Question 1

American investors pay attention to only the Dow Jones Industrial Average.

Accepted Answer

A) True 
 B)False

Question 2

Long-term debt and equity instruments are traded in the ________ market.

Accepted Answer

A)  primary 
B)  secondary 
C)  capital 
D)  money 
A)  primary 
B)  secondary 
C)  capital 
D)  money

Question 3

Currently,over 80% of the new issues in the international bond market are Eurobonds.

Accepted Answer

A) True 
 B)False

Question 4

Financial markets improve economic welfare because

Accepted Answer

A)  they allow funds to move from those without productive investment opportunities to those who have such opportunities. 
B)  they allow consumers to time their purchases better. 
C)  they weed out inefficient firms. 
D)  they do all of the above. 
E)  they do A and B of the above. 
A)  they allow funds to move from those without productive investment opportunities to those who have such opportunities. 
B)  they allow consumers to time their purchases better. 
C)  they weed out inefficient firms. 
D)  they do all of the above. 
E)  they do A and B of the above.

Question 5

Adverse selection is a problem associated with equity and debt contracts arising from

Accepted Answer

A)  the lender's relative lack of information about the borrower's potential returns and risks of his investment activities. 
B)  the lender's inability to legally require sufficient collateral to cover a 100 percent loss if the borrower defaults. 
C)  the borrower's lack of incentive to seek a loan for highly risky investments. 
D)  none of the above. 
A)  the lender's relative lack of information about the borrower's potential returns and risks of his investment activities. 
B)  the lender's inability to legally require sufficient collateral to cover a 100 percent loss if the borrower defaults. 
C)  the borrower's lack of incentive to seek a loan for highly risky investments. 
D)  none of the above.

Question 6

A country whose financial markets function poorly is likely to

Accepted Answer

A)  efficiently allocate its capital resources. 
B)  enjoy high productivity. 
C)  experience economic hardship and financial crises. 
D)  increase its standard of living. 
A)  efficiently allocate its capital resources. 
B)  enjoy high productivity. 
C)  experience economic hardship and financial crises. 
D)  increase its standard of living.

Question 7

Which of the following are secondary 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)  All 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)  All of the above

Question 8

When the borrower engages in activities that make it less likely that the loan will be repaid,________ 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

Why can a financial intermediary's risk-sharing activities be described as asset transformation?

Accepted Answer

Financial intermediaries, such as banks,

Question 10

Intermediaries who link buyers and sellers by buying and selling securities at stated prices are called

Accepted Answer

A)  investment bankers. 
B)  traders. 
C)  brokers. 
D)  dealers. 
E)  none of the above. 
A)  investment bankers. 
B)  traders. 
C)  brokers. 
D)  dealers. 
E)  none of the above.

Question 11

Unlike regulations in other countries,there are very few federal regulations governing who is allowed to set up a financial intermediary.

Accepted Answer

A) True 
 B)False

Question 12

A mutual fund is not a depository institution.

Accepted Answer

A) True 
 B)False

Question 13

Distinguish between money markets and capital markets.

Accepted Answer

Money markets are a part of the debt mar

Question 14

Which of the following statements about financial markets and securities are true?

Accepted Answer

A)  Most common stocks are traded over-the-counter, although the largest corporations have their shares traded at organized stock exchanges such as the New York Stock Exchange. 
B)  A corporation acquires new funds only when its securities are sold in the primary market. 
C)  Money market securities are usually more widely traded than longer-term securities and so tend to be more liquid. 
D)  All of the above are true. 
E)  Only A and B of the above are true. 
A)  Most common stocks are traded over-the-counter, although the largest corporations have their shares traded at organized stock exchanges such as the New York Stock Exchange. 
B)  A corporation acquires new funds only when its securities are sold in the primary market. 
C)  Money market securities are usually more widely traded than longer-term securities and so tend to be more liquid. 
D)  All of the above are true. 
E)  Only A and B of the above are true.

Question 15

Why are financial intermediaries so important to an economy?

Accepted Answer

Financial intermediaries are entities th

Question 16

The government regulates financial markets for two main reasons:

Accepted Answer

A)  to ensure soundness of the financial system and to increase the information available to investors. 
B)  to improve control of monetary policy and to increase the information available to investors. 
C)  to ensure that financial intermediaries do not earn more than the normal rate of return and to improve control of monetary policy. 
D)  to ensure soundness of financial intermediaries and to prevent financial intermediaries from earning less than the normal rate of return. 
A)  to ensure soundness of the financial system and to increase the information available to investors. 
B)  to improve control of monetary policy and to increase the information available to investors. 
C)  to ensure that financial intermediaries do not earn more than the normal rate of return and to improve control of monetary policy. 
D)  to ensure soundness of financial intermediaries and to prevent financial intermediaries from earning less than the normal rate of return.

Question 17

Every financial market allows loans to be made.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following can be described as involving indirect finance?

Accepted Answer

A)  A bank buys a U.S. Treasury bill from one of its depositors. 
B)  A corporation buys commercial paper issued by another corporation. 
C)  A pension fund manager buys commercial paper in the primary market. 
D)  Both A and C of the above. 
A)  A bank buys a U.S. Treasury bill from one of its depositors. 
B)  A corporation buys commercial paper issued by another corporation. 
C)  A pension fund manager buys commercial paper in the primary market. 
D)  Both A and C of the above.

Question 19

What are some of the major foreign stock exchanges? Is following their returns important to U.S.investors? Why or why not?

Accepted Answer

Some of the major foreign stock exchange

Question 20

Distinguish between primary markets and secondary markets.

Accepted Answer

The answer of Distinguish between primary markets and secondary markets....

Exam 2: Overview of the Financial System

American investors pay attention to only the Dow Jones Industrial Average.

Long-term debt and equity instruments are traded in the ________ market.

Currently,over 80% of the new issues in the international bond market are Eurobonds.

Financial markets improve economic welfare because

Adverse selection is a problem associated with equity and debt contracts arising from

A country whose financial markets function poorly is likely to

Which of the following are secondary markets?

When the borrower engages in activities that make it less likely that the loan will be repaid,________ is said to exist.

Why can a financial intermediary's risk-sharing activities be described as asset transformation?

Intermediaries who link buyers and sellers by buying and selling securities at stated prices are called

Unlike regulations in other countries,there are very few federal regulations governing who is allowed to set up a financial intermediary.

A mutual fund is not a depository institution.

Distinguish between money markets and capital markets.

Which of the following statements about financial markets and securities are true?

Why are financial intermediaries so important to an economy?

The government regulates financial markets for two main reasons:

Every financial market allows loans to be made.

Which of the following can be described as involving indirect finance?

What are some of the major foreign stock exchanges? Is following their returns important to U.S.investors? Why or why not?

Distinguish between primary markets and secondary markets.

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