BUS235
Financial Markets & Institutions
Midterms (Qns & Ans)
2025
1. Which of the following best describes the primary function of
financial markets?
- A) To provide a platform for buying and selling goods
- B) To facilitate the allocation of capital and risk
- C) To regulate financial institutions
- D) To provide insurance services
- ANS: B) To facilitate the allocation of capital and risk
©2024/2025
, - Rationale: Financial markets enable the efficient allocation
of capital and risk among investors and borrowers.
2. What is the main purpose of the Federal Reserve System in
the United States?
- A) To provide loans to individuals
- B) To regulate the stock market
- C) To conduct monetary policy and ensure financial stability
- D) To offer investment advice
- ANS: C) To conduct monetary policy and ensure financial
stability
- Rationale: The Federal Reserve System is responsible for
managing the nation's monetary policy and maintaining financial
stability.
3. Which of the following instruments is considered a money
market instrument?
- A) Corporate bond
- B) Treasury bill
- C) Common stock
- D) Real estate investment trust (REIT)
- ANS: B) Treasury bill
©2024/2025
, - Rationale: Treasury bills are short-term debt instruments
issued by the government and are considered money market
instruments.
4. What is the primary difference between primary and
secondary financial markets?
- A) Primary markets deal with new securities, while secondary
markets deal with existing securities
- B) Primary markets are regulated, while secondary markets are
not
- C) Primary markets involve individual investors, while
secondary markets involve institutional investors
- D) Primary markets are for debt instruments, while secondary
markets are for equity instruments
- ANS: A) Primary markets deal with new securities, while
secondary markets deal with existing securities
- Rationale: Primary markets are where new securities are
issued, while secondary markets are where existing securities are
traded.
5. Which of the following best describes the role of investment
banks in financial markets?
- A) Providing loans to small businesses
- B) Facilitating mergers and acquisitions
©2024/2025
Financial Markets & Institutions
Midterms (Qns & Ans)
2025
1. Which of the following best describes the primary function of
financial markets?
- A) To provide a platform for buying and selling goods
- B) To facilitate the allocation of capital and risk
- C) To regulate financial institutions
- D) To provide insurance services
- ANS: B) To facilitate the allocation of capital and risk
©2024/2025
, - Rationale: Financial markets enable the efficient allocation
of capital and risk among investors and borrowers.
2. What is the main purpose of the Federal Reserve System in
the United States?
- A) To provide loans to individuals
- B) To regulate the stock market
- C) To conduct monetary policy and ensure financial stability
- D) To offer investment advice
- ANS: C) To conduct monetary policy and ensure financial
stability
- Rationale: The Federal Reserve System is responsible for
managing the nation's monetary policy and maintaining financial
stability.
3. Which of the following instruments is considered a money
market instrument?
- A) Corporate bond
- B) Treasury bill
- C) Common stock
- D) Real estate investment trust (REIT)
- ANS: B) Treasury bill
©2024/2025
, - Rationale: Treasury bills are short-term debt instruments
issued by the government and are considered money market
instruments.
4. What is the primary difference between primary and
secondary financial markets?
- A) Primary markets deal with new securities, while secondary
markets deal with existing securities
- B) Primary markets are regulated, while secondary markets are
not
- C) Primary markets involve individual investors, while
secondary markets involve institutional investors
- D) Primary markets are for debt instruments, while secondary
markets are for equity instruments
- ANS: A) Primary markets deal with new securities, while
secondary markets deal with existing securities
- Rationale: Primary markets are where new securities are
issued, while secondary markets are where existing securities are
traded.
5. Which of the following best describes the role of investment
banks in financial markets?
- A) Providing loans to small businesses
- B) Facilitating mergers and acquisitions
©2024/2025
