Question 1

If the maturity of a debt instrument is less than one year, the debt is called ________.

Accepted Answer

A) short-term 
B) intermediate-term 
C) long-term 
D) prima-term 
A) short-term 
B) intermediate-term 
C) long-term 
D) prima-term

Question 2

Describe the difference between the money market and the capital market.

Accepted Answer

The money market in which shor

Question 3

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 4

A short-term debt instrument issued by well-known corporations is called ________.

Accepted Answer

A) commercial paper 
B) corporate bonds 
C) municipal bonds 
D) commercial mortgages 
A) commercial paper 
B) corporate bonds 
C) municipal bonds 
D) commercial mortgages

Question 5

Which of the following are investment intermediaries?

Accepted Answer

A) Life insurance companies 
B) Mutual funds 
C) Pension funds 
D) Government retirement funds 
A) Life insurance companies 
B) Mutual funds 
C) Pension funds 
D) Government retirement funds

Question 6

Which of the following can be described as direct finance?

Accepted Answer

A) You take out a mortgage from your local bank. 
B) You borrow $2500 from a friend. 
C) You buy shares of common stock in the secondary market. 
D) You buy shares in a mutual fund. 
A) You take out a mortgage from your local bank. 
B) You borrow $2500 from a friend. 
C) You buy shares of common stock in the secondary market. 
D) You buy shares in a mutual fund.

Question 7

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 ________, and it creates the ________ problem.

Accepted Answer

A) asymmetric information; risk sharing 
B) asymmetric information; adverse selection 
C) adverse selection; risk sharing 
D) moral hazard; adverse selection 
A) asymmetric information; risk sharing 
B) asymmetric information; adverse selection 
C) adverse selection; risk sharing 
D) moral hazard; adverse selection

Question 8

Which of the following benefit directly from any increase in the corporation's profitability?

Accepted Answer

A) A bond holder 
B) A commercial paper holder 
C) A shareholder 
D) A T-bill holder 
A) A bond holder 
B) A commercial paper holder 
C) A shareholder 
D) A T-bill holder

Question 9

Long-term debt has a maturity that is ________.

Accepted Answer

A) between one and ten years 
B) less than a year 
C) between five and ten years 
D) ten years or longer 
A) between one and ten years 
B) less than a year 
C) between five and ten years 
D) ten years or longer

Question 10

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

Accepted Answer

A) Bank commercial loans 
B) Commercial paper 
C) Provincial government bonds 
D) Residential mortgages 
A) Bank commercial loans 
B) Commercial paper 
C) Provincial government bonds 
D) Residential mortgages

Question 11

Which of the following are short-term financial instruments?

Accepted Answer

A) A repurchase agreement 
B) A share of Walt Disney Corporation stock 
C) A Treasury note with a maturity of four years 
D) A residential mortgage 
A) A repurchase agreement 
B) A share of Walt Disney Corporation stock 
C) A Treasury note with a maturity of four years 
D) A residential mortgage

Question 12

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

Question 13

When an investment bank ________ securities, it guarantees a price for a corporation's securities and then sells them to the public.

Accepted Answer

A) underwrites 
B) undertakes 
C) overwrites 
D) overtakes 
A) underwrites 
B) undertakes 
C) overwrites 
D) overtakes

Question 14

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 15

The primary purpose of deposit insurance is to ________.

Accepted Answer

A) improve the flow of information to investors 
B) prevent banking panics 
C) protect bank shareholders against losses 
D) protect bank employees from unemployment 
A) improve the flow of information to investors 
B) prevent banking panics 
C) protect bank shareholders against losses 
D) protect bank employees from unemployment

Question 16

Depository institutions include ________.

Accepted Answer

A) banks, mutual funds, and insurance companies 
B) banks, trust and mortgage loan companies, and credit unions 
C) finance companies, mutual funds, and money market funds 
D) pension funds, mutual funds, and banks 
A) banks, mutual funds, and insurance companies 
B) banks, trust and mortgage loan companies, and credit unions 
C) finance companies, mutual funds, and money market funds 
D) pension funds, mutual funds, and banks

Question 17

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

Accepted Answer

A) in industrial countries are an unqualified failure 
B) differ significantly around the world 
C) in industrialized nations are similar 
D) are unnecessary 
A) in industrial countries are an unqualified failure 
B) differ significantly around the world 
C) in industrialized nations are similar 
D) are unnecessary

Question 18

The liquidity of assets in contractual savings institutions ________.

Accepted Answer

A) is an important consideration 
B) is not an important consideration 
C) is restricted 
D) is an undertaking 
A) is an important consideration 
B) is not an important consideration 
C) is restricted 
D) is an undertaking

Question 19

Which of the following statements about the characteristics of debt and equities is true?

Accepted Answer

A) They can both be long-term financial instruments. 
B) Bond holders are residual claimants. 
C) The income from bonds is typically more variable than that from equities. 
D) Bonds pay dividends. 
A) They can both be long-term financial instruments. 
B) Bond holders are residual claimants. 
C) The income from bonds is typically more variable than that from equities. 
D) Bonds pay dividends.

Question 20

Which of the following is a contractual savings institution?

Accepted Answer

A) A life insurance company 
B) A credit union 
C) A savings and loan association 
D) A mutual fund 
A) A life insurance company 
B) A credit union 
C) A savings and loan association 
D) A mutual fund

Exam 2: An Overview of the Financial System

If the maturity of a debt instrument is less than one year, the debt is called ________.

Describe the difference between the money market and the capital market.

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

A short-term debt instrument issued by well-known corporations is called ________.

Which of the following are investment intermediaries?

Which of the following can be described as direct finance?

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 ________, and it creates the ________ problem.

Which of the following benefit directly from any increase in the corporation's profitability?

Long-term debt has a maturity that is ________.

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

Which of the following are short-term financial instruments?

Contractual savings institutions include ________.

When an investment bank ________ securities, it guarantees a price for a corporation's securities and then sells them to the public.

The primary assets of money market mutual funds are ________.

The primary purpose of deposit insurance is to ________.

Depository institutions include ________.

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

The liquidity of assets in contractual savings institutions ________.

Which of the following statements about the characteristics of debt and equities is true?

Which of the following is a contractual savings institution?

Why Study Money, Banking, and Financial Markets

What Is Money

Understanding Interest Rates

The Behaviour 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

Financial Crises

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

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 Markets

The ISLM Model

Non-Bank Finance

Filters

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 , and it creates the problem.