Question 1

U.S. government securities

Accepted Answer

A)  are short-term debt instruments only.
B)  have maturities ranging from 2 to 30 months only.
C)  finance the deficits of the federal government.
D)  All of the above are correct.

Question 2

For investors living in the issuing state, a positive aspect of municipal bonds is that

Accepted Answer

A)  the interest they earn is taxed deferred until the bonds are sold.
B)  they are considered tax-deductible losses.
C)  they have zero tractability.
D)  the interest they earn is exempt from federal and state income taxes. D

Question 3

Which of the following are not money market instruments?

Accepted Answer

A)  Repurchase agreements
B)  Mortgages
C)  Bankers' acceptances
D)  Federal funds

Question 4

In high quality secondary markets, securities are traded at relatively ___ cost and _____ inconvenience.

Accepted Answer

A)  low, little
B)  high, little
C)  low, great
D)  high, great

Question 5

Which of the following is not a characteristic of corporate bonds?

Accepted Answer

A)  short-term
B)  issued by corporations
C)  pay interest twice a year
D)  principal repaid at maturity A

Question 6

Bankers' acceptances are used in financing which of these?

Accepted Answer

A)  interstate trade
B)  domestic trade
C)  international trade
D)  All of the above are correct.

Question 7

__________ are used to finance specific projects where the proceeds of those projects are used to pay off holders of the security.

Accepted Answer

A)  Negotiable certificates of deposit
B)  General obligation bonds
C)  Revenue bonds
D)  Repurchase agreements

Question 8

What is the difference between a broker and a dealer?

Accepted Answer

A)  There is no difference.
B)  The broker takes a position in a transaction while a dealer for a fee merely arranges trades between buyers and sellers.
C)  The broker sells stocks and bonds, whereas the dealer only deals in bonds.
D)  The dealer sometimes takes a position (becomes a principal)  in a transaction, in addition to arranging trades; the broker only arranges trades for a fee.

Question 9

Term to maturity refers to which of the following?

Accepted Answer

A)  the length of time from the issuance of a financial security to its maturity
B)  net present value from the issuance of a security
C)  the length of time for expected depreciation of the security
D)  the time remaining on a Fed Governor's term

Question 10

Which is an example of a financial instrument that is traded?

Accepted Answer

A)  stocks
B)  corporate bonds
C)  Treasury bills
D)  Treasury bonds
E)  All of the above are financial instruments that are traded.

Question 11

Treasury bills (T-bills)  are

Accepted Answer

A)  the most liquid of all the money market instruments.
B)  traded very actively in the secondary market.
C)  the safest of all money market instruments.
D)  All of the above

Question 12

Overnight loans among depository institutions of their deposits at the Fed are called

Accepted Answer

A)  discount loans.
B)  federal funds.
C)  demand on request loans.
D)  repurchase agreements.

Question 13

How can money be distinguished from other financial assets?

Accepted Answer

A)  Money is unique because it is acceptable as a means of payment.
B)  Money is illiquid.
C)  Money can never lose value in real terms.
D)  Money pays no interest and other financial assets do. A

Question 14

The capital market is extremely important because

Accepted Answer

A)  a smoothly functioning capital market influences how fast the economy grows.
B)  it raises the funds needed by net borrowers to carry out their spending and investment plans.
C)  it provides the only stage upon which capital goods can easily be traded.
D)  Both a and b are correct.

Question 15

Which are not considered capital market instruments?

Accepted Answer

A)  Municipal bonds
B)  Corporate bonds
C)  Bankers' acceptances
D)  Stocks

Question 16

The price at which a market maker is willing to buy securities is called the

Accepted Answer

A)  asked price.
B)  bid price.
C)  equilibrium price.
D)  neutral price.

Question 17

The __________ market is where the trading of financial securities takes place instantaneously.

Accepted Answer

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

Question 18

The money market includes those markets that trade securities with original maturities of __________.

Accepted Answer

A)  1 month or less
B)  6 months or less
C)  8 months or less
D)  12 months or less

Question 19

A broker

Accepted Answer

A)  arranges transactions between buyers and sellers for a fee.
B)  is a principal in a transaction.
C)  holds an inventory of securities to be sold.
D)  All of the above

Question 20

The capital market is notably important because

Accepted Answer

A)  if properly run, the capital market increases the growth of the economy.
B)  capital markets raise funds for net borrowers.
C)  capital markets help net borrowers achieve investment plans.
D)  All of the above are correct.

Exam 4: Financial Markets, Instruments, and Market Makers

U.S. government securities

Correct AnswerverifiedShow Answer

For investors living in the issuing state, a positive aspect of municipal bonds is that

Correct AnswerverifiedD

Which of the following are not money market instruments?

Correct AnswerverifiedShow Answer

In high quality secondary markets, securities are traded at relatively ___ cost and _____ inconvenience.

Correct AnswerverifiedShow Answer

Which of the following is not a characteristic of corporate bonds?

Correct AnswerverifiedA

Bankers' acceptances are used in financing which of these?

Correct AnswerverifiedShow Answer

__________ are used to finance specific projects where the proceeds of those projects are used to pay off holders of the security.

Correct AnswerverifiedShow Answer

What is the difference between a broker and a dealer?

Correct AnswerverifiedShow Answer

Term to maturity refers to which of the following?

Correct AnswerverifiedShow Answer

Which is an example of a financial instrument that is traded?

Correct AnswerverifiedShow Answer

Treasury bills (T-bills) are

Correct AnswerverifiedShow Answer

Overnight loans among depository institutions of their deposits at the Fed are called

Correct AnswerverifiedShow Answer

How can money be distinguished from other financial assets?

Correct AnswerverifiedA

The capital market is extremely important because

Correct AnswerverifiedShow Answer

Which are not considered capital market instruments?

Correct AnswerverifiedShow Answer

The price at which a market maker is willing to buy securities is called the

Correct AnswerverifiedShow Answer

The __________ market is where the trading of financial securities takes place instantaneously.

Correct AnswerverifiedShow Answer

The money market includes those markets that trade securities with original maturities of __________.

Correct AnswerverifiedShow Answer

A broker

Correct AnswerverifiedShow Answer

The capital market is notably important because

Correct AnswerverifiedShow Answer

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In high quality secondary markets, securities are traded at relatively _ cost and ___ inconvenience.

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