Exam 16: The Financial System

Describe the global financial environment.

The process used by an insurance company to determine whom to insure and how much to charge is called ________.

The two largest stock markets in the world are the ____ and the ____.

The SEC requires reports any time an investor accumulates more than 5 percent of a company's outstanding stock.

An owner of which form of stock would receive dividend payments first?

The ____ is a collection of financial markets in which previously issued securities are traded among investors.

Explain the main features of preferred stock.

Businesses are net savers, while households are net users of funds.

The price of a bond is affected by its interest rate.

Bonds with the highest level of risk are rated AAA.

If the money supply grows too rapidly, inflationary pressures will begin to build.

Underwriting is the process used by insurance companies to determine whom to insure and what to charge.

Money market instruments are generally high-risk securities and are purchased by investors when they are in need of a quick resell.

_____ are loans made to borrowers with poor credit ratings.

_____ is defined as the use of material nonpublic information about a company to make investment profits.

Describe how the financial system operates.

_____ securities are backed by a pool of mortgage loans purchased from lenders, such as savings banks.

Alex buys a money market instrument. It will mature within, at most, ____.

The discount rate is the rate banks charge one another for short-term loans.

As market interest rates rise, bond prices fall.