Question 1

The primary assets of a finance company are

Accepted Answer

A)  municipal bonds.
B)  corporate stocks and bonds.
C)  consumer and business loans.
D)  mortgages.E) None of the above
F) A) and B)

Question 2

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

Accepted Answer

A)  You make a loan to your neighbor.
B)  A corporation buys a share of common stock issued by another corporation in the primary market.
C)  You buy a U.S.Treasury bill from the U.S.Treasury.
D)  You make a deposit at a bank.E) B) and D)
F) A) and B)

Question 3

Which of the following statements about the characteristics of debt and equity is false?

Accepted Answer

A)  They can both be long-term financial instruments.
B)  They can both be short-term financial instruments.
C)  They both involve a claim on the issuer's income.
D)  They both enable a corporation to raise funds.E) None of the above
F) B) and C)

Question 4

The primary purpose of deposit insurance is to

Accepted Answer

A)  improve the flow of information to investors.
B)  prevent banking panics.
C)  protect bank shareholders against losses.
D)  protect bank employees from unemployment.E) None of the above
F) A) and B)

Question 5

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

Accepted Answer

A)  foreign bonds.
B)  Eurobonds.
C)  equity bonds.
D)  country bonds.E) B) and D)
F) B) and C)

Question 6

When an investment bank ________ securities,it guarantees a price for a corporation's securities and then sells them to the public.

Accepted Answer

A)  underwrites
B)  undertakes
C)  overwrites
D)  overtakesE) B) and C)
F) C) and D)

Question 7

The time and money spent in carrying out financial transactions are called

Accepted Answer

A)  economies of scale.
B)  financial intermediation.
C)  liquidity services.
D)  transaction costs.E) None of the above
F) A) and C)

Question 8

Which of the following is a depository institution?

Accepted Answer

A)  A life insurance company
B)  A mutual savings bank
C)  A pension fund
D)  A finance companyE) None of the above
F) All of the above

Question 9

With direct finance,funds are channeled through the financial market from the ________ directly to the ________.

Accepted Answer

A)  savers,spenders
B)  spenders,investors
C)  borrowers,savers
D)  investors,saversE) None of the above
F) B) and C)

Question 10

A restriction on bank activities that was repealed in 1999 was

Accepted Answer

A)  the prohibition of the payment of interest on checking deposits.
B)  restrictions on credit terms.
C)  minimum down payments on loans to purchase securities.
D)  separation of commercial banking from the securities industries.E) B) and C)
F) C) and D)

Question 11

The countries that have made the least use of securities markets are ________ and ________; in these two countries finance from financial intermediaries has been almost ten times greater than that from securities markets.

Accepted Answer

A)  Germany; Japan
B)  Germany; Great Britain
C)  Great Britain; Canada
D)  Canada; JapanE) B) and C)
F) A) and C)

Question 12

The primary assets of money market mutual funds are

Accepted Answer

A)  stocks.
B)  bonds.
C)  money market instruments.
D)  deposits.E) All of the above
F) A) and B)

Question 13

A financial market in which only short-term debt instruments are traded is called the ________ market.

Accepted Answer

A)  bond
B)  money
C)  capital
D)  stockE) All of the above
F) B) and C)

Question 14

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

Accepted Answer

A)  Many common stocks are traded over-the-counter,although the largest corporations usually have their shares traded at organized stock exchanges such as the New York Stock Exchange.
B)  As a corporation gets a share of the broker's commission,a corporation acquires new funds whenever its securities are sold.
C)  Capital market securities are usually more widely traded than shorter-term securities and so tend to be more liquid.
D)  Because of their short-terms to maturity,the prices of money market instruments tend to fluctuate wildly.E) All of the above
F) C) and D)

Question 15

An important financial institution that assists in the initial sale of securities in the primary market is the

Accepted Answer

A)  investment bank.
B)  commercial bank.
C)  stock exchange.
D)  brokerage house.E) A) and D)
F) A) and B)

Question 16

Financial institutions that accept deposits and make loans are called ________ institutions.

Accepted Answer

A)  investment
B)  contractual savings
C)  depository
D)  underwritingE) None of the above
F) B) and C)

Question 17

Which of the following are not contractual savings institutions?

Accepted Answer

A)  Life insurance companies
B)  Credit unions
C)  Pension funds
D)  State and local government retirement fundsE) C) and D)
F) A) and C)

Question 18

Which of the following are short-term financial instruments?

Accepted Answer

A)  A repurchase agreement
B)  A share of Walt Disney Corporation stock
C)  A Treasury note with a maturity of four years
D)  A residential mortgageE) A) and B)
F) A) and C)

Question 19

In the United States,loans from ________ are far ________ important for corporate finance than are securities markets.

Accepted Answer

A)  government agencies; more
B)  government agencies; less
C)  financial intermediaries; more
D)  financial intermediaries; lessE) C) and D)
F) A) and B)

Question 20

With ________ finance,borrowers obtain funds from lenders by selling them securities in the financial markets.

Accepted Answer

A)  active
B)  determined
C)  indirect
D)  directE) A) and C)
F) A) and B)

Exam 2: An Overview of the Financial System

The primary assets of money market mutual funds are

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An important financial institution that assists in the initial sale of securities in the primary market is the

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When an investment bank ________ securities,it guarantees a price for a corporation's securities and then sells them to the public.

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In the United States,loans from ________ are far ________ important for corporate finance than are securities markets.

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

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Which of the following statements about the characteristics of debt and equity is false?

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A restriction on bank activities that was repealed in 1999 was

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Which of the following is a depository institution?

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

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Which of the following are not contractual savings institutions?

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With direct finance,funds are channeled through the financial market from the ________ directly to the ________.

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The time and money spent in carrying out financial transactions are called

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

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A financial market in which only short-term debt instruments are traded is called the ________ market.

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The primary purpose of deposit insurance is to

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With ________ finance,borrowers obtain funds from lenders by selling them securities in the financial markets.

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The countries that have made the least use of securities markets are ________ and ________; in these two countries finance from financial intermediaries has been almost ten times greater than that from securities markets.

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Which of the following are short-term financial instruments?

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The primary assets of a finance company are

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Financial institutions that accept deposits and make loans are called ________ institutions.

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In the United States,loans from are far important for corporate finance than are securities markets.

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With direct finance,funds are channeled through the financial market from the directly to the .

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The countries that have made the least use of securities markets are and ; in these two countries finance from financial intermediaries has been almost ten times greater than that from securities markets.

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