Question 1

____ are classified as depository institutions.

Accepted Answer

A)  Credit unions 
B)  Pension funds 
C)  Finance companies 
D)  Securities firms 
A)  Credit unions 
B)  Pension funds 
C)  Finance companies 
D)  Securities firms

Question 2

____ are not considered capital market securities.

Accepted Answer

A)  Derivative securities 
B)  Treasury bonds 
C)  Corporate bonds 
D)  Equity securities 
E)  Mortgages 
A)  Derivative securities 
B)  Treasury bonds 
C)  Corporate bonds 
D)  Equity securities 
E)  Mortgages

Question 3

____ securities have a maturity of one year or less; ____ securities generally have relatively high liquidity.

Accepted Answer

A)  Money market; capital market 
B)  Money market; money market 
C)  Capital market; money market 
D)  Capital market; capital market 
A)  Money market; capital market 
B)  Money market; money market 
C)  Capital market; money market 
D)  Capital market; capital market

Question 4

Bonds commonly have maturities of one to three years.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not a reason why depository financial institutions are popular?

Accepted Answer

A)  They offer deposit accounts that can accommodate the amount and liquidity characteristics desired by most surplus units. 
B)  They repackage funds received from deposits to provide loans of the size and maturity desired by deficit units. 
C)  They accept the risk on loans provided. 
D)  They use their information resources to act as a broker, executing securities transactions between two parties. 
E)  They have more expertise than individual surplus units in evaluating the creditworthiness of deficit units. 
A)  They offer deposit accounts that can accommodate the amount and liquidity characteristics desired by most surplus units. 
B)  They repackage funds received from deposits to provide loans of the size and maturity desired by deficit units. 
C)  They accept the risk on loans provided. 
D)  They use their information resources to act as a broker, executing securities transactions between two parties. 
E)  They have more expertise than individual surplus units in evaluating the creditworthiness of deficit units.

Question 6

The main reason that depository institutions experienced financial problems during the credit crisis was their investment in:

Accepted Answer

A)  mortgages 
B)  money market securities. 
C)  stock 
D)  Treasury bonds. 
A)  mortgages 
B)  money market securities. 
C)  stock 
D)  Treasury bonds.

Question 7

financial markets are efficient, this implies that all securities should earn the same return.

Accepted Answer

A) True 
 B)False

Question 8

Funds are provided to the initial issuer of securities in the

Accepted Answer

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

Question 9

Commercial banks in aggregate have more assets than credit unions.

Accepted Answer

A) True 
 B)False

Question 10

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 11

Investors in equity securities may earn a return from

Accepted Answer

A)  coupon payments and the return of principal at the maturity date. 
B)  coupon payments and a capital gain when they sell the securities. 
C)  quarterly dividends (if paid) and a capital gain when they sell the securities. 
D)  quarterly dividends (if paid) and the return of principal at the maturity date. 
A)  coupon payments and the return of principal at the maturity date. 
B)  coupon payments and a capital gain when they sell the securities. 
C)  quarterly dividends (if paid) and a capital gain when they sell the securities. 
D)  quarterly dividends (if paid) and the return of principal at the maturity date.

Question 12

When a securities firm acts as a broker, it

Accepted Answer

A)  guarantees the issuer a specific price for newly issued securities. 
B)  makes a market in specific securities by adjusting its own inventory. 
C)  executes securities transactions between two parties. 
D)  purchases securities for its own account. 
A)  guarantees the issuer a specific price for newly issued securities. 
B)  makes a market in specific securities by adjusting its own inventory. 
C)  executes securities transactions between two parties. 
D)  purchases securities for its own account.

Question 13

When a securities firm acts as a(n) ____, it makes a market in specific securities by maintaining an inventory of those securities.

Accepted Answer

A)  adviser 
B)  dealer 
C)  broker 
D)  none of the above 
A)  adviser 
B)  dealer 
C)  broker 
D)  none of the above

____ are classified as depository institutions.

____ are not considered capital market securities.

securities have a maturity of one year or less; securities generally have relatively high liquidity.

Bonds commonly have maturities of one to three years.

Which of the following is not a reason why depository financial institutions are popular?

The main reason that depository institutions experienced financial problems during the credit crisis was their investment in:

financial markets are efficient, this implies that all securities should earn the same return.

Funds are provided to the initial issuer of securities in the

Commercial banks in aggregate have more assets than credit unions.

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

Investors in equity securities may earn a return from

When a securities firm acts as a broker, it

When a securities firm acts as a(n) ____, it makes a market in specific securities by maintaining an inventory of those securities.

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

Exam 1: Role of Financial Markets and Institutions

____ are classified as depository institutions.

____ are not considered capital market securities.

____ securities have a maturity of one year or less; ____ securities generally have relatively high liquidity.

Bonds commonly have maturities of one to three years.

Which of the following is not a reason why depository financial institutions are popular?

The main reason that depository institutions experienced financial problems during the credit crisis was their investment in:

financial markets are efficient, this implies that all securities should earn the same return.

Funds are provided to the initial issuer of securities in the

Commercial banks in aggregate have more assets than credit unions.

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

Investors in equity securities may earn a return from

When a securities firm acts as a broker, it

When a securities firm acts as a(n) ____, it makes a market in specific securities by maintaining an inventory of those securities.

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

securities have a maturity of one year or less; securities generally have relatively high liquidity.