Exam 16: The Financial System

The federal government generally issues the municipal bonds.

Which form of stock owner would receive dividend payments first?

Securities represent obligations on the part of issuers-businesses and governments-to provide purchasers with expected or stated returns on the funds invested or loaned.

What feature gives the bondholder or preferred stockholder the right to exchange the bond or preferred stock for a fixed number of shares of common stock?

The _____ involves the direct trading of exchange-listed stocks off the floor of the exchange (in the case of NYSE-listed stocks)or outside the network (in the case of NASDAQ-listed stocks).

Money market instruments are purchased by investors when they are in need of a quick resell and are generally high-risk securities.

Operating under severe recessionary conditions,the Federal Reserve System decides to reduce its reserve requirements from the current level of 9% to 7.5%.Which of the following is likely to happen following the Fed's move?

The market interest rate does not have any effect on bond prices.

Corporate bonds are a diverse group and often vary based on the _____ that backs it.

The ___ establishes and updates rules to ensure that member brokers perform their basic functions honestly and fairly.

M1 consists of currency in circulation and balances in bank checking accounts.

_________ would invest the greatest percentage of its assets in common stocks and other long-term investments.

Preferred stockholders receive fixed dividends.

Which of the following is not one of the four major policy tools the Fed has for controlling the growth in the supply of money and credit?

Generally,commercial paper is considered a very high-risk security.

A local government in Montana issued bonds to the general public to build a community park in the locality.The primary objective of the proposed community park is to enhance the green cover in the locality.Which of the following best describes the bonds issued in this scenario?

What type of financial institution raises money from investors by selling shares?

Raising the reserve requirement tends to increase the supply of money,thereby lowering interest rates.

Other things being equal,as interest rate rises,the price of a bond

If the Fed reduced reserve requirements,