,Chapter 1: Introduction
TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
1) Primary markets are markets in which users of funds raise cash by selling securities to
funds suppliers.
⊚ true
⊚ false
2) Secondary markets are markets used by corporations to raise cash by issuing securities
for a short time period.
⊚ true
⊚ false
3) Corporate security issuers are always directly involved in funds transfers in the secondary
market.
⊚ true
⊚ false
4) The NYSE is an example of a secondary market.
⊚ true
⊚ false
5) Central governments sometimes indirectly intervene in foreign exchange markets by
affecting foreign exchange rates through raising or lowering interest rates.
⊚ true
⊚ false
6) Money markets are the markets for securities with an original maturity of one year or
less.
⊚ true
⊚ false
1
,7) Financial intermediaries rather than financial systems are the most common agents to
channel funds from the suppliers to the users of funds.
⊚ true
⊚ false
8) There are three types of major financial markets today: primary, secondary, and
derivatives markets. The NYSE and NASDAQ are both examples of derivatives markets.
⊚ true
⊚ false
9) Asset transformation by financial intermediaries involves increasing the risk attributes of
securities such as mortgages, bonds, and stocks.
⊚ true
⊚ false
10) One of the factors responsible for globalization of financial markets and institutions is
deregulation.
⊚ true
⊚ false
11) The average cost incurred by financial institutions to collect information is larger than
that of individuals.
⊚ true
⊚ false
12) The Vol-cker Rule prohibits U.S. depository institutions from engaging in proprietary
trading.
⊚ true
⊚ false
2
, 13) Financial intermediation provides direct transfer of funds to the users.
⊚ true
⊚ false
14) In the United States, the SEC provides deposit insurance for $250,000 per person per
bank.
⊚ true
⊚ false
15) An Enterprise Risk Management (ERM) system is responsible for managing the totality
of a firm’s risk exposures.
⊚ true
⊚ false
MULTIPLE CHOICE - Choose the one alternative that best completes the statement or
answers the question.
16) What factors are encouraging financial institutions to offer overlapping financial services
such as banking, investment banking, brokerage, etc.? 1.I. Regulatory changes allowing
institutions to offer more services
2.II. Technological improvements reducing the cost of providing financial services
3.III. Increasing competition from full-service global financial institutions
4.IV. Reduction in the need to manage risk at financial institutions
A) I only
B) II and III only
C) I, II, and III only
D) I, II, and IV only
E) I, II, III, and IV
3
TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
1) Primary markets are markets in which users of funds raise cash by selling securities to
funds suppliers.
⊚ true
⊚ false
2) Secondary markets are markets used by corporations to raise cash by issuing securities
for a short time period.
⊚ true
⊚ false
3) Corporate security issuers are always directly involved in funds transfers in the secondary
market.
⊚ true
⊚ false
4) The NYSE is an example of a secondary market.
⊚ true
⊚ false
5) Central governments sometimes indirectly intervene in foreign exchange markets by
affecting foreign exchange rates through raising or lowering interest rates.
⊚ true
⊚ false
6) Money markets are the markets for securities with an original maturity of one year or
less.
⊚ true
⊚ false
1
,7) Financial intermediaries rather than financial systems are the most common agents to
channel funds from the suppliers to the users of funds.
⊚ true
⊚ false
8) There are three types of major financial markets today: primary, secondary, and
derivatives markets. The NYSE and NASDAQ are both examples of derivatives markets.
⊚ true
⊚ false
9) Asset transformation by financial intermediaries involves increasing the risk attributes of
securities such as mortgages, bonds, and stocks.
⊚ true
⊚ false
10) One of the factors responsible for globalization of financial markets and institutions is
deregulation.
⊚ true
⊚ false
11) The average cost incurred by financial institutions to collect information is larger than
that of individuals.
⊚ true
⊚ false
12) The Vol-cker Rule prohibits U.S. depository institutions from engaging in proprietary
trading.
⊚ true
⊚ false
2
, 13) Financial intermediation provides direct transfer of funds to the users.
⊚ true
⊚ false
14) In the United States, the SEC provides deposit insurance for $250,000 per person per
bank.
⊚ true
⊚ false
15) An Enterprise Risk Management (ERM) system is responsible for managing the totality
of a firm’s risk exposures.
⊚ true
⊚ false
MULTIPLE CHOICE - Choose the one alternative that best completes the statement or
answers the question.
16) What factors are encouraging financial institutions to offer overlapping financial services
such as banking, investment banking, brokerage, etc.? 1.I. Regulatory changes allowing
institutions to offer more services
2.II. Technological improvements reducing the cost of providing financial services
3.III. Increasing competition from full-service global financial institutions
4.IV. Reduction in the need to manage risk at financial institutions
A) I only
B) II and III only
C) I, II, and III only
D) I, II, and IV only
E) I, II, III, and IV
3
