Question 1

Which of the following are primary markets?

Accepted Answer

A)  The New York Stock Exchange 
B)  The U.S. government bond market 
C)  The over-the-counter stock market 
D)  The options markets 
E)  None of the above 
A)  The New York Stock Exchange 
B)  The U.S. government bond market 
C)  The over-the-counter stock market 
D)  The options markets 
E)  None of the above E

Question 2

An investor who puts all her funds into one asset ________ her portfolio's ________.

Accepted Answer

A)  increases; diversification 
B)  decreases; diversification 
C)  increases; average return 
D)  decreases; average return 
A)  increases; diversification 
B)  decreases; diversification 
C)  increases; average return 
D)  decreases; average return B

Question 3

Asymmetric information can lead to the widespread collapse of financial intermediaries,referred as financial ________.

Accepted Answer

A)  panic 
B)  bubble 
C)  asset 
D)  transaction 
A)  panic 
B)  bubble 
C)  asset 
D)  transaction A

Question 4

The government agency that insures each depositor at a commercial bank,savings and loan association,or mutual savings bank up to a loss of $100,000 per account ($250,000 for individual retirement accounts)is the Securities and Exchange Commission (SEC).

Accepted Answer

A) True 
 B)False

Question 5

Financial markets have the basic function of

Accepted Answer

A)  bringing together people with funds to lend and people who want to borrow funds. 
B)  assuring that the swings in the business cycle are less pronounced. 
C)  assuring that governments need never resort to printing money. 
D)  both A and B of the above. 
E)  both B and C of the above. 
A)  bringing together people with funds to lend and people who want to borrow funds. 
B)  assuring that the swings in the business cycle are less pronounced. 
C)  assuring that governments need never resort to printing money. 
D)  both A and B of the above. 
E)  both B and C of the above.

Question 6

Which of the following financial intermediaries are depository institutions?

Accepted Answer

A)  A savings and loan association 
B)  A commercial bank 
C)  A credit union 
D)  All of the above 
E)  Only A and C of the above 
A)  A savings and loan association 
B)  A commercial bank 
C)  A credit union 
D)  All of the above 
E)  Only A and C of the above

Question 7

Bonds that are sold in a foreign country and are denominated in a currency other than that of the country in which they are sold are known as

Accepted Answer

A)  foreign bonds. 
B)  Eurobonds. 
C)  Eurocurrencies. 
D)  Eurodollars. 
A)  foreign bonds. 
B)  Eurobonds. 
C)  Eurocurrencies. 
D)  Eurodollars.

Question 8

When the lender and the borrower have different amounts of information regarding a transaction,________ is said to exist.

Accepted Answer

A)  asymmetric information 
B)  adverse selection 
C)  moral hazard 
D)  fraud 
A)  asymmetric information 
B)  adverse selection 
C)  moral hazard 
D)  fraud

Question 9

The money market is the market in which ________ are traded.

Accepted Answer

A)  new issues of securities 
B)  previously issued securities 
C)  short-term debt instruments 
D)  long-term debt and equity instruments 
A)  new issues of securities 
B)  previously issued securities 
C)  short-term debt instruments 
D)  long-term debt and equity instruments

Question 10

Bonds that are sold in a foreign country and are denominated in that country's currency are known as

Accepted Answer

A)  foreign bonds. 
B)  Eurobonds. 
C)  Eurocurrencies. 
D)  Eurodollars. 
A)  foreign bonds. 
B)  Eurobonds. 
C)  Eurocurrencies. 
D)  Eurodollars.

Question 11

A pension fund is not a contractual savings institution.

Accepted Answer

A) True 
 B)False

Question 12

In financial markets,lenders typically have inferior information about potential returns and risks associated with any investment project.This difference in information is called

Accepted Answer

A)  comparative informational disadvantage. 
B)  asymmetric information. 
C)  variant information. 
D)  caveat venditor. 
A)  comparative informational disadvantage. 
B)  asymmetric information. 
C)  variant information. 
D)  caveat venditor.

Question 13

A bond denominated in euros and issued in a country that uses the euro as its currency is an example of a Eurobond.

Accepted Answer

A) True 
 B)False

Question 14

The concept of adverse selection helps to explain

Accepted Answer

A)  which firms are more likely to obtain funds from banks and other financial intermediaries, rather than from the securities markets. 
B)  why indirect finance is more important than direct finance as a source of business finance. 
C)  why direct finance is more important than indirect finance as a source of business finance. 
D)  only A and B of the above. 
E)  only A and C of the above. 
A)  which firms are more likely to obtain funds from banks and other financial intermediaries, rather than from the securities markets. 
B)  why indirect finance is more important than direct finance as a source of business finance. 
C)  why direct finance is more important than indirect finance as a source of business finance. 
D)  only A and B of the above. 
E)  only A and C of the above.

Question 15

Asymmetric information can lead to widespread collapse of financial intermediaries,referred to as a

Accepted Answer

A)  bank holiday. 
B)  financial panic. 
C)  financial disintermediation. 
D)  financial collapse. 
A)  bank holiday. 
B)  financial panic. 
C)  financial disintermediation. 
D)  financial collapse.

Question 16

The major differences between financial regulation in the United States and abroad relate to bank regulation. Specifically,in the past,the U.S.was the only industrialized country to subject banks to restrictions on ________.

Accepted Answer

A)  branching 
B)  lending 
C)  assets they may hold 
D)  the size they could grow to 
A)  branching 
B)  lending 
C)  assets they may hold 
D)  the size they could grow to

Question 17

The largest depository institution (value of assets)at the end of 2012 was

Accepted Answer

A)  commercial banks. 
B)  pension funds. 
C)  credit unions. 
D)  mutual funds. 
A)  commercial banks. 
B)  pension funds. 
C)  credit unions. 
D)  mutual funds.

Question 18

Financial intermediaries

Accepted Answer

A)  exist because there are substantial information and transaction costs in the economy. 
B)  improve the lot of the small saver. 
C)  are involved in the process of indirect finance. 
D)  do all of the above. 
E)  do only A and B of the above. 
A)  exist because there are substantial information and transaction costs in the economy. 
B)  improve the lot of the small saver. 
C)  are involved in the process of indirect finance. 
D)  do all of the above. 
E)  do only A and B of the above.

Question 19

The process of financial intermediation is also known as direct finance.

Accepted Answer

A) True 
 B)False

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: Overview of the Financial System

Which of the following are primary markets?

An investor who puts all her funds into one asset ________ her portfolio's ________.

Asymmetric information can lead to the widespread collapse of financial intermediaries,referred as financial ________.

The government agency that insures each depositor at a commercial bank,savings and loan association,or mutual savings bank up to a loss of $100,000 per account ($250,000 for individual retirement accounts)is the Securities and Exchange Commission (SEC).

Financial markets have the basic function of

Which of the following financial intermediaries are depository institutions?

Bonds that are sold in a foreign country and are denominated in a currency other than that of the country in which they are sold are known as

When the lender and the borrower have different amounts of information regarding a transaction,________ is said to exist.

The money market is the market in which ________ are traded.

Bonds that are sold in a foreign country and are denominated in that country's currency are known as

A pension fund is not a contractual savings institution.

In financial markets,lenders typically have inferior information about potential returns and risks associated with any investment project.This difference in information is called

A bond denominated in euros and issued in a country that uses the euro as its currency is an example of a Eurobond.

The concept of adverse selection helps to explain

Asymmetric information can lead to widespread collapse of financial intermediaries,referred to as a

The major differences between financial regulation in the United States and abroad relate to bank regulation. Specifically,in the past,the U.S.was the only industrialized country to subject banks to restrictions on ________.

The largest depository institution (value of assets)at the end of 2012 was

Financial intermediaries

The process of financial intermediation is also known as direct finance.

Which of the following is a contractual savings institution?

Why Study Financial Markets and Institutions?

What Do Interest Rates Mean and What Is Their Role in Valuation?

Why Do Interest Rates Change?

How Do Risk and Term Structure Affect Interest Rates?

Are Financial Markets Efficient?

Why Do Financial Institutions Exist?

Why Do Financial Crises Occur and

Central Banks and the Federal Reserve System

Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics

The Money Markets

The Bond Market

The Stock Market

The Mortgage Markets

The Foreign Exchange Market

The International Financial System

Banking and the Management of Financial Institutions

Financial Regulation

Banking Industry: Structure and Competition

The Mutual Fund Industry

Insurance Companies and Pension Funds

Investment Banks, Security Brokers and Dealers, and Venture Capital Firms

Risk Management in Financial Institutions

Hedging with Financial Derivatives

Financial Crises In Emerging Market Economies

Savings Associations and Credit Unions

Finance Companies

Filters

An investor who puts all her funds into one asset her portfolio's .