FIN350: Spring 2024 Quiz 1 (Individual Project Answers 1 & 2) (Nam)

FIN350: Spring 2024 Quiz 1 (Individual Project Answers 1 & 2) (Nam) The bond markets are important because A) they are easily the most widely followed financial markets in the United States. B) they are the markets where interest rates are determined. C) they are the markets where foreign exchange rates are determined. D) all of the above. - CORRECT ANSWER-They are the markets where interest rates are determined. Interest rates are important to financial institutions since an increase in interest rate ________ the cost of acquiring funds and ________ the income from financial assets. A) decreases; decreases B) increases; increases C) decreases; increases D) increases; decreases - CORRECT ANSWER-B) increases; increases Typically, increasing interest rates A) discourages individuals from saving. B) discourages corporate investments. C) encourages corporate expansion. D) encourages corporate borrowing. - CORRECT ANSWER-B) discourages corporate investments. Compared to interest rates on long-term U.S. government bonds, interest rates on ________ fluctuate more and are lower on average. A) medium-quality corporate bonds B) low-quality corporate bonds C) high-quality corporate bonds D) three-month Treasury bills - CORRECT ANSWER-D) three-month Treasury bills Stock prices since the 1980s have been A) relatively stable, trending upward at a steady pace. B) relatively stable, trending downward at a moderate rate. C) extremely volatile. D) unstable, trending downward at a moderate rate. - CORRECT ANSWER-C) extremely volatile. A stronger dollar benefits ________ and hurts ________. A) American businesses; American consumers B) American businesses; foreign businesses C) American consumers; American businesses D) foreign businesses; American consumers - CORRECT ANSWER-C) American consumers; American businesses The largest financial intermediaries are A) insurance companies. B) finance companies. C) banks. D) all of the above. - CORRECT ANSWER-C) banks. The organization responsible for the conduct of monetary policy in the United States is the A) Comptroller of the Currency. B) U.S. Treasury. C) Federal Reserve System. D) Bureau of Monetary Affairs. - CORRECT ANSWER-C) Federal Reserve System. Monetary policy is chiefly concerned with A) how much money businesses earn. B) the level of interest rates and the nation's money supply. C) how much money people pay in taxes. D) whether people have saved enough money for retirement. - CORRECT ANSWER-B) the level of interest rates and the nation's money supply. Economists group commercial banks, savings and loan associations, credit unions, mutual funds, mutual savings banks, insurance companies, pension funds, and finance companies together under the heading financial intermediaries. Financial intermediaries A) act as middlemen, borrowing funds from those who have saved and lending these funds to others. B) produce non-economic value and are therefore a drain on society's resources. C) help promote a more efficient and dynamic financial and economic system. D) do only A and C of the above. - CORRECT ANSWER-D) do only A and C of the above. Which of the following is NOT true? A) Equity represents an ownership interest in a firm and entitles the holder to the residual cash flows. B) Adverse selection refers to those with high credit risks, being the most active borrowers. C) The capital markets trade only short-term money market instruments. D) Currently, over 80% of the new issues in the international bond market are Eurobonds. - CORRECT ANSWER-C) The capital markets trade only short-term money market instruments. Banks are important to the study of money and the economy because they A) provide a channel for linking those who want to save with those who want to invest. B) have been a source of financial innovation that is expanding the alternatives available to those wanting to invest their money. C) are the only financial institution to play a role in determining the quantity of money in the economy. D) do only A and B of the above. - CORRECT ANSWER-D) do only A and B of the above. Monetary policy affects A) interest rates. B) inflation. C) business cycles. D) all of the above. - CORRECT ANSWER-D) all of the above