QUESTION 1

Savings by _____ in small dollar amounts is the origin of much of the money that funds business loans in the economy.

		consumers
		the government
		small businesses
		large

5 points

QUESTION 2

An important function of the financial system is:

		to allow the federal government to view all financial transactions.
		to direct money to the best investment opportunities in the economy.
		to help state governments to coordinate state tax levies.
		ich

5 points

QUESTION 3

Secondary financial markets are similar to:

		direct auction markets.
		new-car markets.
		used-car markets.
		grocery

5 points

QUESTION 4

Which of the following statements is TRUE?

		Equities are generally traded in the
		Treasury
		Equities are generally traded in the money
		Equities are generally traded in the capital market.

5 points

QUESTION 5

The ease with which a security can be sold at a fair value and converted into cash is called:

		convertibility.
		liquidity.
		lovability.
		disability.

5 points

QUESTION 6

What is the role of the financial system?

		To make sure there is full employment in the economy
		To channel money from savers to borrowers
		To set interest rates and borrowing costs for the economy
		To collect income taxes from individuals and corporations

5 points

QUESTION 7

What does a competitive financial system imply about interest rates?

		It implies that interest rates are fixed by the government
		It implies that many banks will go out of business from making bad loans
		It implies that you will receive the highest possible rate for money invested with a bank and the lowest possible interest rate when borrowing money
		It implies that bank CEOs will become rich at the expense of the depositors

5 points

QUESTION 8

What is a primary market?

		One in which new securities are sold for the first time
		One where old securities are sold to new investors
		One where previously issued bonds are sold
		One where 30-year government bonds are sold to foreign investors

5 points

QUESTION 9

What is a money market?

		Markets in which short-term debt with maturities of less than one year are bought and sold
		Markets in which money is exchanged for financial advice
		Markets in which money is exchanged for insurance products
		This is the market for options and futures traded on the NYSE

5 points

QUESTION 10

What are the main types of securities in the money markets?

		Stocks and bonds
		Treasury bills and commercial paper
		Cash, stocks, options, and oil futures
		Insurance and real estate including REITS

5 points

QUESTION 11

If a firm sells common stock to the public for the very first time, it is known as

		An underwriting
		An IPO
		A LIBOR
		Financial intermediation

5 points

QUESTION 12

What is the theory that security prices reflect all information, whether public or private?

		Weak-form efficiency
		Semi-strong-form efficiency
		Strong-form efficiency
		Nominal-form efficiency

5 points

QUESTION 13

If the supply of loanable funds decreases, all else equal we would expect

		Interest rates to remain unchanged
		Interest rates to increase
		Interest rates to decrease
		The price of money to remain unchanged

5 points

QUESTION 14

If your firm primarily borrows from commercial banks, then it primarily accesses the capital markets through:

		direct financing.
		indirect financing.
		legal loopholes.
		the shark tank.

5 points

QUESTION 15

If you are a borrower, which would you prefer to occur during the life of your loan?

		a level of inflation that is higher than that anticipated at the outset of the loan
		a level of inflation that is lower than that anticipated at the outset of the loan
		a level of inflation that is exactly as anticipated at the outset of the loan
		no inflation at all

5 points

QUESTION 16

The real rate of return can be justified, at a basic level, by

		compensation for inflation
		compensation for deferring consumption
		compensation for risk
		compensation for expected inflation

5 points

QUESTION 17

One of the main services offered by investment banks to companies is

		helping companies sell new debt or equity issues in the security markets
		making loans to companies
		taking deposits from companies
		all of the above

5 points

QUESTION 18

If a firm needs to finance a new corporate headquarters building, then it would most likely seek the funds in the:

		money market.
		capital market.
		options market.
		grocery market.

5 points

QUESTION 19

If inflation is anticipated to be 5 percent during the next year, while the real rate of interest for a one-year loan is 5 percent, then what should the nominal rate of interest be for a risk-free one-year loan?

5 points

QUESTION 20

Suppose you are a financial manager at a manufacturing company that is going to make a five-year loan to a key supplier. The inflation rate over the next five years is expected to be 2, 3, 4, 5, and 6 percent. If the real rate of interest is 6 percent, what is the nominal rate on this loan?