Question 1

Which of the following is not a regulator of part of the U.S.financial system?

Accepted Answer

A)  National Credit Union Administration 
B)  Securities and Exchange Commission 
C)  Federal Reserve System 
D)  Federal Deposit Insurance Corporation 
E)  All of the above are regulators. 
A)  National Credit Union Administration 
B)  Securities and Exchange Commission 
C)  Federal Reserve System 
D)  Federal Deposit Insurance Corporation 
E)  All of the above are regulators.

Question 2

When the least desirable credit risks are the ones most likely to seek loans,lenders are subject to the

Accepted Answer

A)  moral hazard problem. 
B)  adverse selection problem. 
C)  shirking problem. 
D)  free-rider problem. 
E)  principal-agent problem. 
A)  moral hazard problem. 
B)  adverse selection problem. 
C)  shirking problem. 
D)  free-rider problem. 
E)  principal-agent problem.

Question 3

A financial intermediary's risk-sharing activities are also referred to as asset transformation.

Accepted Answer

A) True 
 B)False

Question 4

When the potential borrowers who are the most likely to default are the ones most actively seeking a loan,________ 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 5

Distinguish between direct financing and indirect financing.

Accepted Answer

The financial system offers two differen

Question 6

At the end of 2012,the value of debt instruments in the U.S.was around ________ trillion,and the value of equities was around ________ trillion.

Accepted Answer

A)  $38; $19 
B)  $20; $10 
C)  $19; $38 
D)  $10; $20 
A)  $38; $19 
B)  $20; $10 
C)  $19; $38 
D)  $10; $20

Question 7

The New York Stock Exchange is an example of a primary market.

Accepted Answer

A) True 
 B)False

Question 8

Discuss the differences between depository institutions,contractual savings institutions,and investment intermediaries.

Accepted Answer

Depository institutions, contractual sav

Question 9

A corporation acquires new funds only when its securities are sold in the

Accepted Answer

A)  secondary market by an investment bank. 
B)  primary market by an investment bank. 
C)  secondary market by a stock exchange broker. 
D)  secondary market by a commercial bank. 
A)  secondary market by an investment bank. 
B)  primary market by an investment bank. 
C)  secondary market by a stock exchange broker. 
D)  secondary market by a commercial bank.

Question 10

The main sources of financing for businesses,in order of importance,are

Accepted Answer

A)  financial intermediaries, issuing bonds, issuing stocks. 
B)  issuing bonds, issuing stocks, financial intermediaries. 
C)  issuing stocks, issuing bonds, financial intermediaries. 
D)  issuing stocks, financial intermediaries, issuing bonds. 
A)  financial intermediaries, issuing bonds, issuing stocks. 
B)  issuing bonds, issuing stocks, financial intermediaries. 
C)  issuing stocks, issuing bonds, financial intermediaries. 
D)  issuing stocks, financial intermediaries, issuing bonds.

Question 11

An example of direct financing is if you were to lend money to your neighbor.

Accepted Answer

A) True 
 B)False

Question 12

Why do corporations that issue new securities to raise capital now conduct more of this business in
financial markets in Europe and Asia than in the United States?

Accepted Answer

The factors that have contributed to rai

Question 13

Equity represents an ownership interest in a firm and entitles the holder to the residual cash flows.

Accepted Answer

A) True 
 B)False

Question 14

The country whose banks are the most restricted in the range of assets they may hold is

Accepted Answer

A)  Japan. 
B)  Canada. 
C)  Germany. 
D)  the United States. 
A)  Japan. 
B)  Canada. 
C)  Germany. 
D)  the United States.

Question 15

The presence of transaction costs in financial markets explains,in part,why

Accepted Answer

A)  financial intermediaries and indirect finance play such an important role in financial markets. 
B)  equity and bond financing play such an important role in financial markets. 
C)  corporations get more funds through equity financing than they get from financial intermediaries. 
D)  direct financing is more important than indirect financing as a source of funds. 
A)  financial intermediaries and indirect finance play such an important role in financial markets. 
B)  equity and bond financing play such an important role in financial markets. 
C)  corporations get more funds through equity financing than they get from financial intermediaries. 
D)  direct financing is more important than indirect financing as a source of funds.

Question 16

Which of the following are investment intermediaries?

Accepted Answer

A)  Finance companies 
B)  Mutual funds 
C)  Pension funds 
D)  All of the above 
E)  Only A and B of the above 
A)  Finance companies 
B)  Mutual funds 
C)  Pension funds 
D)  All of the above 
E)  Only A and B of the above

Question 17

The DAX (Germany)and the FTSE 100 (London)are examples of ________.

Accepted Answer

A)  foreign stock exchanges 
B)  foreign currencies 
C)  foreign stock price indexes 
D)  foreign mutual funds 
A)  foreign stock exchanges 
B)  foreign currencies 
C)  foreign stock price indexes 
D)  foreign mutual funds

Question 18

A ________ is when one party in a financial contract has incentives to act in its own interest rather than in the interests of the other party.

Accepted Answer

A)  moral hazard 
B)  risk 
C)  conflict of interest 
D)  financial panic 
A)  moral hazard 
B)  risk 
C)  conflict of interest 
D)  financial panic

Question 19

What are some of the differences between an organized exchange and an over-the-counter market?

Accepted Answer

Organized exchanges and over-the-counter

Question 20

Through risk-sharing activities,a financial intermediary ________ its own risk and ________ the risks of its customers.

Accepted Answer

A)  reduces; increases 
B)  increases; reduces 
C)  reduces; reduces 
D)  increases; increases 
A)  reduces; increases 
B)  increases; reduces 
C)  reduces; reduces 
D)  increases; increases

Exam 2: Overview of the Financial System

Which of the following is not a regulator of part of the U.S.financial system?

When the least desirable credit risks are the ones most likely to seek loans,lenders are subject to the

A financial intermediary's risk-sharing activities are also referred to as asset transformation.

When the potential borrowers who are the most likely to default are the ones most actively seeking a loan,________ is said to exist.

Distinguish between direct financing and indirect financing.

At the end of 2012,the value of debt instruments in the U.S.was around ________ trillion,and the value of equities was around ________ trillion.

The New York Stock Exchange is an example of a primary market.

Discuss the differences between depository institutions,contractual savings institutions,and investment intermediaries.

A corporation acquires new funds only when its securities are sold in the

The main sources of financing for businesses,in order of importance,are

An example of direct financing is if you were to lend money to your neighbor.

Why do corporations that issue new securities to raise capital now conduct more of this business in financial markets in Europe and Asia than in the United States?

Equity represents an ownership interest in a firm and entitles the holder to the residual cash flows.

The country whose banks are the most restricted in the range of assets they may hold is

The presence of transaction costs in financial markets explains,in part,why

Which of the following are investment intermediaries?

The DAX (Germany)and the FTSE 100 (London)are examples of ________.

A ________ is when one party in a financial contract has incentives to act in its own interest rather than in the interests of the other party.

What are some of the differences between an organized exchange and an over-the-counter market?

Through risk-sharing activities,a financial intermediary ________ its own risk and ________ the risks of its customers.

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

At the end of 2012,the value of debt instruments in the U.S.was around trillion,and the value of equities was around trillion.

Through risk-sharing activities,a financial intermediary its own risk and the risks of its customers.