ECON 301 quiz 2025 Questions and
Answers
Function of financial markets and banks - --CORRECT ANSWER--- borrow and
raise capital
- Channel funds to those who have safe funds and those who want to borrow
- Perform the function channeling from those who want to lend and those who
want to borrow
- Can happen through direct and indirect finance
Direct Finance - --CORRECT ANSWER--does not involve the use of
intermediates (banks)
indirect finance - --CORRECT ANSWER--does not involve intermediates (banks)
Lenders - --CORRECT ANSWER--- buy securities from financial markets
- funds go to the financial market and intermediates
Borrows - --CORRECT ANSWER--- Issue securities to financial markets
- Funds come from financial market and intermediates
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, Debt instruments - --CORRECT ANSWER--ana agreement by the borrower to
repay the lender a fixed dollar amount (interest and principal) at regular intervals
until a specific date (maturity)when original amount is repaid
Maturity - --CORRECT ANSWER--- number of years or months for debt
- Short term is less than 1 year
- Intermediate is 1-10 years
- long term is more than 10 years
Equity - --CORRECT ANSWER--- contracted agreement representing claims to a
stock in the income and assets of a business
EX: Corporate stock
- Equities have no maturity
- Since equity holders own the firm they're entitled to selected members of the
firms board of directors and vote on issues regarding management
Key difference between debt and equity - --CORRECT ANSWER--equity holders
are the firms residual claimants which means the firm must pay bond holders
before making payments to equity holders
Advantage of debt holder - --CORRECT ANSWER--received fixed payments of
whether the borrowers income or assets become more or less valuable over time
....COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 2
Answers
Function of financial markets and banks - --CORRECT ANSWER--- borrow and
raise capital
- Channel funds to those who have safe funds and those who want to borrow
- Perform the function channeling from those who want to lend and those who
want to borrow
- Can happen through direct and indirect finance
Direct Finance - --CORRECT ANSWER--does not involve the use of
intermediates (banks)
indirect finance - --CORRECT ANSWER--does not involve intermediates (banks)
Lenders - --CORRECT ANSWER--- buy securities from financial markets
- funds go to the financial market and intermediates
Borrows - --CORRECT ANSWER--- Issue securities to financial markets
- Funds come from financial market and intermediates
....COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 1
, Debt instruments - --CORRECT ANSWER--ana agreement by the borrower to
repay the lender a fixed dollar amount (interest and principal) at regular intervals
until a specific date (maturity)when original amount is repaid
Maturity - --CORRECT ANSWER--- number of years or months for debt
- Short term is less than 1 year
- Intermediate is 1-10 years
- long term is more than 10 years
Equity - --CORRECT ANSWER--- contracted agreement representing claims to a
stock in the income and assets of a business
EX: Corporate stock
- Equities have no maturity
- Since equity holders own the firm they're entitled to selected members of the
firms board of directors and vote on issues regarding management
Key difference between debt and equity - --CORRECT ANSWER--equity holders
are the firms residual claimants which means the firm must pay bond holders
before making payments to equity holders
Advantage of debt holder - --CORRECT ANSWER--received fixed payments of
whether the borrowers income or assets become more or less valuable over time
....COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 2
