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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A

deficit units.

B

surplus units.

C

primary units.

D

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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A

households

B

corporations

C

the U.S. Treasury

D

government agencies

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Question 3
Free
Multiple Choice

Behavioral finance

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A

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

B

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

C

applies psychology to financial decision making.

D

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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A

money markets.

B

capital markets.

C

primary markets.

D

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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A

secondary market.

B

primary market.

C

deficit market.

D

surplus market.

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Question 6
Multiple Choice

Which of the following is a capital market instrument?

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A
a six-month certificate of deposit
B
a three-month Treasury bill
C
a ten-year bond
D
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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A
Treasury note
B
municipal bond
C
mortgage
D
commercial paper
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Question 8
Multiple Choice

The creditors in the federal funds market are

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A
households.
B
depository institutions.
C
firms.
D
government agencies.
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Question 9
Multiple Choice

Investors in equity securities may earn a return from

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A
coupon payments and the return of principal at the maturity date.
B
coupon payments and a capital gain when they sell the securities.
C
quarterly dividends (if paid) and a capital gain when they sell the securities.
D
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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A
relatively low liquidity, low expected return, and a high degree of credit risk.
B
relatively high liquidity, high expected return, and a high degree of credit risk.
C
relatively low liquidity, high expected return, and a low degree of credit risk.
D
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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A
efficient.
B
primary.
C
overvalued.
D
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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A
perfect
B
active
C
inefficient
D
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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A
required complete disclosure of relevant financial information for publicly offered securities in the primary market.
B
declared trading strategies to manipulate the prices of public secondary securities illegal.
C
imposed heavy penalties for insider trading.
D
required complete disclosure of relevant financial information for securities traded in the secondary market.
E
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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A
Federal Reserve Act.
B
McFadden Act.
C
Securities Exchange Act of 1934.
D
Glass-Steagall Act.
E
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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A
debt security.
B
money market security.
C
equity security.
D
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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A
efficient
B
inefficient
C
perfect
D
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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A
provide brokerage services
B
provide underwriting services
C
accept deposits that are insured by the federal government and use the funds to provide loans to corporations
D
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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A
information and transaction costs would be lower.
B
transaction costs would be higher but information costs would be unchanged.
C
information costs would be higher but transaction costs would be unchanged.
D
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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A
finance companies
B
securities firms
C
credit unions
D
pension funds
E
insurance companies
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