Question 1

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

Accepted Answer

A) You make a loan to your neighbor. 
B) A corporation buys a share of common stock issued by another corporation in the primary market. 
C) You buy a U.S. Treasury bill from the U.S. Treasury at TreasuryDirect.gov. 
D) You make a deposit at a bank. 
A) You make a loan to your neighbor. 
B) A corporation buys a share of common stock issued by another corporation in the primary market. 
C) You buy a U.S. Treasury bill from the U.S. Treasury at TreasuryDirect.gov. 
D) You make a deposit at a bank. D

Question 2

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

Accepted Answer

A) bank commercial loans 
B) commercial paper 
C) state and local government bonds 
D) residential mortgages 
A) bank commercial loans 
B) commercial paper 
C) state and local government bonds 
D) residential mortgages B

Question 3

Financial intermediaries have developed expertise in monitoring the parties they lend to,thus reducing losses due to

Accepted Answer

A) moral hazard. 
B) adverse selection. 
C) free-riding. 
D) economies of scope. 
A) moral hazard. 
B) adverse selection. 
C) free-riding. 
D) economies of scope. A

Question 4

The primary assets of money market mutual funds are

Accepted Answer

A) stocks. 
B) bonds. 
C) money market instruments. 
D) deposits. 
A) stocks. 
B) bonds. 
C) money market instruments. 
D) deposits.

Question 5

The primary assets of a pension fund are

Accepted Answer

A) money market instruments. 
B) corporate bonds and stock. 
C) consumer and business loans. 
D) mortgages. 
A) money market instruments. 
B) corporate bonds and stock. 
C) consumer and business loans. 
D) mortgages.

Question 6

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 7

The higher a security's price in the secondary market the ________ funds a firm can raise by selling securities in the ________ market.

Accepted Answer

A) more;primary 
B) more;secondary 
C) less;primary 
D) less;secondary 
A) more;primary 
B) more;secondary 
C) less;primary 
D) less;secondary

Question 8

Equity and debt instruments with maturities greater than one year are called ________ market instruments.

Accepted Answer

A) capital 
B) money 
C) federal 
D) benchmark 
A) capital 
B) money 
C) federal 
D) benchmark

Question 9

A liquid asset is

Accepted Answer

A) an asset that can easily and quickly be sold to raise cash. 
B) a share of an ocean resort. 
C) difficult to resell. 
D) always sold in an over-the-counter market. 
A) an asset that can easily and quickly be sold to raise cash. 
B) a share of an ocean resort. 
C) difficult to resell. 
D) always sold in an over-the-counter market.

Question 10

Reducing risk through the purchase of assets whose returns do not always move together is

Accepted Answer

A) diversification. 
B) intermediation. 
C) intervention. 
D) discounting. 
A) diversification. 
B) intermediation. 
C) intervention. 
D) discounting.

Question 11

Financial markets have the basic function of

Accepted Answer

A) getting people with funds to lend together with people who want to borrow funds. 
B) assuring that the swings in the business cycle are less pronounced. 
C) assuring that governments need never resort to printing money. 
D) providing a risk-free repository of spending power. 
A) getting people with funds to lend together with people who want to borrow funds. 
B) assuring that the swings in the business cycle are less pronounced. 
C) assuring that governments need never resort to printing money. 
D) providing a risk-free repository of spending power.

Question 12

If Toyota (headquarters in Japan)sells a $1,000 bond in the United States,the bond is a

Accepted Answer

A) foreign bond. 
B) Eurobond. 
C) Tokyo bond. 
D) currency bond. 
A) foreign bond. 
B) Eurobond. 
C) Tokyo bond. 
D) currency bond.

Question 13

Bonds that are sold in a foreign country and are denominated in the country's currency in which they are 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 14

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 15

Federal funds are

Accepted Answer

A) funds raised by the federal government in the bond market. 
B) loans made by the Federal Reserve System to banks. 
C) loans made by banks to the Federal Reserve System. 
D) loans made by banks to each other. 
A) funds raised by the federal government in the bond market. 
B) loans made by the Federal Reserve System to banks. 
C) loans made by banks to the Federal Reserve System. 
D) loans made by banks to each other.

Question 16

Secondary markets make financial instruments more

Accepted Answer

A) solid. 
B) vapid. 
C) liquid. 
D) risky. 
A) solid. 
B) vapid. 
C) liquid. 
D) risky.

Question 17

The time and money spent in carrying out financial transactions are called

Accepted Answer

A) economies of scale. 
B) financial intermediation. 
C) liquidity services. 
D) transaction costs. 
A) economies of scale. 
B) financial intermediation. 
C) liquidity services. 
D) transaction costs.

Question 18

Which of the following statements about financial markets and securities is TRUE?

Accepted Answer

A) Many common stocks are traded over-the-counter,although the largest corporations usually have their shares traded at organized stock exchanges such as the New York Stock Exchange. 
B) As a corporation gets a share of the broker's commission,a corporation acquires new funds whenever its securities are sold. 
C) Capital market securities are usually more widely traded than shorter-term securities and so tend to be more liquid. 
D) Prices of capital market securities are usually more stable than prices of money market securities,and so are often used to hold temporary surplus funds of corporations. 
A) Many common stocks are traded over-the-counter,although the largest corporations usually have their shares traded at organized stock exchanges such as the New York Stock Exchange. 
B) As a corporation gets a share of the broker's commission,a corporation acquires new funds whenever its securities are sold. 
C) Capital market securities are usually more widely traded than shorter-term securities and so tend to be more liquid. 
D) Prices of capital market securities are usually more stable than prices of money market securities,and so are often used to hold temporary surplus funds of corporations.

Question 19

Corporations receive funds when their stock is sold in the primary market. Why do corporations pay attention to what is happening to their stock in the secondary market?

Accepted Answer

The existence of the secondary market ma

Question 20

Contractual savings institutions include

Accepted Answer

A) mutual savings banks. 
B) money market mutual funds. 
C) commercial banks. 
D) life insurance companies. 
A) mutual savings banks. 
B) money market mutual funds. 
C) commercial banks. 
D) life insurance companies.

Exam 2: An Overview of the Financial System

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

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

Financial intermediaries have developed expertise in monitoring the parties they lend to,thus reducing losses due to

The primary assets of money market mutual funds are

The primary assets of a pension fund are

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

The higher a security's price in the secondary market the ________ funds a firm can raise by selling securities in the ________ market.

Equity and debt instruments with maturities greater than one year are called ________ market instruments.

A liquid asset is

Reducing risk through the purchase of assets whose returns do not always move together is

Financial markets have the basic function of

If Toyota (headquarters in Japan)sells a $1,000 bond in the United States,the bond is a

Bonds that are sold in a foreign country and are denominated in the country's currency in which they are sold are known as

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

Federal funds are

Secondary markets make financial instruments more

The time and money spent in carrying out financial transactions are called

Which of the following statements about financial markets and securities is TRUE?

Corporations receive funds when their stock is sold in the primary market. Why do corporations pay attention to what is happening to their stock in the secondary market?

Contractual savings institutions include

Why Study Money, banking, and Financial Markets

What Is Money

The Meaning of 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

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Financial Crises

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

Financial Crises in Emerging Market Economies

The ISLM Model

Filters

The higher a security's price in the secondary market the funds a firm can raise by selling securities in the market.