FIN 304 Final questions & Answers 2025
Latest Update!!!
What factors are encouraging financial institutions to offer overlapping financial services
such as banking, investment banking, brokerage, etc.?
I. Regulatory changes allowing institutions to offer more services
II. Technological improvements reducing the cost of providing financial services
III. Increasing competition from full-service global financial institutions
IV. Reduction in the need to manage risk at financial institutions - ANSWER I, II, and III
only
IBM creates and sells additional stock to the investment banker Morgan Stanley.
Morgan Stanley then resells the issue to the U.S. public through its mutual funds.
This transaction is an example of a(n) - ANSWER primary market transaction
IBM creates and sells additional stock to the investment banker Morgan Stanley.
Morgan Stanley then resells the issue to the U.S. public through its mutual funds.
Morgan Stanley is acting as a(n) - ANSWER asset transformer
A corporation seeking to sell new equity securities to the public for the first time in order
to raise cash for capital investment would most likely - ANSWER conduct an IPO with
the assistance of an investment banker.
The largest capital market security outstanding in 2016 measured by market value was -
ANSWER corporate stocks
markets in which corporations raise funds through new issues of securities - ANSWER
primary markets
Match the intermediary with the characteristic that best describes its function.
I. Provide protection from adverse events.
II. Pool funds of small savers and invest in either money or capital markets.
III. Provide consumer loans and real estate loans funded by deposits.
IV. Accumulate and transfer wealth from work period to retirement period.
V. Underwrite and trade securities and provide brokerage services.
Thrifts
Insurers
Pension funds
Securities firms and investment banks
Mutual funds - ANSWER 2,5,1,3,4
Secondary markets help support primary markets because secondary markets
,I. offer primary market purchasers liquidity for their holdings.
II. update the price or value of the primary market claims.
III. reduce the cost of trading the primary market claims. - ANSWER I, II, and III
Financial intermediaries (FIs) can offer savers a safer, more liquid investment than a
capital market security, even though the intermediary invests in risky illiquid instruments
because - ANSWER FI's can diversify away some of their risk and closely monitor the
riskiness of their assets
Households are increasingly likely to both directly purchase securities (perhaps via a
broker) and also place some money with a bank or thrift to meet different needs. Match
up the given investor's desire with the appropriate intermediary or direct security.
I. Money likely to be needed within six months
II. Money to be set aside for college in 10 years
III. Money to provide supplemental retirement income
IV. Money to be used to provide for children in the event of death
1. Depository institutions
2. Insurer
3. Pension fund
4. Stocks or bonds - ANSWER 1,4,3,2
Which of the following is/are money market instrument(s)?
- negotiable cd's
- common stock
- t-bonds
- 4-year maturity corporate bond - ANSWER negotiable cd's
The Securities Exchange Commission (SEC) does not - ANSWER decide whether a
public issue is fairly priced
The most diversified type of depository institutions is - ANSWER commercial banks
Depository institutions (DIs) play an important role in the transmission of monetary
policy from the Federal Reserve to the rest of the economy because - ANSWER DI
deposits are a major portion of the money supply
short-term unsecured promissory notes issued by a company to raise short term cash -
ANSWER commercial paper
bank issued time deposits that specify an interest rate and maturity date and are
negotiable - ANSWER negotiable certificates of deposits
time drafts payable to a seller of goods, with payment guaranteed by a bank - ANSWER
bankers acceptances
, the fundamental ownership claim in a public corporation - ANSWER corporate stock
loans to individuals or businesses to purchase a home, land, or other real property -
ANSWER mortgages
long-term bonds issued by corporations - ANSWER corporate bonds
long-term bonds issued by the U.S. governments - ANSWER treasury bonds
What are the major instruments traded in the capital markets? - ANSWER stocks and
bonds
depository institutions whose major assets are loans and whose major liabilities are
deposits. - ANSWER commercial banks
depository institutions in the form of savings associations, savings banks, and credit
unions. Generally perform services similar to commercial banks, but they tend to
concentrate their loans in one segment, such as real estate loans or consumer loans -
ANSWER thrifts
services benefiting supplier of funds - ANSWER monitoring costs
liquidity risk
price risk
transaction cost services
maturity intermediation
aggregation of funds in an FI provides greater incentive to collect a firms information
and monitor actions - ANSWER monitoring cost
FI's provide financial claims to household savers with superior liquidity attributes and
with lower price risk - ANSWER liquidity price risk
similar to economies of scale in information production costs, an FI's size can result in
economies of scale in transactions - ANSWER transaction cost services
FI's can better bear the risk of mismatching the maturities of their assets and liabilities -
ANSWER maturity intermediation
FI's such as mutual funds will allow small investors to overcome constraints to buying
assets imposed by large minimum denomination size - ANSWER denomination
intermediation
Services Performed by FI's Benefiting the Overall Economy - ANSWER Money supply
transmission
credit allocation
Latest Update!!!
What factors are encouraging financial institutions to offer overlapping financial services
such as banking, investment banking, brokerage, etc.?
I. Regulatory changes allowing institutions to offer more services
II. Technological improvements reducing the cost of providing financial services
III. Increasing competition from full-service global financial institutions
IV. Reduction in the need to manage risk at financial institutions - ANSWER I, II, and III
only
IBM creates and sells additional stock to the investment banker Morgan Stanley.
Morgan Stanley then resells the issue to the U.S. public through its mutual funds.
This transaction is an example of a(n) - ANSWER primary market transaction
IBM creates and sells additional stock to the investment banker Morgan Stanley.
Morgan Stanley then resells the issue to the U.S. public through its mutual funds.
Morgan Stanley is acting as a(n) - ANSWER asset transformer
A corporation seeking to sell new equity securities to the public for the first time in order
to raise cash for capital investment would most likely - ANSWER conduct an IPO with
the assistance of an investment banker.
The largest capital market security outstanding in 2016 measured by market value was -
ANSWER corporate stocks
markets in which corporations raise funds through new issues of securities - ANSWER
primary markets
Match the intermediary with the characteristic that best describes its function.
I. Provide protection from adverse events.
II. Pool funds of small savers and invest in either money or capital markets.
III. Provide consumer loans and real estate loans funded by deposits.
IV. Accumulate and transfer wealth from work period to retirement period.
V. Underwrite and trade securities and provide brokerage services.
Thrifts
Insurers
Pension funds
Securities firms and investment banks
Mutual funds - ANSWER 2,5,1,3,4
Secondary markets help support primary markets because secondary markets
,I. offer primary market purchasers liquidity for their holdings.
II. update the price or value of the primary market claims.
III. reduce the cost of trading the primary market claims. - ANSWER I, II, and III
Financial intermediaries (FIs) can offer savers a safer, more liquid investment than a
capital market security, even though the intermediary invests in risky illiquid instruments
because - ANSWER FI's can diversify away some of their risk and closely monitor the
riskiness of their assets
Households are increasingly likely to both directly purchase securities (perhaps via a
broker) and also place some money with a bank or thrift to meet different needs. Match
up the given investor's desire with the appropriate intermediary or direct security.
I. Money likely to be needed within six months
II. Money to be set aside for college in 10 years
III. Money to provide supplemental retirement income
IV. Money to be used to provide for children in the event of death
1. Depository institutions
2. Insurer
3. Pension fund
4. Stocks or bonds - ANSWER 1,4,3,2
Which of the following is/are money market instrument(s)?
- negotiable cd's
- common stock
- t-bonds
- 4-year maturity corporate bond - ANSWER negotiable cd's
The Securities Exchange Commission (SEC) does not - ANSWER decide whether a
public issue is fairly priced
The most diversified type of depository institutions is - ANSWER commercial banks
Depository institutions (DIs) play an important role in the transmission of monetary
policy from the Federal Reserve to the rest of the economy because - ANSWER DI
deposits are a major portion of the money supply
short-term unsecured promissory notes issued by a company to raise short term cash -
ANSWER commercial paper
bank issued time deposits that specify an interest rate and maturity date and are
negotiable - ANSWER negotiable certificates of deposits
time drafts payable to a seller of goods, with payment guaranteed by a bank - ANSWER
bankers acceptances
, the fundamental ownership claim in a public corporation - ANSWER corporate stock
loans to individuals or businesses to purchase a home, land, or other real property -
ANSWER mortgages
long-term bonds issued by corporations - ANSWER corporate bonds
long-term bonds issued by the U.S. governments - ANSWER treasury bonds
What are the major instruments traded in the capital markets? - ANSWER stocks and
bonds
depository institutions whose major assets are loans and whose major liabilities are
deposits. - ANSWER commercial banks
depository institutions in the form of savings associations, savings banks, and credit
unions. Generally perform services similar to commercial banks, but they tend to
concentrate their loans in one segment, such as real estate loans or consumer loans -
ANSWER thrifts
services benefiting supplier of funds - ANSWER monitoring costs
liquidity risk
price risk
transaction cost services
maturity intermediation
aggregation of funds in an FI provides greater incentive to collect a firms information
and monitor actions - ANSWER monitoring cost
FI's provide financial claims to household savers with superior liquidity attributes and
with lower price risk - ANSWER liquidity price risk
similar to economies of scale in information production costs, an FI's size can result in
economies of scale in transactions - ANSWER transaction cost services
FI's can better bear the risk of mismatching the maturities of their assets and liabilities -
ANSWER maturity intermediation
FI's such as mutual funds will allow small investors to overcome constraints to buying
assets imposed by large minimum denomination size - ANSWER denomination
intermediation
Services Performed by FI's Benefiting the Overall Economy - ANSWER Money supply
transmission
credit allocation
