,TEST BANK FOR
Financial Markets and Institutions, 10th Edition By Jeff Madura
Chapter 1-25
Chapter 1—Role of Financial Markets and Institutions
1. Financial market participants who provide funds are called
a. deficit units.
b. surplus units.
c. primary units.
d. secondary units.
ANS: B PTS: 1
2. 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
3. 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
,4. 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
5. 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
6. 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
7. Which of the following is a money market security?
a. Treasury note
b. municipal bond
c. mortgage
d. commercial paper
, ANS: D PTS: 1
8. The creditors in the federal funds market are
a. households.
b. depository institutions.
c. firms.
d. government agencies.
ANS: B PTS: 1
9. 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
10. 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
11. If security prices fully reflect all available information, the markets for these securities are
a. efficient.
b. primary.
c. overvalued.
Financial Markets and Institutions, 10th Edition By Jeff Madura
Chapter 1-25
Chapter 1—Role of Financial Markets and Institutions
1. Financial market participants who provide funds are called
a. deficit units.
b. surplus units.
c. primary units.
d. secondary units.
ANS: B PTS: 1
2. 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
3. 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
,4. 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
5. 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
6. 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
7. Which of the following is a money market security?
a. Treasury note
b. municipal bond
c. mortgage
d. commercial paper
, ANS: D PTS: 1
8. The creditors in the federal funds market are
a. households.
b. depository institutions.
c. firms.
d. government agencies.
ANS: B PTS: 1
9. 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
10. 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
11. If security prices fully reflect all available information, the markets for these securities are
a. efficient.
b. primary.
c. overvalued.
