Exam 3: Financial Instruments, Financial Markets, and Financial Institutions

As we saw in the chapter, some financial instruments are used primarily to transfer risk.Explain how a bread maker can use a financial instrument to transfer the following risk: the bread maker has the opportunity to provide bread to a local army base.The base figures they will need 10,000 loaves of bread each week, or roughly 500,000 for a year.The problem is the baker must quote a price for the entire year.The baker would really like to have this contract but he realizes that fluctuating input prices (specifically wheat) could result in significant losses.

Which of the following is not a financial intermediary?

Financial instruments and money share which of the following characteristics?

Why didn't the over-the-counter (OTC) exchanges suffer the disruption of service that the New York Stock Exchange did after the terrorist attacks of September 11, 2001?

Is the obtaining of a car loan a primary or secondary market transaction?

Consider a typical individual who owns the following financial instruments: A life insurance policy for $250,000; a certificate of deposit for $10,000; homeowner's and auto insurance policies; $50,000 in a mutual fund, and $150,000 in her pension fund at work.Which of these are instruments used primarily as stores of value and which are being used to transfer risk?

Explain how the introduction of asset-backed securities has allowed investors to take advantage of higher returns from loans that most investors could never make on their own.

The better the information provided to financial markets the:

Credit cards usually charge higher rates of interest than most other forms of lending.In terms of information, collateral and monitoring, how might these higher rates be explained?

Asymmetric information in financial markets is a potential problem usually resulting from:

Which of the following is not true of over-the-counter markets?

Why might a life insurance company insist on an individual having a physical exam before agreeing to provide life insurance to the individual?

A financial intermediary:

Financial instruments used primarily as stores of value include each of the following, except:

Sue has a checking account at the First National Bank; her checking account is a(n):

Today the primary distinction between direct and indirect finance is in:

The New York Stock Exchange (NYSE) originated as:

Newly issued U.S.Treasury Securities are sold in:

Financial intermediaries pool funds of:

If financial markets didn't exist: