Question 1

The Securities Act of 1933

Accepted Answer

A)  required complete disclosure of relevant financial information for publicly offered securities in the primary market. 
B)  declared trading strategies to manipulate the prices of public secondary securities illegal. 
C)  imposed heavy penalties for insider trading. 
D)  required complete disclosure of relevant financial information for securities traded in the secondary market. 
E)  all of the above 
A)  required complete disclosure of relevant financial information for publicly offered securities in the primary market. 
B)  declared trading strategies to manipulate the prices of public secondary securities illegal. 
C)  imposed heavy penalties for insider trading. 
D)  required complete disclosure of relevant financial information for securities traded in the secondary market. 
E)  all of the above

Question 2

Which of the following is not a typical function of securities firms?

Accepted Answer

A)  provide brokerage services 
B)  provide underwriting services 
C)  accept deposits that are insured by the federal government and use the funds to provide loans to corporations 
D)  offer advice on mergers and other corporate restructurings. 
A)  provide brokerage services 
B)  provide underwriting services 
C)  accept deposits that are insured by the federal government and use the funds to provide loans to corporations 
D)  offer advice on mergers and other corporate restructurings.

Question 3

The foreign exchange market facilitates the exchange of:

Accepted Answer

A)  information between investors in different countries. 
B)  debt securities. 
C)  equity securities. 
D)  currencies. 
A)  information between investors in different countries. 
B)  debt securities. 
C)  equity securities. 
D)  currencies.

Question 4

Securities that are not as safe and liquid as other securities are never considered for investment by anyone.

Accepted Answer

A) True 
 B)False

Question 5

Systemic risk is the risk that a large decline in one stock's price could cause investors to sell their stock in other companies.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is a money market security?

Accepted Answer

A)  Treasury note 
B)  municipal bond 
C)  mortgage 
D)  commercial paper 
A)  Treasury note 
B)  municipal bond 
C)  mortgage 
D)  commercial paper

Question 7

The adoption of the euro increased business between European countries and created a more competitive environment in Europe.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not an issuer of bonds?

Accepted Answer

A)  households 
B)  corporations 
C)  the U.S. Treasury 
D)  government agencies 
A)  households 
B)  corporations 
C)  the U.S. Treasury 
D)  government agencies

Question 9

Valuing stocks is easier than valuing debt securities because stocks promise to provide investors with specific payments at regular intervals.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following transactions would not be considered a secondary market transaction?

Accepted Answer

A)  An individual investor purchases some existing shares of stock in Apple through her broker. 
B)  An institutional investor sells some Disney stock through its broker. 
C)  A firm that was privately held engages in an offering of stock to the public. 
D)  All of the above are secondary market transactions. 
A)  An individual investor purchases some existing shares of stock in Apple through her broker. 
B)  An institutional investor sells some Disney stock through its broker. 
C)  A firm that was privately held engages in an offering of stock to the public. 
D)  All of the above are secondary market transactions.

Question 11

Equity securities

Accepted Answer

A)  have a maturity. 
B)  pay interest on a periodic basis. 
C)  represent ownership in the issuer. 
D)  repay the principal amount at maturity. 
A)  have a maturity. 
B)  pay interest on a periodic basis. 
C)  represent ownership in the issuer. 
D)  repay the principal amount at maturity.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Common types of money market securities include negotiable certificates of deposit and Treasury bills.

Accepted Answer

A) True 
 B)False

Question 14

Since markets are efficient, institutional and individual investors should ignore the various investment instruments available.

Accepted Answer

A) True 
 B)False

Question 15

If security prices fully reflect all available information, the markets for these securities are

Accepted Answer

A)  efficient. 
B)  primary. 
C)  overvalued. 
D)  undervalued. 
A)  efficient. 
B)  primary. 
C)  overvalued. 
D)  undervalued.

Question 16

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 17

The Sarbanes-Oxley Act requires firms to provide complete and accurate financial information and imposes penalties on key executives of the firm if financial fraud is detected.

Accepted Answer

A) True 
 B)False

Question 18

Stock issued by a corporation is an example of a(n)

Accepted Answer

A)  debt security. 
B)  money market security. 
C)  equity security. 
D)  A and B 
A)  debt security. 
B)  money market security. 
C)  equity security. 
D)  A and B

Question 19

Debt securities issued by a small firm may be ________, meaning that _______ investors want to invest in those securities.

Accepted Answer

A)  liquid; many 
B)  liquid; not many 
C)  illiquid; not many 
D)  illiquid; many 
A)  liquid; many 
B)  liquid; not many 
C)  illiquid; not many 
D)  illiquid; many

Question 20

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

Exam 1: Role of Financial Markets and Institutions

The Securities Act of 1933

Which of the following is not a typical function of securities firms?

The foreign exchange market facilitates the exchange of:

Securities that are not as safe and liquid as other securities are never considered for investment by anyone.

Systemic risk is the risk that a large decline in one stock's price could cause investors to sell their stock in other companies.

Which of the following is a money market security?

The adoption of the euro increased business between European countries and created a more competitive environment in Europe.

Which of the following is not an issuer of bonds?

Valuing stocks is easier than valuing debt securities because stocks promise to provide investors with specific payments at regular intervals.

Which of the following transactions would not be considered a secondary market transaction?

Equity securities

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

Common types of money market securities include negotiable certificates of deposit and Treasury bills.

Since markets are efficient, institutional and individual investors should ignore the various investment instruments available.

If security prices fully reflect all available information, the markets for these securities are

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

The Sarbanes-Oxley Act requires firms to provide complete and accurate financial information and imposes penalties on key executives of the firm if financial fraud is detected.

Stock issued by a corporation is an example of a(n)

Debt securities issued by a small firm may be ________, meaning that _______ investors want to invest in those securities.

Which of the following is a nondepository financial institution?

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 Operations

Pension Fund Operations

Filters

Debt securities issued by a small firm may be __, meaning that _ investors want to invest in those securities.