Question 1

In recent years, financial institutions have consolidated to capitalize on economies of scale and on economies of scope.

Accepted Answer

A) True 
 B)False

Question 2

The creditors in the federal funds market are

Accepted Answer

A) households. 
B) depository institutions. 
C) firms. 
D) government agencies. 
A) households. 
B) depository institutions. 
C) firms. 
D) government agencies.

Question 3

Which of the following is a nondepository financial institution?

Accepted Answer

A) savings bank 
B) commercial bank 
C) savings and loan association 
D) mutual fund 
A) savings bank 
B) commercial bank 
C) savings and loan association 
D) mutual fund

Question 4

An asymmetric information problem arises when one party to a transaction has information that is not available to the other party, as when a corporation fails to tell investors the full extent of its losses.

Accepted Answer

A) True 
 B)False

Question 5

Securities represent a claim on the issuer.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is incorrect?

Accepted Answer

A) Financial markets attract funds from investors and channel the funds to corporations. 
B) Money markets enable corporations to borrow funds on a short-term basis so that they can support their existing operations. 
C) Financial institutions serve solely as intermediaries with the financial markets and never serve as investors. 
D) Investors seek to invest their funds in the stock of firms that are presently undervalued and have much potential to improve. 
A) Financial markets attract funds from investors and channel the funds to corporations. 
B) Money markets enable corporations to borrow funds on a short-term basis so that they can support their existing operations. 
C) Financial institutions serve solely as intermediaries with the financial markets and never serve as investors. 
D) Investors seek to invest their funds in the stock of firms that are presently undervalued and have much potential to improve.

Question 7

By requiring full disclosure of information, securities laws prevent investors from making poor investment decisions.

Accepted Answer

A) True 
 B)False

Question 8

If financial markets were ____, all information about any securities for sale in primary and secondary markets would be continuously and freely available to investors.

Accepted Answer

A) efficient 
B) inefficient 
C) perfect 
D) imperfect 
A) efficient 
B) inefficient 
C) perfect 
D) imperfect

Question 9

Commercial banks in aggregate have more assets than credit unions.

Accepted Answer

A) True 
 B)False

Question 10

____ involve(s)decisions such as how much funding to obtain and what types of securities to issue when financing operations.

Accepted Answer

A) Corporate finance 
B) Investment management 
C) Financial markets and institutions 
D) None of these are correct. 
A) Corporate finance 
B) Investment management 
C) Financial markets and institutions 
D) None of these are correct.

Question 11

When security prices fully reflect all available information, the markets for these securities are said to be efficient.

Accepted Answer

A) True 
 B)False

Question 12

Households with ____ are served by ____.

Accepted Answer

A) deficient funds; depository institutions and finance companies 
B) deficient funds; finance companies only 
C) savings; finance companies only 
D) savings; pension funds and finance companies 
A) deficient funds; depository institutions and finance companies 
B) deficient funds; finance companies only 
C) savings; finance companies only 
D) savings; pension funds and finance companies

Question 13

Institutional investors not only provide financial support to companies but also exercise some degree of corporate control over them.

Accepted Answer

A) True 
 B)False

Question 14

The risk that financial problems could spread among financial institutions and across financial markets, causing a collapse of the financial system, is known as

Accepted Answer

A) systemic risk. 
B) leverage risk. 
C) financial meltdown risk. 
D) credit risk. 
A) systemic risk. 
B) leverage risk. 
C) financial meltdown risk. 
D) credit risk.

Question 15

Common types of capital market securities include Treasury bills and commercial paper.

Accepted Answer

A) True 
 B)False

Question 16

The total asset value of savings institutions is larger than that of commercial banks.

Accepted Answer

A) True 
 B)False

Question 17

Financial market participants who provide funds are called

Accepted Answer

A) deficit units. 
B) surplus units. 
C) primary units. 
D) secondary units. 
A) deficit units. 
B) surplus units. 
C) primary units. 
D) secondary units.

Question 18

Capital market securities are commonly issued in order to finance the purchase of assets such as buildings, equipment, or machinery.

Accepted Answer

A) True 
 B)False

Question 19

In aggregate, ____ are the most dominant depository institution, with more total assets than other depository institutions.

Accepted Answer

A) commercial banks 
B) savings banks 
C) credit unions 
D) S&Ls 
A) commercial banks 
B) savings banks 
C) credit unions 
D) S&Ls

Question 20

Most mutual funds raise funds by issuing securities and then lend the funds to individuals and small businesses.

Accepted Answer

A) True 
 B)False

Exam 1: Role of Financial Markets and Institutions

In recent years, financial institutions have consolidated to capitalize on economies of scale and on economies of scope.

The creditors in the federal funds market are

Which of the following is a nondepository financial institution?

An asymmetric information problem arises when one party to a transaction has information that is not available to the other party, as when a corporation fails to tell investors the full extent of its losses.

Securities represent a claim on the issuer.

Which of the following statements is incorrect?

By requiring full disclosure of information, securities laws prevent investors from making poor investment decisions.

If financial markets were ____, all information about any securities for sale in primary and secondary markets would be continuously and freely available to investors.

Commercial banks in aggregate have more assets than credit unions.

____ involve(s)decisions such as how much funding to obtain and what types of securities to issue when financing operations.

When security prices fully reflect all available information, the markets for these securities are said to be efficient.

Households with ____ are served by ____.

Institutional investors not only provide financial support to companies but also exercise some degree of corporate control over them.

The risk that financial problems could spread among financial institutions and across financial markets, causing a collapse of the financial system, is known as

Common types of capital market securities include Treasury bills and commercial paper.

The total asset value of savings institutions is larger than that of commercial banks.

Financial market participants who provide funds are called

Capital market securities are commonly issued in order to finance the purchase of assets such as buildings, equipment, or machinery.

In aggregate, ____ are the most dominant depository institution, with more total assets than other depository institutions.

Most mutual funds raise funds by issuing securities and then lend the funds to individuals and small businesses.

Determination of Interest Rates

Structure of Interest Rates

Functions of the Fed

Monetary Policy

Money Markets

Bond Markets

Bond Valuation and Risk

Mortgage Markets

Stock Offerings and Investor Monitoring

Stock Valuation and Risk

Market Microstructure and Strategies

Financial Futures Markets

Options Markets

Swap Markets

Foreign Exchange Derivative Markets

Commercial Bank Operations

Bank Regulation

Bank Management

Bank Performance

Thrift Operations

Finance Company Operations

Mutual Fund Operations

Securities Operations

Insurance and Pension Fund Operations

Pension Fund Operations

Filters

Households with are served by .