank CD. 
D)  U.S. government agency security.

Question 19

Which of these financial institutions is the most likely to have a portfolio very similar to those of life insurance companies?

Accepted Answer

A)  Money market mutual funds 
B)  Mutual savings banks 
C)  Private noninsured pension funds 
D)  Property and casualty insurance companies 
A)  Money market mutual funds 
B)  Mutual savings banks 
C)  Private noninsured pension funds 
D)  Property and casualty insurance companies

Question 20

One of the most popular types of mortgage pools is insured by the

Accepted Answer

A)  Federal Deposit Insurance Corporation. 
B)  Federal Savings and Loan Insurance Corporation. 
C)  Federal Home Loan Bank Board. 
D)  Government National Mortgage Association. 
A)  Federal Deposit Insurance Corporation. 
B)  Federal Savings and Loan Insurance Corporation. 
C)  Federal Home Loan Bank Board. 
D)  Government National Mortgage Association.

Exam 3: Financial Instruments, Markets, and Institutions

Financial intermediaries participate in the money and capital markets as

All financial intermediaries acquire funds by

An investor who anticipates that Treasury bond prices will fall should

__________ are never borrower-spenders.

An example of direct finance would be when

Consumer finance companies specialize in

Saver-lenders often choose to invest in financial intermediaries because the intermediaries

__________ are concentrated on the East Coast and have a relatively long history of making nonmortgage consumer loans.

Savings banks are very similar to

An efficient financial system

The largest group of saver-lenders in the financial system is

Some mortgage pools are referred to as

A market in which stock prices are rising is called a

Which of the following is not a major purpose of financial intermediaries?

Traditionally, the largest asset held by savings-and-loan associations has been

The most popular and widely followed stock index is the

Bonds without a maturity date are called

An example of a financial instrument in the money market is a

Which of these financial institutions is the most likely to have a portfolio very similar to those of life insurance companies?

One of the most popular types of mortgage pools is insured by the

Introducing Money, Banking, and Financial Markets

The Role of Money in the Macroeconomy

Interest Rate Measurement and Behavior

The Term and Risk Structure of Interest Rates

The Structure and Performance of Securities Markets

The Pricing of Risky Financial Assets

Money and Capital Markets

Demystifying Derivatives

Understanding Foreign Exchange

The Nature of Financial Intermediation

Depository Financial Institutions

Nondepository Financial Institutions

Understanding Financial Contracts

The Regulation of Markets and Institutions

Financial System Design

Who's in Charge Here?

Bank Reserves and the Money Supply

The Instruments of Central Bankin

Understanding Movements in Bank Reserves

Monetary Policy Strategy

The Classical Foundations

The Keynesian Framework

The ISLM World

Money and Economic Stability in the ISLM World

An Aggregate Supply and Demand Perspective on Money and Economic Stability

Rational Expectations: Theory and Policy Implications

Empirical Evidence on the Effectiveness of Monetary Policy

Tying It All Together

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