Question 1

The purpose of the disclosure requirements of the Securities and Exchange Commission is to

Accepted Answer

A)  increase the information available to investors.
B)  prevent bank panics.
C)  improve monetary control.
D)  protect investors against financial losses.

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 at TreasuryDirect.gov.
D)  You make a deposit at a bank.

Question 3

In order to reduce risk and increase the safety of financial institutions,commercial banks and other depository institutions are prohibited from

Accepted Answer

A)  owning municipal bonds.
B)  making real estate loans.
C)  making personal loans.
D)  owning common stock.

Question 4

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

Accepted Answer

A)  active
B)  determined
C)  indirect
D)  direct

Question 5

U.S.Treasury bills are considered the safest of all money market instruments because there is a low probability of

Accepted Answer

A)  defeat.
B)  default.
C)  desertion.
D)  demarcation.

Question 6

The primary assets of credit unions are

Accepted Answer

A)  municipal bonds.
B)  business loans.
C)  consumer loans.
D)  mortgages.

Question 7

Which of the following financial intermediaries is NOT a depository institution?

Accepted Answer

A)  a savings and loan association
B)  a commercial bank
C)  a credit union
D)  a finance company

Question 8

In a(n) ________ market,dealers in different locations buy and sell securities to anyone who comes to them and is willing to accept their prices.

Accepted Answer

A)  exchange
B)  over-the-counter
C)  common
D)  barter

Question 9

Reducing risk through the purchase of assets whose returns do not always move together is

Accepted Answer

A)  diversification.
B)  intermediation.
C)  intervention.
D)  discounting.

Question 10

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

Accepted Answer

A)  A corporation takes out loans from a bank.
B)  People buy shares in a mutual fund.
C)  A corporation buys a short-term corporate security in a secondary market.
D)  People buy shares of common stock in the primary markets.

Question 11

Prices of money market instruments undergo the least price fluctuations because of

Accepted Answer

A)  the short terms to maturity for the securities.
B)  the heavy regulations in the industry.
C)  the price ceiling imposed by government regulators.
D)  the lack of competition in the market.

Question 12

The process where financial intermediaries create and sell low-risk assets and use the proceeds to purchase riskier assets is known as

Accepted Answer

A)  risk sharing.
B)  risk aversion.
C)  risk neutrality.
D)  risk selling.

Question 13

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

Accepted Answer

A)  You make a loan to your neighbor.
B)  You buy shares in a mutual fund.
C)  You buy a U.S.Treasury bill from the U.S.Treasury at Treasury Direct.gov.
D)  You purchase shares in an initial public offering by a corporation in the primary market.

Question 14

U.S.dollar deposits in foreign banks outside the U.S.or in foreign branches of U.S.banks are called

Accepted Answer

A)  Atlantic dollars.
B)  Eurodollars.
C)  foreign dollars.
D)  outside dollars.

Question 15

A debt instrument sold by a bank to its depositors that pays annual interest of a given amount and at maturity pays back the original purchase price is called

Accepted Answer

A)  commercial paper.
B)  a certificate of deposit.
C)  a municipal bond.
D)  federal funds.

Question 16

Thrift institutions include

Accepted Answer

A)  banks,mutual funds,and insurance companies.
B)  savings and loan associations,mutual savings banks,and credit unions.
C)  finance companies,mutual funds,and money market funds.
D)  pension funds,mutual funds,and banks.

Question 17

Which of the following is a depository institution?

Accepted Answer

A)  a life insurance company
B)  a credit union
C)  a pension fund
D)  a mutual fund

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 mortgage

Question 19

Economies of scale enable financial institutions to

Accepted Answer

A)  reduce transactions costs.
B)  avoid the asymmetric information problem.
C)  avoid adverse selection problems.
D)  reduce moral hazard.

Question 20

When I purchase ________,I own a portion of a firm and have the right to vote on issues important to the firm and to elect its directors.

Accepted Answer

A)  bonds
B)  bills
C)  notes
D)  stock

Exam 2: An Overview of the Financial System

A debt instrument sold by a bank to its depositors that pays annual interest of a given amount and at maturity pays back the original purchase price is called

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U.S.dollar deposits in foreign banks outside the U.S.or in foreign branches of U.S.banks are called

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The primary assets of credit unions are

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

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Prices of money market instruments undergo the least price fluctuations because of

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The process where financial intermediaries create and sell low-risk assets and use the proceeds to purchase riskier assets is known as

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U.S.Treasury bills are considered the safest of all money market instruments because there is a low probability of

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The purpose of the disclosure requirements of the Securities and Exchange Commission is to

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When I purchase ________,I own a portion of a firm and have the right to vote on issues important to the firm and to elect its directors.

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In a(n) ________ market,dealers in different locations buy and sell securities to anyone who comes to them and is willing to accept their prices.

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Which of the following financial intermediaries is NOT a depository institution?

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

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Thrift institutions include

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

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Which of the following is a depository institution?

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In order to reduce risk and increase the safety of financial institutions,commercial banks and other depository institutions are prohibited from

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Which of the following are short-term financial instruments?

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Economies of scale enable financial institutions to

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Reducing risk through the purchase of assets whose returns do not always move together is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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