Basic Finance An Introduction to Financial Institutions, Investments, and Management, 13e
Herbert Mayo, Michael Lavelle (Test Bank All Chapters, 100% Original Verified, A+ Grade)
Chapter_01__An_Introduction_to_Basic_Finance
No Test/Exam Questions in Chapter 1.
,Name: Class: Date:
Chapter 02: The Role of Financial Markets and Financial Intermediaries
Indicate whether the statement is true or false.
1. The power to create money is given by the Constitution to the federal government.
a. True
b. False
2. Since M2 excludes time deposits, M2 is a less comprehensive measure of the money supply than M1.
a. True
b. False
3. When individuals withdraw cash from checking accounts, the money supply is unaffected.
a. True
b. False
4. The yield curve relates risk and interest rates.
a. True
b. False
5. During most historical periods, the yield curve has been positively sloped.
a. True
b. False
6. What serves for money in France may not necessarily be money in another country.
a. True
b. False
7. The U.S. Treasury creates most of the nation's money supply.
a. True
b. False
8. When individuals deposit cash in a demand deposit, the money supply is reduced.
a. True
b. False
9. M1 includes savings accounts in commercial banks.
a. True
b. False
10. A financial intermediary transfers funds from borrowers to lenders by creating claims on itself.
a. True
b. False
11. When cash is deposited in a checking account, the reserves of commercial banks are increased.
a. True
b. False
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,Name: Class: Date:
Chapter 02: The Role of Financial Markets and Financial Intermediaries
12. When funds are deposited in a savings account, the excess reserves of banks are unaffected.
a. True
b. False
13. Large certificates of deposit in units of $500,000 are insured by FDIC.
a. True
b. False
14. In general, banks prefer loans that stress liquidity and safety.
a. True
b. False
15. Insurance companies are a major source of loans to individuals.
a. True
b. False
16. Money market mutual funds invest in short-term securities like U.S. Treasury bills.
a. True
b. False
17. An increase in interest rates tends to reduce the earnings of money market mutual funds.
a. True
b. False
18. A pension plan that invests in the stock of IBM or Verizon performs the function of a financial intermediary.
a. True
b. False
19. A financial intermediary creates claims on itself when it accepts depositors' funds.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
20. M1 includes coins, currency, and
a. demand deposits.
b. savings accounts.
c. certificates of deposit.
d. time deposits.
21. The power to create money is given by the Constitution to
a. state governments.
b. Congress.
c. the Federal Reserve.
d. commercial banks.
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, Name: Class: Date:
Chapter 02: The Role of Financial Markets and Financial Intermediaries
22. The term structure of interest rates relates
a. risk and yields.
b. yields and credit ratings.
c. term and yields.
d. stock and bond yields.
23. The term structure of interest rates indicates the
a. relationship between risk and yields.
b. relationship between the time and yields.
c. difference between borrowing and lending.
d. difference between the yield (interest rate) on government and corporate debt.
24. Money serves as a
a. substitute for equity.
b. precaution against inflation.
c. medium of exchange.
d. risk-free liability.
25. M2 includes coins and currency in circulation outside of banks as well as
a. demand deposits and savings accounts.
b. savings accounts and small certificates of deposit.
c. demand deposits and small certificates of deposit.
d. demand deposits, savings accounts, and small certificates of deposit.
26. Which of the following is NOT a financial intermediary?
a. New York Stock Exchange
b. Washington Savings and Loan
c. First National City Bank
d. Merchants Savings Bank
27. The assets of a typical commercial bank include
a. commercial loans.
b. demand deposits.
c. common stock.
d. equity.
28. Federally insured investments include
a. savings accounts in national commercial banks.
b. certificates of deposit in excess of $500,000.
c. life insurance policies.
d. commercial bank assets.
29. The primary assets of life insurance companies include
a. life insurance.
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Herbert Mayo, Michael Lavelle (Test Bank All Chapters, 100% Original Verified, A+ Grade)
Chapter_01__An_Introduction_to_Basic_Finance
No Test/Exam Questions in Chapter 1.
,Name: Class: Date:
Chapter 02: The Role of Financial Markets and Financial Intermediaries
Indicate whether the statement is true or false.
1. The power to create money is given by the Constitution to the federal government.
a. True
b. False
2. Since M2 excludes time deposits, M2 is a less comprehensive measure of the money supply than M1.
a. True
b. False
3. When individuals withdraw cash from checking accounts, the money supply is unaffected.
a. True
b. False
4. The yield curve relates risk and interest rates.
a. True
b. False
5. During most historical periods, the yield curve has been positively sloped.
a. True
b. False
6. What serves for money in France may not necessarily be money in another country.
a. True
b. False
7. The U.S. Treasury creates most of the nation's money supply.
a. True
b. False
8. When individuals deposit cash in a demand deposit, the money supply is reduced.
a. True
b. False
9. M1 includes savings accounts in commercial banks.
a. True
b. False
10. A financial intermediary transfers funds from borrowers to lenders by creating claims on itself.
a. True
b. False
11. When cash is deposited in a checking account, the reserves of commercial banks are increased.
a. True
b. False
Powered by Cognero Page 1
,Name: Class: Date:
Chapter 02: The Role of Financial Markets and Financial Intermediaries
12. When funds are deposited in a savings account, the excess reserves of banks are unaffected.
a. True
b. False
13. Large certificates of deposit in units of $500,000 are insured by FDIC.
a. True
b. False
14. In general, banks prefer loans that stress liquidity and safety.
a. True
b. False
15. Insurance companies are a major source of loans to individuals.
a. True
b. False
16. Money market mutual funds invest in short-term securities like U.S. Treasury bills.
a. True
b. False
17. An increase in interest rates tends to reduce the earnings of money market mutual funds.
a. True
b. False
18. A pension plan that invests in the stock of IBM or Verizon performs the function of a financial intermediary.
a. True
b. False
19. A financial intermediary creates claims on itself when it accepts depositors' funds.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
20. M1 includes coins, currency, and
a. demand deposits.
b. savings accounts.
c. certificates of deposit.
d. time deposits.
21. The power to create money is given by the Constitution to
a. state governments.
b. Congress.
c. the Federal Reserve.
d. commercial banks.
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, Name: Class: Date:
Chapter 02: The Role of Financial Markets and Financial Intermediaries
22. The term structure of interest rates relates
a. risk and yields.
b. yields and credit ratings.
c. term and yields.
d. stock and bond yields.
23. The term structure of interest rates indicates the
a. relationship between risk and yields.
b. relationship between the time and yields.
c. difference between borrowing and lending.
d. difference between the yield (interest rate) on government and corporate debt.
24. Money serves as a
a. substitute for equity.
b. precaution against inflation.
c. medium of exchange.
d. risk-free liability.
25. M2 includes coins and currency in circulation outside of banks as well as
a. demand deposits and savings accounts.
b. savings accounts and small certificates of deposit.
c. demand deposits and small certificates of deposit.
d. demand deposits, savings accounts, and small certificates of deposit.
26. Which of the following is NOT a financial intermediary?
a. New York Stock Exchange
b. Washington Savings and Loan
c. First National City Bank
d. Merchants Savings Bank
27. The assets of a typical commercial bank include
a. commercial loans.
b. demand deposits.
c. common stock.
d. equity.
28. Federally insured investments include
a. savings accounts in national commercial banks.
b. certificates of deposit in excess of $500,000.
c. life insurance policies.
d. commercial bank assets.
29. The primary assets of life insurance companies include
a. life insurance.
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