Mid-Term Paper: Monetary, Banking and Financial Markets
TERM PAPER : Monetary, Banking and Financial Markets
1) Financial markets have the basic function of A
A) getting people with funds to lend together with people who want to borrow funds.
B) assuring that the swings in the business cycle are less pronounced.
C) assuring that governments need never resort to printing money.
D) providing a risk-free repository of spending power.
2) Financial markets improve economic welfare because B
A) they channel funds from investors to savers.
B) they allow consumers to time their purchase better.
C) they weed out inefficient firms.
D) eliminate the need for indirect finance.
3) Secondary markets make financial instruments more C
A) solid.
B) vapid.
C) liquid.
D) risky.
4) An important financial institution that assists in the initial sale of securities in the primary A market is the
A) investment bank.
B) commercial bank.
C) stock exchange.
D) brokerage house.
5) Which of the following instruments are traded in a money market? B
A) State and local government bonds.
B) U.S. Treasury bills.
C) Corporate bonds.
D) U.S. government agency securities.
6) Bonds that are sold in a foreign country and are denominated in the countryʹs currency in A which they are sold are known as
A) foreign bonds.
B) Eurobonds.
C) equity bonds.
D) country bonds.
7) Adverse selection is a problem associated with equity and debt contracts arising from A
A) the lender’s relative lack of information about the borrower’s potential returns and risks of his investment activities.
B) the lender’s inability to legally require sufficient collateral to cover a 100% loss if the borrower defaults.
C) the borrower’s lack of incentive to seek a loan for highly risky investments.
D) the borrower’s lack of good options for obtaining funds.
8) Which of the following are not contractual savings institutions? B
A) Life insurance companies
B) Credit unions
C) Pension funds
D) State and local government retirement funds
1) Financial markets have the basic function of A
A) getting people with funds to lend together with people who want to borrow funds.
B) assuring that the swings in the business cycle are less pronounced.
C) assuring that governments need never resort to printing money.
D) providing a risk-free repository of spending power.
2) Financial markets improve economic welfare because B
A) they channel funds from investors to savers.
B) they allow consumers to time their purchase better.
C) they weed out inefficient firms.
D) eliminate the need for indirect finance.
3) Secondary markets make financial instruments more C
A) solid.
B) vapid.
C) liquid.
D) risky.
4) An important financial institution that assists in the initial sale of securities in the primary A market is the
A) investment bank.
B) commercial bank.
C) stock exchange.
D) brokerage house.
5) Which of the following instruments are traded in a money market? B
A) State and local government bonds.
B) U.S. Treasury bills.
C) Corporate bonds.
D) U.S. government agency securities.
6) Bonds that are sold in a foreign country and are denominated in the countryʹs currency in A which they are sold are known as
A) foreign bonds.
B) Eurobonds.
C) equity bonds.
D) country bonds.
7) Adverse selection is a problem associated with equity and debt contracts arising from A
A) the lender’s relative lack of information about the borrower’s potential returns and risks of his investment activities.
B) the lender’s inability to legally require sufficient collateral to cover a 100% loss if the borrower defaults.
C) the borrower’s lack of incentive to seek a loan for highly risky investments.
D) the borrower’s lack of good options for obtaining funds.
8) Which of the following are not contractual savings institutions? B
A) Life insurance companies
B) Credit unions
C) Pension funds
D) State and local government retirement funds