1) Every
financial market has the following characteristic:
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.
5) Which
of the following can be described as involving direct finance?
A)
A corporation issues new shares of stock.
B)
A corporation buys commercial paper issued by another corporation.
C)
A pension fund manager buys commercial paper in the secondary market.
D)
Both (a) and (b) of the above.
E)
Both (b) and (c) of the above.
Answer:
D
10) Which
of the following can be described as involving direct finance?
A) A
corporation issues new shares of stock.
B) A
corporation buys commercial paper issued by another corporation.
C)
A pension fund manager buys commercial
paper from the issuing corporation.
D)
All of the above.
E)
Both (b) and (c) of the above.
Answer:
D
15) Which of the following can be described as
involving indirect finance?
A)
A bank buys a U.S. Treasury bill from one of its depositors.
B)
A corporation buys commercial paper issued by another corporation.
C)
A pension fund manager buys commercial paper in the primary market.
D)
Both (b) and (c) of the above.
Answer:
A
20) Which
of the following can be described as involving indirect finance?
A)
You make a loan to your neighbor.
B)
You buy a U.S. Treasury bill from the bank.
C)
You buy a U.S. Treasury bill from the U.S. Treasury.
D)
A corporation buys commercial paper issued by another corporation.
Answer:
B
25) Which
of the following are short-term financial instruments?
A)
A negotiable certificate of deposit
B)
A bankers acceptance
C)
A six-month loan
D)
A U.S. Treasury bill
E)
All of the above
Answer:
E
30) Which
of the following statements about the characteristics of debt and equity are
true?
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)
Both (a) and (b) of the above.
E)
Both (a) and (c) of the above.
Answer:
E
35) Which
of the following markets is sometimes organized as an over-the-counter market?
A)
The stock market
B)
The bond market
C)
The foreign exchange market
D)
The federal funds market
E)
Each of the above
Answer:
E
40) Which
of the following instruments are traded in a capital market?
A)
U.S. Government agency securities
B)
Negotiable bank CDs
C)
Repurchase agreements
D)
Banker's acceptances
E)
None of the above
Answer:
A
45) Which
of the following is a contractual savings institution?
A)
A life insurance company B) A credit union
C)
A savings and loan association D) A mutual fund
Answer:
A
50) Which
of the following financial intermediaries are depository institutions?
A)
A savings and loan association
B)
A commercial bank
C)
A money market mutual fund
D)
All of the above
E)
Only (a) and (b) of the above
Answer:
E
55) Which
of the following are investment intermediaries?
A)
Finance companies
B)
Mutual funds
C)
Pension funds
D)
All of the above.
E)
Only (a) and (b) of the above
Answer:
E
60) The
primary assets of commercial banks include
A)
mortgages.
B)
consumer and business loans.
C)
U.S. government securities.
D)
all of the above.
E)
Only (a) and (b) of the above
Answer:
D
65) Federal
funds are
A)
funds raised by the federal government in the bond market.
B)
loans made by the Federal Reserve System to banks.
C)
loans made by banks to the Federal Reserve System.
D)
loans made by banks to each other.
E)
none of the above.
Answer:
D
70) Which
of the following do not provide charters?
A)
The Office of the Comptroller of the Currency
B)
The Federal Reserve System
C)
The National Credit Union Administration
D)
State banking and insurance commissions
Answer:
B
75) Forty
or so dealers establish a "market" in these securities by standing
ready to buy and sell them.
A)
Secondary stocks B) Surplus stocks
C)
U.S. government bonds D) Common stocks
Answer:
C
80) Which
of the following statements about financial markets and securities are true?
A)
A bond is a debt security that promises to make payments for a specified period
of time.
B)
Equities usually make periodic payments called dividends and are considered to
be long term securities because they have no maturity date.
C)
A debt instrument is short term if its maturity is less than ten years.
D)
All of the above are true.
E)
Only (a) and (b) of the above are true.
Answer:
E
85) Which
of the following statements about financial markets and securities are true?
A)
Most 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)
A corporation acquires new funds only when its securities are first 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.
Answer:
D
90) U.S.
Treasury bills
A)
are issued in three-, six-, nine-, and twelve-month maturities.
B)
sell at a discount because they have no interest payments.
C)
are the most liquid of the money market securities.
D)
are all of the above.
E)
are only (b) and (c) of the above.
Answer:
E
95) In
the United States loans from _____ are far _____ important for corporate
finance than are
securities
markets.
A)
government agencies; more B) government agencies; less
C)
financial intermediaries; more D) financial intermediaries; less
Answer:
C
100) That
depositors earn interest on checking and savings accounts, and yet withdraw
their funds whenever necessary is possible because
A)
government regulations mandate this policy.
B)
financial intermediaries earn such large profits.
C)
financial intermediaries lower transaction costs.
D)
financial intermediaries hold highly diversified asset portfolios.
Answer:
C
105) The
problem created by asymmetric information before the transaction occurs is
called _____, while the problem created after the transaction occurs is called
_____.
A)
adverse selection; moral hazard B) moral hazard; adverse selection
C)
costly state verification; free-riding D) free-riding; costly state verification
Answer:
A
110) In
financial markets, lenders typically have inferior information about potential
returns and risks associated with any investment project. This difference in information is
called
A)
comparative informational disadvantage.
B)
asymmetric information.
C)
variant information.
D)
caveat venditor.
Answer:
B