1)

Which of the following can be described as involving direct finance?

Select one:

A. People buy shares of common stock in the primary markets.

B. A corporation buys a short-term corporate security in a secondary market.

C. A corporation takes out loans from a bank.

D. People buy shares in a mutual fund.

2)

Which of the following statements about financial markets and securities is TRUE?

Select one:

A. A debt instrument is intermediate term if its maturity is less than one year.

B. A debt instrument is intermediate term if its maturity is ten years or longer.

C. A bond is a long-term security that promises to make periodic payments called dividends to the firm's residual claimants.

D. The maturity of a debt instrument is the number of years (term) to that instrument's expiration date.

3)

Of the following assets, the least liquid is

Select one:

A. stocks.

B. traveler's checks.

C. checking deposits.

D. a house.

4)

If an individual moves money from a savings deposit account to a money market deposit account

Select one:

A. M1 decreases and M2 stays the same.

B. M1 stays the same and M2 stays the same.

C. M1 stays the same and M2 increases.

D. M1 increases and M2 decreases.

5)

If a $10,000 face-value discount bond maturing in one year is selling for $5,000, then its yield to maturity is

Select one:

A. 5 percent.

B. 10 percent.

C. 50 percent.

D. 100 percent.