Test Bank For Financial Markets and Institutions 11th Edition By Jeff Madura
Chapter 1—Role of Financial Markets and Institutions
- Financial market participants who provide funds are called
a. | deficit units. |
b. | surplus units. |
c. | primary units. |
d. | secondary units. |
ANS: B PTS: 1 DIF: Easy OBJ: FMAI.MADU.15.01.01
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom’s: Knowledge
- The main provider(s) of funds to the U.S. Treasury is (are)
a. | households and businesses. |
b. | foreign financial institutions. |
c. | the Federal Reserve System. |
d. | foreign nonfinancial sectors. |
ANS: A PTS: 1 DIF: Easy OBJ: FMAI.MADU.15.01.01
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom’s: Knowledge
- The largest deficit unit is (are)
a. | households and businesses. |
b. | foreign financial institutions. |
c. | the U.S. Treasury. |
d. | foreign nonfinancial sectors. |
ANS: C PTS: 1 DIF: Easy OBJ: FMAI.MADU.15.01.01
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom’s: Knowledge
- Those financial markets that facilitate the flow of short-term funds are known as
a. | money markets. |
b. | capital markets. |
c. | primary markets. |
d. | secondary markets. |
ANS: A PTS: 1 DIF: Easy OBJ: FMAI.MADU.15.01.02
NAT: BUSPROG.FMAI.MADU.15.02 STA: DISC.FMAI.MADU.15.02
KEY: Bloom’s: Knowledge
- Funds are provided to the initial issuer of securities in the
a. | secondary market. |
b. | primary market. |
c. | deficit market. |
d. | surplus market. |
ANS: B PTS: 1 DIF: Easy OBJ: FMAI.MADU.15.01.01
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom’s: Knowledge
- Which of the following is a capital market instrument?
a. | a six-month CD |
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 |
ANS: C PTS: 1 DIF: Moderate OBJ: FMAI.MADU.15.01.02
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom’s: Comprehension
- Which of the following is a money market security?
a. | Treasury note |
b. | municipal bond |
c. | mortgage |
d. | commercial paper |
ANS: D PTS: 1 DIF: Moderate OBJ: FMAI.MADU.15.01.02
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom’s: Comprehension
- The creditors in the federal funds market are
a. | households. |
b. | depository institutions. |
c. | firms. |
d. | government agencies. |
ANS: B PTS: 1 DIF: Easy OBJ: FMAI.MADU.15.01.03
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom’s: Knowledge
- Equity securities have a ____ expected return than most long-term debt securities, and they exhibit a ____ degree of risk.
a. | higher; higher |
b. | lower; lower |
c. | lower; higher |
d. | higher; lower |
ANS: A PTS: 1 DIF: Moderate OBJ: FMAI.MADU.15.01.02
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom’s: Comprehension
- Money market securities generally have ____. Capital market securities are typically expected to have a ____.
a. | less liquidity; higher annualized return |
b. | more liquidity; lower annualized return |
c. | less liquidity; lower annualized return |
d. | more liquidity; higher annualized return |
ANS: D PTS: 1 DIF: Moderate OBJ: FMAI.MADU.15.01.02
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom’s: Comprehension
- If security prices fully reflect all available information, the markets for these securities are
a. | efficient. |
b. | primary. |
c. | overvalued. |
d. | undervalued. |
ANS: A PTS: 1 DIF: Easy OBJ: FMAI.MADU.15.01.02
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom’s: Knowledge
- If markets are ____, investors could use available information ignored by the market to earn abnormally high returns.
a. | perfect |
b. | active |
c. | inefficient |
d. | in equilibrium |
ANS: C PTS: 1 DIF: Moderate OBJ: FMAI.MADU.15.01.02
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom’s: Knowledge
- If financial markets are efficient, this implies that all securities should earn the same return.
- True
- False
ANS: F PTS: 1 DIF: Easy OBJ: FMAI.MADU.15.01.02
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom’s: Comprehension
- The Securities Act of 1933
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 above |
ANS: A PTS: 1 DIF: Easy OBJ: FMAI.MADU.15.01.02
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom’s: Knowledge
- The Securities Exchange Commission (SEC) was established by the
a. | Federal Reserve Act. |
b. | McFadden Act. |
c. | Securities Exchange Act of 1934. |
d. | Glass-Steagall Act. |
e. | none of the above |
ANS: C PTS: 1 DIF: Easy OBJ: FMAI.MADU.15.01.02
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom’s: Knowledge
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