Question 1

Which of the following financial assets is least likely to have an active secondary market?

Accepted Answer

A)  Common stock of a large public firm 
B)  Bank loans made to smaller firms 
C)  Bonds of a major, multinational corporation 
D) Debt issued by the U.S. Treasury 
A)  Common stock of a large public firm 
B)  Bank loans made to smaller firms 
C)  Bonds of a major, multinational corporation 
D) Debt issued by the U.S. Treasury B

Question 2

From June 2001 to June 2006, housing prices in the United States doubled.

Accepted Answer

A) True 
 B)False  True

Question 3

The key to the banks' ability to make illiquid loans is their ability to pool liquid deposits from thousands of depositors.

Accepted Answer

A) True 
 B)False  True

Question 4

Insurance companies can usually cover the claims of policyholders because:

Accepted Answer

A)  the incidence of claims normally averages out across all policyholders. 
B)  they issue a very limited number of policies. 
C)  they are fully insured by the U.S. government. 
D) their stockholders will cover any cash shortfalls encountered by the company. 
A)  the incidence of claims normally averages out across all policyholders. 
B)  they issue a very limited number of policies. 
C)  they are fully insured by the U.S. government. 
D) their stockholders will cover any cash shortfalls encountered by the company.

Question 5

Households hold more than half of U.S. corporate equities.

Accepted Answer

A) True 
 B)False

Question 6

Foreign currencies are traded:

Accepted Answer

A)  only by banks in New York and London. 
B)  over the counter. 
C)  on both the NYSE and NASDAQ. 
D) on the Intercontinental Exchange. 
A)  only by banks in New York and London. 
B)  over the counter. 
C)  on both the NYSE and NASDAQ. 
D) on the Intercontinental Exchange.

Question 7

"Reinvestment" means:

Accepted Answer

A)  new investment in new operations. 
B)  additional investment in existing operations. 
C)  new investment by new shareholders. 
D) additional investment by existing shareholders. 
A)  new investment in new operations. 
B)  additional investment in existing operations. 
C)  new investment by new shareholders. 
D) additional investment by existing shareholders.

Question 8

When corporations need to raise funds through stock issues, they rely on the:

Accepted Answer

A)  primary market. 
B)  secondary market. 
C)  tertiary market. 
D) centralized NASDAQ exchange. 
A)  primary market. 
B)  secondary market. 
C)  tertiary market. 
D) centralized NASDAQ exchange.

Question 9

Smaller businesses are especially dependent upon internally generated funds.

Accepted Answer

A) True 
 B)False

Question 10

What are the advantages of investing indirectly in stocks and bonds via mutual funds and pension funds?

Accepted Answer

Mutual funds pool savings from many indi

Question 11

During the Financial Crisis of 2007-2009, the U.S. government bailed out all firms in danger of failing.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following functions does not require financial markets?

Accepted Answer

A)  Transporting of cash across time 
B)  Provision of liquidity 
C)  Risk reduction by investment in diversified portfolios 
D) Provision of pricing information 
A)  Transporting of cash across time 
B)  Provision of liquidity 
C)  Risk reduction by investment in diversified portfolios 
D) Provision of pricing information

Question 13

One reason suggesting that banks may be better than individuals at matching lenders to borrowers is that banks:

Accepted Answer

A)  can shift loan risk to their deposit customers. 
B)  are motivated by the potential for profit. 
C)  do not have any income tax liability. 
D) have information to evaluate creditworthiness. 
A)  can shift loan risk to their deposit customers. 
B)  are motivated by the potential for profit. 
C)  do not have any income tax liability. 
D) have information to evaluate creditworthiness.

Question 14

Firms can often determine the current price of any commodities they use in their production process by consulting the price quotes provided by:

Accepted Answer

A)  their investment bank. 
B)  the New York Mercantile Exchange. 
C)  the New York Stock Exchange. 
D) the Standard & Poor's market indexes. 
A)  their investment bank. 
B)  the New York Mercantile Exchange. 
C)  the New York Stock Exchange. 
D) the Standard & Poor's market indexes.

Question 15

Which one of these is generally a key difference between U.S. and foreign commercial banks?

Accepted Answer

A)  Pooling and investing savings 
B)  Accepting investor deposits 
C)  Providing debt financing to corporations 
D) Making equity investments in corporations 
A)  Pooling and investing savings 
B)  Accepting investor deposits 
C)  Providing debt financing to corporations 
D) Making equity investments in corporations

Question 16

Which one of these was a major cause of the deep recession and severe unemployment throughout much of Europe that followed the financial crisis of 2007-2009?

Accepted Answer

A)  Government actions to raise interest rates 
B)  Investor speculation 
C)  Risk-adverse investor attitudes 
D) Government actions to lower government debt 
A)  Government actions to raise interest rates 
B)  Investor speculation 
C)  Risk-adverse investor attitudes 
D) Government actions to lower government debt

Question 17

Corporate financing comes ultimately from:

Accepted Answer

A)  savings by households and foreign investors. 
B)  cash generated from the firm's operations. 
C)  the financial markets and intermediaries. 
D) the issue of shares in the firm. 
A)  savings by households and foreign investors. 
B)  cash generated from the firm's operations. 
C)  the financial markets and intermediaries. 
D) the issue of shares in the firm.

Question 18

One contributing factor to the 2007-2009 financial crisis was the structuring of mortgage loans with:

Accepted Answer

A)  high initial payments, offset by significantly lower payments later. 
B)  low initial payments, offset by significantly higher payments later. 
C)  no initial payments, offset by significantly high payments later. 
D) equal payments over the life of the loan. 
A)  high initial payments, offset by significantly lower payments later. 
B)  low initial payments, offset by significantly higher payments later. 
C)  no initial payments, offset by significantly high payments later. 
D) equal payments over the life of the loan.

Question 19

The markets for long-term debt and equity are called capital markets.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following are both a financial intermediary and a financial institution?

Accepted Answer

A)  Mutual funds 
B)  Pension funds 
C)  Insurance companies 
D) Hedge funds 
A)  Mutual funds 
B)  Pension funds 
C)  Insurance companies 
D) Hedge funds

Exam 2: Financial Markets and Institutions

Which of the following financial assets is least likely to have an active secondary market?

From June 2001 to June 2006, housing prices in the United States doubled.

The key to the banks' ability to make illiquid loans is their ability to pool liquid deposits from thousands of depositors.

Insurance companies can usually cover the claims of policyholders because:

Households hold more than half of U.S. corporate equities.

Foreign currencies are traded:

"Reinvestment" means:

When corporations need to raise funds through stock issues, they rely on the:

Smaller businesses are especially dependent upon internally generated funds.

What are the advantages of investing indirectly in stocks and bonds via mutual funds and pension funds?

During the Financial Crisis of 2007-2009, the U.S. government bailed out all firms in danger of failing.

Which of the following functions does not require financial markets?

One reason suggesting that banks may be better than individuals at matching lenders to borrowers is that banks:

Firms can often determine the current price of any commodities they use in their production process by consulting the price quotes provided by:

Which one of these is generally a key difference between U.S. and foreign commercial banks?

Which one of these was a major cause of the deep recession and severe unemployment throughout much of Europe that followed the financial crisis of 2007-2009?

Corporate financing comes ultimately from:

One contributing factor to the 2007-2009 financial crisis was the structuring of mortgage loans with:

The markets for long-term debt and equity are called capital markets.

Which of the following are both a financial intermediary and a financial institution?

Goals and Governance of the Corporation

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash-Flow Analysis to Make Investment Decisions

Project Analysis

Introduction to Risk, Return, and the Opportunity Cost of Capital

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing

How Corporations Raise Venture Capital and Issue Securities

Debt Policy

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Working Capital Management

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Filters