Role Of Financial Markets And Institutions

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Question 1

Free

Multiple Choice

Financial market participants who provide funds are called

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deficit units.

surplus units.

primary units.

secondary units.

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Question 2

Free

Multiple Choice

Which of the following is not an issuer of bonds?

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households

corporations

the U.S. Treasury

government agencies

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Question 3

Free

Multiple Choice

Behavioral finance

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applies concepts from sociology and anthropology to the behavior of market participants.

studies the behavior of financial markets in response to changes in Federal Reserve policy.

applies psychology to financial decision making.

explains why markets are efficient.

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Question 4

Free

Multiple Choice

Those financial markets that facilitate the flow of short-term funds are known as

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money markets.

capital markets.

primary markets.

secondary markets.

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Question 5

Free

Multiple Choice

Funds are provided to the initial issuer of securities in the

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secondary market.

primary market.

deficit market.

surplus market.

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Question 6

Multiple Choice

Which of the following is a capital market instrument?

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a six-month certificate of deposit

a three-month Treasury bill

a ten-year bond

an agreement for a bank to loan funds directly to a company for nine months

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Question 7

Multiple Choice

Which of the following is a money market security?

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Treasury note

municipal bond

mortgage

commercial paper

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Question 8

Multiple Choice

The creditors in the federal funds market are

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households.

depository institutions.

firms.

government agencies.

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Question 9

Multiple Choice

Investors in equity securities may earn a return from

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coupon payments and the return of principal at the maturity date.

coupon payments and a capital gain when they sell the securities.

quarterly dividends (if paid) and a capital gain when they sell the securities.

quarterly dividends (if paid) and the return of principal at the maturity date.

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Question 10

Multiple Choice

Money market securities generally have ____ .

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relatively low liquidity, low expected return, and a high degree of credit risk.

relatively high liquidity, high expected return, and a high degree of credit risk.

relatively low liquidity, high expected return, and a low degree of credit risk.

relatively high liquidity, low expected return, and a low degree of credit risk.

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Question 11

Multiple Choice

If security prices fully reflect all available information, the markets for these securities are

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efficient.

primary.

overvalued.

undervalued.

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Question 12

Multiple Choice

If markets are ____ , investors could use available information ignored by the market to earn abnormally high returns.

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perfect

active

inefficient

in equilibrium

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Question 13

True/False

financial markets are efficient, this implies that all securities should earn the same return.

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True

False

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Question 14

Multiple Choice

The Securities Act of 1933

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required complete disclosure of relevant financial information for publicly offered securities in the primary market.

declared trading strategies to manipulate the prices of public secondary securities illegal.

imposed heavy penalties for insider trading.

required complete disclosure of relevant financial information for securities traded in the secondary market.

all of the above

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Question 15

Multiple Choice

The Securities and Exchange Commission (SEC) was established by the

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Federal Reserve Act.

McFadden Act.

Securities Exchange Act of 1934.

Glass-Steagall Act.

none of the above

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Question 16

Multiple Choice

Stock issued by a corporation is an example of a(n)

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debt security.

money market security.

equity security.

A and B

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Question 17

Multiple Choice

If financial markets were ____ , all information about any securities for sale in primary and secondary markets would be continuously and freely available to investors.

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efficient

inefficient

perfect

imperfect

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Question 18

Multiple Choice

Which of the following is not a typical function of securities firms?

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provide brokerage services

provide underwriting services

accept deposits that are insured by the federal government and use the funds to provide loans to corporations

offer advice on mergers and other corporate restructurings.

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Question 19

Multiple Choice

Without the participation of financial intermediaries in financial market transactions,

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information and transaction costs would be lower.

transaction costs would be higher but information costs would be unchanged.

information costs would be higher but transaction costs would be unchanged.

information and transaction costs would be higher.

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Question 20

Multiple Choice

Which of the following is most likely to be described as a depository institution?

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finance companies

securities firms

credit unions

pension funds

insurance companies

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