Exam 2: An Overview of the Financial System

Asymmetric information is a universal problem.This would suggest that financial regulations

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

Equity instruments are traded in the ________ market.

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

Forty or so dealers establish a "market" in these securities by standing ready to buy and sell them.

Collateral is ________ the lender receives if the borrower does not pay back the loan.

Describe the two methods of organizing a secondary market.

Money market mutual fund shares function like

A financial market in which only short-term debt instruments are traded is called the ________ market.

Financial institutions that accept deposits and make loans are called ________ institutions.

Studies of the major developed countries show that when businesses go looking for funds to finance their activities they usually obtain these funds from

Financial intermediaries provide customers with liquidity services. Liquidity services

Although the dominance of ________ over ________ is clear in all countries,the relative importance of bond versus stock markets differs widely.

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

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

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

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

Typically,borrowers have superior information relative to lenders about the potential returns and risks associated with an investment project.The difference in information is called

A liquid asset is

Financial markets improve economic welfare because