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FINA 365 UNL Jinsook Lee Exam 1 EXAM QUESTIONS AND
CORRECT VERIFIED SOLUTIONS LATEST UPDATE THIS YEAR –
JUST RELEASED
FINA 365 UNL Jinsook Lee Exam 1
10-Line Exam Coverage
1. U.S. financial system structure, financial institutions, and the role of financial
intermediaries.
2. Commercial banks, their balance sheets, lending activities, liabilities, assets, and
profitability.
3. Banking regulation, federal agencies, interstate banking, and major financial-services
legislation.
4. Thrifts, savings institutions, credit unions, and their organizational and regulatory
characteristics.
5. Finance companies, consumer credit, business lending, factoring, and alternative
sources of financing.
6. Investment banks, securities firms, underwriting, securities distribution, trading, and
venture capital.
7. Financial markets, direct versus indirect finance, primary versus secondary markets,
and market participants.
8. Supply and demand for loanable funds and the determination of interest rates and
credit prices.
9. Interest-rate concepts, yield curves, term structure, expectations, liquidity, and risk
considerations.
10. Securitization, off-balance-sheet activities, financial innovation, institutional risk, and
changes in financial intermediation.
1. Which statement best explains why financial intermediaries are important to the
functioning of modern financial systems?
A. They eliminate every possible financial risk faced by borrowers and investors.
B. They connect surplus-fund suppliers with deficit-fund users while reducing information and
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transaction costs.
C. They guarantee that every borrower receives financing regardless of creditworthiness.
D. They prevent financial markets from determining interest rates through supply and demand.
Answer: B.
Rationale: Financial intermediaries channel funds between savers and borrowers while helping
reduce transaction costs, information problems, and risk associated with financial contracting.
2. Which situation represents indirect finance rather than direct finance within the financial
system?
A. A corporation sells newly issued bonds directly to investors through an investment bank.
B. A household purchases common stock directly from another investor through an exchange.
C. A commercial bank accepts deposits and uses those funds to make business loans.
D. A government sells Treasury securities directly to institutional investors.
Answer: C.
Rationale: Indirect finance occurs when a financial intermediary stands between the ultimate
lender and borrower, such as a bank accepting deposits and making loans.
3. Why can financial intermediaries potentially reduce information problems more effectively
than individual lenders acting independently?
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A. Intermediaries never experience losses from borrowers.
B. Intermediaries specialize in screening borrowers, monitoring loans, and gathering financial
information.
C. Intermediaries receive government guarantees on every loan they originate.
D. Intermediaries eliminate the need for borrowers to disclose financial information.
Answer: B.
Rationale: Specialized intermediaries can develop expertise in evaluating creditworthiness and
monitoring borrowers, lowering information-related costs.
4. Which of the following is most accurately classified as a financial market rather than a
financial intermediary?
A. Commercial bank
B. Credit union
C. Securities exchange
D. Finance company
Answer: C.
Rationale: A securities exchange is a marketplace where financial claims can be traded, whereas
banks, credit unions, and finance companies are intermediaries.
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5. What is the primary distinction between a primary market and a secondary market for
financial securities?
A. Primary markets trade only government securities, while secondary markets trade only
corporate securities.
B. Primary markets involve new securities, while secondary markets facilitate trading of
previously issued securities.
C. Primary markets always have higher interest rates than secondary markets.
D. Secondary markets are operated exclusively by commercial banks.
Answer: B.
Rationale: Primary markets provide funding to issuers through newly issued securities, while
secondary markets provide liquidity by allowing existing securities to be traded.
6. Why does the existence of a well-functioning secondary market generally increase the
attractiveness of financial securities?
A. It guarantees investors positive returns.
B. It provides liquidity by allowing investors to sell securities after purchasing them.
C. It eliminates interest-rate risk from all securities.
D. It prevents securities prices from changing.
Answer: B.
FINA 365 UNL Jinsook Lee Exam 1 EXAM QUESTIONS AND
CORRECT VERIFIED SOLUTIONS LATEST UPDATE THIS YEAR –
JUST RELEASED
FINA 365 UNL Jinsook Lee Exam 1
10-Line Exam Coverage
1. U.S. financial system structure, financial institutions, and the role of financial
intermediaries.
2. Commercial banks, their balance sheets, lending activities, liabilities, assets, and
profitability.
3. Banking regulation, federal agencies, interstate banking, and major financial-services
legislation.
4. Thrifts, savings institutions, credit unions, and their organizational and regulatory
characteristics.
5. Finance companies, consumer credit, business lending, factoring, and alternative
sources of financing.
6. Investment banks, securities firms, underwriting, securities distribution, trading, and
venture capital.
7. Financial markets, direct versus indirect finance, primary versus secondary markets,
and market participants.
8. Supply and demand for loanable funds and the determination of interest rates and
credit prices.
9. Interest-rate concepts, yield curves, term structure, expectations, liquidity, and risk
considerations.
10. Securitization, off-balance-sheet activities, financial innovation, institutional risk, and
changes in financial intermediation.
1. Which statement best explains why financial intermediaries are important to the
functioning of modern financial systems?
A. They eliminate every possible financial risk faced by borrowers and investors.
B. They connect surplus-fund suppliers with deficit-fund users while reducing information and
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transaction costs.
C. They guarantee that every borrower receives financing regardless of creditworthiness.
D. They prevent financial markets from determining interest rates through supply and demand.
Answer: B.
Rationale: Financial intermediaries channel funds between savers and borrowers while helping
reduce transaction costs, information problems, and risk associated with financial contracting.
2. Which situation represents indirect finance rather than direct finance within the financial
system?
A. A corporation sells newly issued bonds directly to investors through an investment bank.
B. A household purchases common stock directly from another investor through an exchange.
C. A commercial bank accepts deposits and uses those funds to make business loans.
D. A government sells Treasury securities directly to institutional investors.
Answer: C.
Rationale: Indirect finance occurs when a financial intermediary stands between the ultimate
lender and borrower, such as a bank accepting deposits and making loans.
3. Why can financial intermediaries potentially reduce information problems more effectively
than individual lenders acting independently?
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A. Intermediaries never experience losses from borrowers.
B. Intermediaries specialize in screening borrowers, monitoring loans, and gathering financial
information.
C. Intermediaries receive government guarantees on every loan they originate.
D. Intermediaries eliminate the need for borrowers to disclose financial information.
Answer: B.
Rationale: Specialized intermediaries can develop expertise in evaluating creditworthiness and
monitoring borrowers, lowering information-related costs.
4. Which of the following is most accurately classified as a financial market rather than a
financial intermediary?
A. Commercial bank
B. Credit union
C. Securities exchange
D. Finance company
Answer: C.
Rationale: A securities exchange is a marketplace where financial claims can be traded, whereas
banks, credit unions, and finance companies are intermediaries.
, Page 4 of 127
5. What is the primary distinction between a primary market and a secondary market for
financial securities?
A. Primary markets trade only government securities, while secondary markets trade only
corporate securities.
B. Primary markets involve new securities, while secondary markets facilitate trading of
previously issued securities.
C. Primary markets always have higher interest rates than secondary markets.
D. Secondary markets are operated exclusively by commercial banks.
Answer: B.
Rationale: Primary markets provide funding to issuers through newly issued securities, while
secondary markets provide liquidity by allowing existing securities to be traded.
6. Why does the existence of a well-functioning secondary market generally increase the
attractiveness of financial securities?
A. It guarantees investors positive returns.
B. It provides liquidity by allowing investors to sell securities after purchasing them.
C. It eliminates interest-rate risk from all securities.
D. It prevents securities prices from changing.
Answer: B.
