Question 1

Distinguish between money markets and capital markets.

Accepted Answer

The answer of Distinguish between money markets and capital markets....

Question 2

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 3

The largest depository institution (value of assets)at the end of 2009 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 4

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 5

Corporations that issue new securities to raise capital now conduct more of this business in financial markets in Europe and Asia than in the U.S.

Accepted Answer

A) True 
 B)False

Question 6

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 7

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 8

Fire and casualty insurance companies are what type of intermediary?

Accepted Answer

A) Contractual savings institution 
B) Depository institutions 
C) Investment intermediaries 
D) None of the above 
A) Contractual savings institution 
B) Depository institutions 
C) Investment intermediaries 
D) None of the above

Question 9

Adverse selection refers to those with high credit risks, being most aggressive in their search for funds.

Accepted Answer

A) True 
 B)False

Question 10

Every financial market performs the following function:

Accepted Answer

A) It determines the level of interest rates. 
B) It allows common stock to be traded. 
C) It allows loans to be made. 
D) It channels funds from lenders-savers to borrowers-spenders. 
A) It determines the level of interest rates. 
B) It allows common stock to be traded. 
C) It allows loans to be made. 
D) It channels funds from lenders-savers to borrowers-spenders.

Question 11

What are adverse selection and moral hazard?

Accepted Answer

The answer of What are adverse selection and moral hazard?...

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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 14

Many common stocks are traded at organized exchanges, although a majority of the largest corporations have their shares traded over the counter.

Accepted Answer

A) True 
 B)False

Question 15

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 16

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 17

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 18

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

Accepted Answer

A) True 
 B)False

Question 19

Every financial market allows loans to be made.

Accepted Answer

A) True 
 B)False

Question 20

Most people's involvement with the financial system is through financial intermediaries rather than financial markets.

Accepted Answer

A) True 
 B)False

Exam 2: Overview of the Financial System

Distinguish between money markets and capital markets.

Which of the following financial intermediaries are depository institutions?

The largest depository institution (value of assets)at the end of 2009 was

Financial markets have the basic function of

Corporations that issue new securities to raise capital now conduct more of this business in financial markets in Europe and Asia than in the U.S.

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

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).

Fire and casualty insurance companies are what type of intermediary?

Adverse selection refers to those with high credit risks, being most aggressive in their search for funds.

Every financial market performs the following function:

What are adverse selection and moral hazard?

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

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

Many common stocks are traded at organized exchanges, although a majority of the largest corporations have their shares traded over the counter.

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

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

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.

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

Every financial market allows loans to be made.

Most people's involvement with the financial system is through financial intermediaries rather than financial 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 Why Are They so Damaging to the Economy

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

Savings Associations and Credit Unions

Finance Companies

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