Exam 2: An Overview of the Financial System

Long-term debt has a maturity that is

Bonds issued by state and local governments are called ________ bonds.

U.S.Treasury bills are considered the safest of all money market instruments because there is almost no risk of

Because there is an imbalance of information in a lending situation,we must deal with the problems of adverse selection and moral hazard.Define these terms and explain how financial intermediaries can reduce these problems.

Which of the following is a depository institution?

Assume that you borrow $2000 at 10% annual interest to finance a new business project.For this loan to be profitable,the minimum amount this project must generate in annual earnings is

Thrift institutions include

A debt instrument sold by a bank to its depositors that pays annual interest of a given amount and at maturity pays back the original purchase price is called

Which of the following is a contractual savings institution?

Which of the following can be described as involving direct finance?

Which of the following instruments is not traded in a money market?

In order to reduce risk and increase the safety of financial institutions,commercial banks and other depository institutions are prohibited from

How do regulators help to ensure the soundness of financial intermediaries?

Financial markets have the basic function of

The process where financial intermediaries create and sell low-risk assets and use the proceeds to purchase riskier assets is known as

________ are financial intermediaries that acquire funds by selling shares to many individuals and using the proceeds to purchase diversified portfolios of stocks and bonds.

________ work in the secondary markets matching buyers with sellers of securities.

The process of asset transformation refers to the conversion of

If Microsoft sells a bond in London and it is denominated in dollars,the bond is a

Equity of U.S.companies can be purchased by