Test bank for financial markets institutions 6th

,Financial Markets & Institutions 5th
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Edition Test Bank
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Chapterv01vIntroductionvAnswervKey
Truev/vFalsevQuestions

1. Primaryvmarketsvarevmarketsvwherevusersvofvfundsvraisevcashvbyvsellingvs
ecuritiesvtovfunds’vsuppliers.
TRUE

2. Secondaryvmarketsvarevmarketsvusedvbyvcorporationsvtovraisevcashvbyvissuingvs
ecuritiesvforvavshortvtimevperiod.
FALSE

3. Invavprivatevplacement,vthevissuervtypicallyvsellsvtheventirevissuevtovone,vorvonlyva
vfew,vinstitutionalvbuyers.

TRUE

4. ThevNYSEvisvanvexamplevofvavsecondaryvmarket.
TRUE

5. Privatelyvplacedvsecuritiesvarevusuallyvsoldvtovonevorvmorevinvestmentvbankersva
ndvthenvresoldvtovthevgeneralvpublic.
FALSE

6. Moneyvmarketsvarevthevmarketsvforvsecuritiesvwithvanvoriginalvmaturityvofv1vy
earvorvless.
TRUE

7. Financialvintermediariesvsuchvasvbanksvtypicallyvhavevassetsvthatvarevriskiervt
hanvtheirvliabilities.
TRUE

8. Therevarevthreevtypesvofvmajorvfinancialvmarketsvtoday:vprimary,vsecondary,v
andvderivativesvmarkets.vThevNYSEvandvNASDAQvarevbothvexamplesvofvder
ivativesvmarkets.
FALSE

MultiplevChoicevQuestions

9. Whatvfactorsvarevencouragingvfinancialvinstitutionsvtovoffervoverlappingvf
inancialvservicesvsuchvasvbanking,vinvestmentvbanking,vbrokerage,vetc.?

I. Regulatoryvchangesvallowingvinstitutionsvtovoffervmorevservices
II. Technologicalvimprovementsvreducingvthevcostvofvprovidingvfinancialv
services
III. Increasingvcompetitionvfromvfullvservicevglobalvfinancialvinstitutions
IV. Reductionvinvthevneedvtovmanagevriskvatvfinancialvinstitutions

, A. Ivonly
B. IIvandvIIIvonly
C. I,vII,vandvIIIvonly
D. I,vII,vandvIVvonly
E. I,vII,vIII,vandvIVv

Figurev1-1

IBMvcreatesvandvsellsvadditionalvstockvtovthevinvestmentvbanker,vMorganvStanley.v
MorganvStanleyvthenvresellsvthevissuevtovthevU.S.vpublic.

10. Thisvtransactionvisvanvexamplevofva(n)
A. primaryvmarketvtransaction
B. assetvtransformationvbyvMorganvStanley
C. moneyvmarketvtransaction
D. foreignvexchangevtransaction
E. forwardvtransaction

11. MorganvStanleyvisvactingvasva(n)v
A.assetvtransformer
B. assetvbroker
C. governmentvregulator
D. foreignvservicevrepresentative

12. Avcorporationvseekingvtovsellvnewvequityvsecuritiesvtovthevpublicvforvthevfirstvti
mevinvordervtovraisevcashvforvcapitalvinvestmentvwouldvmostvlikelyvA.conduct
vanvIPOvwith vthevassistancevofvanvinvestmentvbanker

B. engagevinvavsecondaryvmarketvsalevofvequity
C. conductvavprivatevplacementvtovavlargevnumbervofvpotentialvbuyers
D. placevanvadvinvthevWallvStreetvJournalvsolicitingvretailvsuppliersvofvfunds
E. nonevofvthevabove

13. Thevlargestvcapitalvmarketvsecurityvoutstandingvinv2010vmeasuredvbyvmarketv
valuevwas
A. securitizedvmortgages
B. corporatevbonds
C. municipalvbonds
D. Treasuryvbonds
E. corporatevstocks

14. Thevdiagramvbelowvisvavdiagramvofvthev
A.secondaryvmarkets
B. primaryvmarkets
C. moneyvmarkets
D. derivativesvmarkets
E. commoditiesvmarkets

15. v and
allowvavfinancialvintermediaryvtovoffervsafe,vliquidvliabilitiesvsuchvasvdeposi
tsvwhilevinvestingvthevdepositors’vmoneyvinvriskier,villiquidvassets.

, A.Diversification;vhighvequityvreturns
B. Pricevrisk;vcollateral
C. Freevriders;vregulations
D. Monitoring;vdiversification
E. Primaryvmarkets;vforeignvexchangevmarkets

16. Depositoryvinstitutionsvinclude:v
A.banks
B. thrifts
C. financevcompanies
D. allvofvthevabove
E. AvandvBvonly

17. Matchvthevintermediaryvwithvthevcharacteristicvthatvbestvdescribesvitsvfunction.

I. Providevprotectionvfromvadversevevents
II. Poolvfundsvofvsmallvsaversvandvinvestvinveithervmoneyvorvcapitalvmarkets
III. Providevconsumervloansvandvrealvestatevloansvfundedvbyvdeposits
IV. Accumulatevandvtransfervwealthvfromvworkvperiodvtovretirementvperiod
V. Underwritevandvtradevsecuritiesvandvprovidevbrokeragevservices

1. Thrifts
2. Insurers
3. Pensionvfunds
4. Securitiesvfirmsvandvinvestmentvbanks
5. Mutualvfundsv
A.1,v3,v2,v5,v4
B.v4,v2,v3,v5,v1
C.v2,v5,v1,v3,v4
D.v2,v4,v5,v3,v1
E.v5,v1,v3,v2,v4

18. Secondaryvmarketsvhelpvsupportvprimaryvmarketsvbecausevsecondaryvmarkets

I. Offervprimaryvmarketvpurchasersvliquidityvforvtheirvholdings
II. Updatevthevpricevorvvaluevofvthevprimaryvmarketvclaims
III. Reducevthevcostvofvtradingvthevprimaryvmarketvclaims
A.Ivonly
B. IIvonly
C. IvandvIIvonly
D. IIvandvIIIvonly
E. I,vII,vandvIII

19. Financialvintermediariesv(FIs)vcanvoffervsaversvavsafer,vmorevliquidvinvestmentvt
hanvavcapitalvmarketvsecurity,vevenvthoughvthevintermediaryvinvestsvinvriskyvilli
quidvinstrumentsvbecause
A.FIsvcanvdiversifyvawayvsomevofvtheirvrisk
B. FIsvcloselyvmonitorvthevriskinessvofvtheirvassets
C. thevfederalvgovernmentvrequiresvthemvtovdovso