Question 1

Bonds that are sold in a foreign country and are denominated in a currency other than that of the country in which it is sold are known as

Accepted Answer

A) foreign bonds. 
B) Eurobonds. 
C) equity bonds. 
D) country bonds. 
A) foreign bonds. 
B) Eurobonds. 
C) equity bonds. 
D) country bonds.

Question 2

Which of the following is a long-term financial instrument?

Accepted Answer

A) A negotiable certificate of deposit 
B) A repurchase agreement 
C) A U.S.Treasury bond 
D) A U.S.Treasury bill 
A) A negotiable certificate of deposit 
B) A repurchase agreement 
C) A U.S.Treasury bond 
D) A U.S.Treasury bill

Question 3

If the maturity of a debt instrument is less than one year,the debt is called

Accepted Answer

A) short-term. 
B) intermediate-term. 
C) long-term. 
D) prima-term. 
A) short-term. 
B) intermediate-term. 
C) long-term. 
D) prima-term.

Question 4

A financial market in which previously issued securities can be resold is called a ________ market.

Accepted Answer

A) primary 
B) secondary 
C) tertiary 
D) used securities 
A) primary 
B) secondary 
C) tertiary 
D) used securities

Question 5

Economies of scale enable financial institutions to

Accepted Answer

A) reduce transactions costs. 
B) avoid the asymmetric information problem. 
C) avoid adverse selection problems. 
D) reduce moral hazard. 
A) reduce transactions costs. 
B) avoid the asymmetric information problem. 
C) avoid adverse selection problems. 
D) reduce moral hazard.

Question 6

________ institutions are financial intermediaries that acquire funds at periodic intervals on a contractual basis.

Accepted Answer

A) Investment 
B) Contractual savings 
C) Thrift 
D) Depository 
A) Investment 
B) Contractual savings 
C) Thrift 
D) Depository

Question 7

An important function of secondary markets is to

Accepted Answer

A) make it easier to sell financial instruments to raise funds. 
B) raise funds for corporations through the sale of securities. 
C) make it easier for governments to raise taxes. 
D) create a market for newly constructed houses. 
A) make it easier to sell financial instruments to raise funds. 
B) raise funds for corporations through the sale of securities. 
C) make it easier for governments to raise taxes. 
D) create a market for newly constructed houses.

Question 8

Distinguish between direct finance and indirect finance.Which of these is the most important source of funds for corporations in the United States?

Accepted Answer

With direct finance,funds flow directly

Question 9

Which of the following instruments are traded in a capital market?

Accepted Answer

A) U.S.Government agency securities 
B) Negotiable bank CDs 
C) Repurchase agreements 
D) U.S.Treasury bills 
A) U.S.Government agency securities 
B) Negotiable bank CDs 
C) Repurchase agreements 
D) U.S.Treasury bills

Question 10

An important feature of money market mutual fund shares is

Accepted Answer

A) deposit insurance. 
B) the ability to write checks against shareholdings. 
C) the ability to borrow against shareholdings. 
D) claims on shares of corporate stock. 
A) deposit insurance. 
B) the ability to write checks against shareholdings. 
C) the ability to borrow against shareholdings. 
D) claims on shares of corporate stock.

Question 11

Which of the following do not provide charters?

Accepted Answer

A) The Office of the Comptroller of the Currency 
B) The Federal Reserve System 
C) The National Credit Union Administration 
D) State banking and insurance commissions 
A) The Office of the Comptroller of the Currency 
B) The Federal Reserve System 
C) The National Credit Union Administration 
D) State banking and insurance commissions

Question 12

The regulatory agency that sets reserve requirements for all banks is

Accepted Answer

A) the Federal Reserve System. 
B) the Federal Deposit Insurance Corporation. 
C) the Office of Thrift Supervision. 
D) the Securities and Exchange Commission. 
A) the Federal Reserve System. 
B) the Federal Deposit Insurance Corporation. 
C) the Office of Thrift Supervision. 
D) the Securities and Exchange Commission.

Question 13

The process of indirect finance using financial intermediaries is called

Accepted Answer

A) direct lending. 
B) financial intermediation. 
C) resource allocation. 
D) financial liquidation. 
A) direct lending. 
B) financial intermediation. 
C) resource allocation. 
D) financial liquidation.

Question 14

The concept of diversification is captured by the statement

Accepted Answer

A) don't look a gift horse in the mouth. 
B) don't put all your eggs in one basket. 
C) it never rains,but it pours. 
D) make hay while the sun shines. 
A) don't look a gift horse in the mouth. 
B) don't put all your eggs in one basket. 
C) it never rains,but it pours. 
D) make hay while the sun shines.

Question 15

Conflicts of interest are a type of ________ problem that can happen when an institution provides multiple services.

Accepted Answer

A) adverse selection 
B) free-riding 
C) discounting 
D) moral hazard 
A) adverse selection 
B) free-riding 
C) discounting 
D) moral hazard

Question 16

Which of the following is not a contractual savings institution?

Accepted Answer

A) A life insurance company 
B) A pension fund 
C) A savings and loan association 
D) A fire and casualty insurance company 
A) A life insurance company 
B) A pension fund 
C) A savings and loan association 
D) A fire and casualty insurance company

Question 17

The primary liabilities of depository institutions are

Accepted Answer

A) premiums from policies. 
B) shares. 
C) deposits. 
D) bonds. 
A) premiums from policies. 
B) shares. 
C) deposits. 
D) bonds.

Question 18

An example of the problem of ________ is when a corporation uses the funds raised from selling bonds to fund corporate expansion to pay for Caribbean cruises for all of its employees and their families.

Accepted Answer

A) adverse selection 
B) moral hazard 
C) risk sharing 
D) credit risk 
A) adverse selection 
B) moral hazard 
C) risk sharing 
D) credit risk

Question 19

The principal lender-savers are

Accepted Answer

A) governments. 
B) businesses. 
C) households. 
D) foreigners. 
A) governments. 
B) businesses. 
C) households. 
D) foreigners.

Question 20

A breakdown of financial markets can result in

Accepted Answer

A) financial stability. 
B) rapid economic growth. 
C) political instability. 
D) stable prices. 
A) financial stability. 
B) rapid economic growth. 
C) political instability. 
D) stable prices.

Exam 2: An Overview of the Financial System

Bonds that are sold in a foreign country and are denominated in a currency other than that of the country in which it is sold are known as

Which of the following is a long-term financial instrument?

If the maturity of a debt instrument is less than one year,the debt is called

A financial market in which previously issued securities can be resold is called a ________ market.

Economies of scale enable financial institutions to

________ institutions are financial intermediaries that acquire funds at periodic intervals on a contractual basis.

An important function of secondary markets is to

Distinguish between direct finance and indirect finance.Which of these is the most important source of funds for corporations in the United States?

Which of the following instruments are traded in a capital market?

An important feature of money market mutual fund shares is

Which of the following do not provide charters?

The regulatory agency that sets reserve requirements for all banks is

The process of indirect finance using financial intermediaries is called

The concept of diversification is captured by the statement

Conflicts of interest are a type of ________ problem that can happen when an institution provides multiple services.

Which of the following is not a contractual savings institution?

The primary liabilities of depository institutions are

An example of the problem of ________ is when a corporation uses the funds raised from selling bonds to fund corporate expansion to pay for Caribbean cruises for all of its employees and their families.

The principal lender-savers are

A breakdown of financial markets can result in

Why Study Money, banking, and Financial Markets

What Is Money

Understanding Interest Rates

The Behavior of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Financial Crises

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Central Banks and the Federal Reserve System

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory,inflation and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

The ISLM Model

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