Understanding Financial Markets And Institutions

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Question 1

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Multiple Choice

Which of these provide a forum in which demanders of funds raise funds by issuing new financial instruments, such as stocks and bonds?

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investment banks

money markets

primary markets

secondary markets

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Question 2

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Multiple Choice

In the United States, which of these financial institutions arrange most primary market transactions for businesses?

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investment banks

asset transformer

direct transfer agents

over-the-counter agents

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Question 3

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Multiple Choice

Primary market financial instruments include stock issues from firms allowing their equity shares to be publicly traded on the stock market for the first time. We usually refer to these first-time issues as which of the following?

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initial public offerings

direct transfers

money market transfers

over-the-counter stocks

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Question 4

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Multiple Choice

Once firms issue financial instruments in primary markets, these same stocks and bonds are then traded in which of these?

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initial public offerings

direct transfers

secondary markets

over-the-counter stocks

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Question 5

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Multiple Choice

Which of these feature debt securities or instruments with maturities of one year or less?

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money markets

primary markets

secondary markets

over-the-counter stocks

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Question 6

Multiple Choice

Which of the following is NOT a money market instrument?

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treasury bills

commercial paper

corporate bonds

bankers' acceptances

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Question 7

Multiple Choice

Which of these money market instruments are short-term funds transferred between financial institutions, usually for no more than one day?

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treasury bills

federal funds

commercial paper

banker acceptances

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Question 8

Multiple Choice

Which of the following is NOT a capital market instrument?

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U.S. Treasury notes and bonds

U.S. Treasury bills

U.S. government agency bonds

corporate stocks and bonds

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Question 9

Multiple Choice

Which of these capital market instruments are long-term loans to individuals or businesses to purchase homes, pieces of land, or other real property?

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treasury notes and bonds

mortgages

mortgage-backed securities

corporate bonds

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Question 10

Multiple Choice

Which of these markets trade currencies for immediate or for some future stated delivery?

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money markets

primary markets

foreign exchange markets

over-the-counter stocks

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Question 11

Multiple Choice

Which of these formalizes an agreement between two parties to exchange a standard quantity of an asset at a predetermined price on a specified date in the future?

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derivative security

initial public offering

liquidity asset

trading volume

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Question 12

Multiple Choice

Which of these does NOT perform vital functions to securities markets of all sorts by channelling funds from those with surplus funds to those with shortages of funds?

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commercial banks

secondary markets

insurance companies

mutual funds

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Question 13

Multiple Choice

Which of these refer to the ease with which an asset can be converted into cash?

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direct transfer

liquidity

primary market

secondary market

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Question 14

Multiple Choice

Which of the following is the risk that an asset's sale price will be lower than its purchase price?

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default risk

liquidity risk

price risk

trading risk

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Question 15

Multiple Choice

Which of these is the interest rate that is actually observed in financial markets?

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nominal interest rates

real interest rates

real risk-free rate

market premium

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Question 16

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Which of these is the interest rate that would exist on a default-free security if no inflation were expected?

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nominal interest rate

real interest rate

default premium

market premium

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Question 17

Multiple Choice

Which of the following is the risk that a security issuer will miss an interest or principal payment or continue to miss such payments?

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default risk

liquidity risk

maturity risk

price risk

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Question 18

Multiple Choice

Which of these is NOT a participant in the shadow banking system?

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structured investment vehicles (SIVs)

special purpose vehicles (SPVs)

limited-purpose finance companies

credit unions

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Question 19

Multiple Choice

How is the shadow banking system the same as the traditional banking system?

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It intermediates the flow of funds between net savers and net borrowers.

It serves as a middle man.

The complete credit intermediation is performed through a series of steps involving many nonbank financial service firms.

The complete credit intermediation is performed by a single bank.

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Question 20

Multiple Choice

Which of the following is the continual increase in the price level of a basket of goods and services?

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deflation

inflation

recession

stagflation

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