Question 1

Which of the following functions does not require financial markets?

Accepted Answer

A)   transporting of cash across time
B)   provision of liquidity
C)   risk reduction by investment in diversified portfolios
D)   provision of pricing information

Question 2

U.S.bonds and other debt securities are mostly held by:

Accepted Answer

A)   institutional investors.
B)   households.
C)   foreign investors.
D)   state and local governments.

Question 3

NINJA stands for

Accepted Answer

A)   No income, No Job, No Assets
B)   No income, No job, Assets
C)   No interest rate, No Job, No Assets
D)   No insider information, No Jeopardy, No Assets

Question 4

Identify a minimum of four major market factors that contributed to the financial crisis of 2007-2009.

Accepted Answer

1.The Federal Reserve for its easy money...

Question 5

One reason suggesting that banks may be better than individuals at matching lenders to borrowers is that banks:

Accepted Answer

A)   can shift loan risk to their deposit customers.
B)   are motivated by the potential for profit.
C)   do not have any income tax liability.
D)   have information to evaluate creditworthiness.

Question 6

Which one of these may provide a financial return to some investors while not providing any financial return to other investors?

Accepted Answer

A)   Mutual funds
B)   Pension funds
C)   Insurance companies
D)   Hedge fund

Question 7

The cost of capital is the minimum acceptable rate of return for capital investment.

Accepted Answer

A) True 
 B)False

Question 8

During the Financial Crisis of 2007-2009,the U.S.government bailed out all firms in danger of failing.

Accepted Answer

A) True 
 B)False

Question 9

A primary market would be utilized when:

Accepted Answer

A)   investors buy or sell existing securities.
B)   shares of common stock are exchanged.
C)   securities are initially issued.
D)   a commission must be paid on the transaction.

Question 10

When Patricia sells her General Motors common stock at the same time that Brian purchases the same amount of GM stock,GM receives:

Accepted Answer

A)   the dollar value of the transaction.
B)   the dollar amount of the transaction, less brokerage fees.
C)   only the par value of the common stock.
D)   nothing.

Question 11

Which one of these was a contributing factor to the need for many foreign banks to seek aid from their governments as a result of the financial crisis of 2007-2009?

Accepted Answer

A)   decrease in their exchange rates
B)   investments in U.S. subprime mortgages
C)   interest rate spikes
D)   currency controls

Question 12

A mother in a developing country wants to borrow the equivalent of $20 to enable her to start a small restaurant run by her family.Which type of financing is she looking to obtain?

Accepted Answer

A)   public bond issue
B)   IPO
C)   micro loan
D)   futures contract on a commodity

Question 13

The cost of capital:

Accepted Answer

A)   is the expected rate of return on a capital investment.
B)   is an opportunity cost determined by the risk-free rate of return.
C)   is the interest rate that the firm pays on a loan from a bank or insurance company.
D)   for risky investments is normally higher than the firm's borrowing rate.

Question 14

A bond differs from a share of stock in that a bond:

Accepted Answer

A)   represents a claim on the firm.
B)   has more risk.
C)   has guaranteed dividend payments.
D)   has a maturity date.

Question 15

Excess cash held by a firm should be:

Accepted Answer

A)   reinvested by the firm in projects offering the lowest rate of return.
B)   reinvested by the firm in projects offering rates of return higher than the cost of capital.
C)   reinvested by the firm in the financial markets.
D)   distributed to bondholders in the form of extra coupon payments.

Question 16

Which one of these is a money market security?

Accepted Answer

A)   commercial paper
B)   common stock
C)   2-year bond
D)   20-year bond

Question 17

Which one of the following is the biggest provider of payment mechanisms?

Accepted Answer

A)   hedge funds
B)   banks
C)   mutual funds
D)   insurance companies

Question 18

Financial markets and intermediaries:

Accepted Answer

A)   channel savings to real investment.
B)   increase risks for businesses.
C)   generally reduce the liquidity of securities.
D)   prevent the transportation of cash across time.

Question 19

Foreign currencies are traded:

Accepted Answer

A)   only by banks in New York and London.
B)   over the counter.
C)   on both the NYSE and NASDAQ.
D)   on the Intercontinental Exchange.

Question 20

Corporate financing comes ultimately from:

Accepted Answer

A)   savings by households and foreign investors.
B)   cash generated from the firm's operations.
C)   the financial markets and intermediaries.
D)   the issue of shares in the firm.

Exam 2: Financial Markets and Institutions

A bond differs from a share of stock in that a bond:

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Which one of these is a money market security?

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Which of the following functions does not require financial markets?

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Financial markets and intermediaries:

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A mother in a developing country wants to borrow the equivalent of $20 to enable her to start a small restaurant run by her family.Which type of financing is she looking to obtain?

Correct AnswerverifiedShow Answer

Which one of these may provide a financial return to some investors while not providing any financial return to other investors?

Correct AnswerverifiedShow Answer

Corporate financing comes ultimately from:

Correct AnswerverifiedShow Answer

NINJA stands for

Correct AnswerverifiedShow Answer

Which one of these was a contributing factor to the need for many foreign banks to seek aid from their governments as a result of the financial crisis of 2007-2009?

Correct AnswerverifiedShow Answer

During the Financial Crisis of 2007-2009,the U.S.government bailed out all firms in danger of failing.

Correct AnswerverifiedShow Answer

When Patricia sells her General Motors common stock at the same time that Brian purchases the same amount of GM stock,GM receives:

Correct AnswerverifiedShow Answer

A primary market would be utilized when:

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Excess cash held by a firm should be:

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Foreign currencies are traded:

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Identify a minimum of four major market factors that contributed to the financial crisis of 2007-2009.

Correct Answerverified1.The Federal Reserve for its easy money...View AnswerShow Answer

One reason suggesting that banks may be better than individuals at matching lenders to borrowers is that banks:

Correct AnswerverifiedShow Answer

U.S.bonds and other debt securities are mostly held by:

Correct AnswerverifiedShow Answer

The cost of capital is the minimum acceptable rate of return for capital investment.

Correct AnswerverifiedShow Answer

The cost of capital:

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Which one of the following is the biggest provider of payment mechanisms?

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1.The Federal Reserve for its easy money...
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