Question 1

Long-term debt securities tend to have a ____ expected return and ____ risk than money market securities.

Accepted Answer

A)  lower; lower
B)  lower; higher
C)  higher; lower
D)  higher; higherE) A) and B)
F) C) and D)

Question 2

Which of the following is a money market security?

Accepted Answer

A)  Treasury note
B)  municipal bond
C)  mortgage
D)  commercial paperE) A) and B)
F) None of the above

Question 3

When a securities firm acts as a(n)  ____, it maintains a position in securities.

Accepted Answer

A)  adviser
B)  dealer
C)  broker
D)  none of the aboveE) None of the above
F) All of the above

Question 4

According to your text, which of the following is not considered a money market security?

Accepted Answer

A)  Treasury bills
B)  Treasury notes
C)  retail CD
D)  banker's acceptance
E)  commercial paperF) A) and D)
G) B) and E)

Question 5

The credit crisis in the 2008-2009 period was caused by weak economies in Asia.

Accepted Answer

A) True 
 B)False

Question 6

By requiring full disclosure of information, securities laws prevent investors from making poor investment decisions.

Accepted Answer

A) True 
 B)False

Question 7

There is a ____ relationship between the risk of a security and the expected return from investing in the security.

Accepted Answer

A)  positive
B)  negative
C)  indeterminable
D)  none of the aboveE) All of the above
F) B) and C)

Question 8

Which of the following financial intermediaries commonly invests in stocks and bonds?

Accepted Answer

A)  pension funds
B)  insurance companies
C)  mutual funds
D)  all of the aboveE) All of the above
F) A) and C)

Question 9

When security prices fully reflect all available information, the markets for these securities are said to be perfect.

Accepted Answer

A) True 
 B)False

Question 10

Money market securities generally have ____. Capital market securities are typically expected to have a ____.

Accepted Answer

A)  less liquidity; higher annualized return
B)  more liquidity; lower annualized return
C)  less liquidity; lower annualized return
D)  more liquidity; higher annualized returnE) A) and B)
F) All of the above

Question 11

Without the participation of financial intermediaries in financial market transactions,

Accepted Answer

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.E) B) and D)
F) A) and B)

Question 12

Common types of money market securities include negotiable certificates of deposit and Treasury bills.

Accepted Answer

A) True 
 B)False

Question 13

Savings institutions represent a nondepository institution.

Accepted Answer

A) True 
 B)False

Question 14

The Securities Act of 1933

Accepted Answer

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)  declared misleading financial statements for public primary securities illegal.
D)  required complete disclosure of relevant financial information for securities traded in the secondary market.
E)  all of the aboveF) B) and E)
G) A) and B)

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not a reason why depository financial institutions are popular?

Accepted Answer

A)  They offer deposit accounts that can accommodate the amount and liquidity characteristics desired by most surplus units.
B)  They repackage funds received from deposits to provide loans of the size and maturity desired by deficit units.
C)  They accept the risk on loans provided.
D)  They use their information resources to act as a broker, executing securities transactions between two parties.
E)  They have more expertise than individual surplus units in evaluating the creditworthiness of deficit units.F) C) and E)
G) D) and E)

Question 17

Which of the following is a nondepository financial institution?

Accepted Answer

A)  savings banks
B)  commercial banks
C)  savings and loan associations
D)  mutual fundsE) B) and C)
F) A) and D)

Question 18

Which of the following are not considered depository financial institutions?

Accepted Answer

A)  finance companies
B)  commercial banks
C)  savings institutions
D)  credit unions
E)  All of the above are depository financial institutions.F) A) and D)
G) None of the above

Question 19

International integration of securities markets allows:

Accepted Answer

A)   a. governments and corporations to have easier access to funding from creditors and investors in other countries.
B)   a. investors and creditors to benefit from investment opportunities in other countries.
C)   a. one's country's financial problems to adversely affect other countries.
D)   a. All of the aboveE) All of the above
F) B) and D)

Question 20

A common use of funds for ____ is investment in stocks and businesses, while their main use of funds is providing loans to households and businesses.

Accepted Answer

A)  savings institutions
B)  commercial banks
C)  mutual funds
D)  finance companiesE) A) and D)
F) All of the above

Exam 1: Role of Financial Markets and Institutions

International integration of securities markets allows:

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Which of the following is a nondepository financial institution?

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According to your text, which of the following is not considered a money market security?

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The Securities Act of 1933

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Money market securities generally have ____. Capital market securities are typically expected to have a ____.

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Which of the following are not considered depository financial institutions?

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Long-term debt securities tend to have a ____ expected return and ____ risk than money market securities.

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By requiring full disclosure of information, securities laws prevent investors from making poor investment decisions.

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When a securities firm acts as a(n) ____, it maintains a position in securities.

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Which of the following is not a reason why depository financial institutions are popular?

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The credit crisis in the 2008-2009 period was caused by weak economies in Asia.

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Which of the following financial intermediaries commonly invests in stocks and bonds?

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When security prices fully reflect all available information, the markets for these securities are said to be perfect.

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Which of the following is a money market security?

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Common types of money market securities include negotiable certificates of deposit and Treasury bills.

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

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There is a ____ relationship between the risk of a security and the expected return from investing in the security.

Correct AnswerverifiedShow Answer

A common use of funds for ____ is investment in stocks and businesses, while their main use of funds is providing loans to households and businesses.

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Without the participation of financial intermediaries in financial market transactions,

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Savings institutions represent a nondepository institution.

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Money market securities generally have . Capital market securities are typically expected to have a .

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Long-term debt securities tend to have a expected return and risk than money market securities.

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