Finance 371 Midterm Exam 1 Questions
And All Correct Answers 2025.
Financial market participants who borrow funds are called
a. deficit units.
b. surplus units.
c. primary units.
d. secondary units. - Answer A
Those financial markets that facilitate the flow of long-term funds are known as
a. money markets.
b. capital markets.
c. primary markets.
d. secondary markets - Answer B
If a corporation wants to borrow funds, it can issue bonds in the ______ market.
a. secondary
b. primary
c. deficit
d. surplus - Answer B
Indiana Bank purchased corporate bonds with a 10-year maturity 3 years ago. If it now needs
funds, it could sell those bonds in the ______ market.
a. secondary
b. primary
c. deficit
d. surplus - Answer A
Which of the following is a money market security?
a. six-month treasury bill
b. municipal bond
,The _______________________ required complete disclosure of relevant financial information
for publicly offered securities in the primary market..
a. Glass-Steagall Act
b. Federal Reserve Act
c. Sarbanes-Oxley Act
d. Securities Act of 1933 - Answer D
Because financial markets are ____, securities buyers and sellers do not have full access to
information and cannot always break down securities to the precise size they desire.
a. efficient
b. inefficient
c. perfect
d. imperfect - Answer D
Which of the following is most likely to be described as a depository institution?
a. savings institutions
b. securities firms
c. finance companies
d. pension funds
e. insurance companies - Answer A
Which of the following financial intermediaries are not major investors in stocks?
a. commercial banks
b. insurance companies
c. mutual funds
d. pension funds - Answer A
One reason for the __________ was that mortgage lenders did not always properly verify the
income, job status, and credit history of mortgage applicants before extending a mortgage.
a. credit crisis in the 2008-2009 period
b. stock market crash in 2013
c. mutual fund crisis in 2015
,b. False - Answer A
The federal government commonly acts as a surplus unit.
a. True
b. False - Answer B
Those financial markets that facilitate the flow of short-term funds (with maturities of less than
one year) are known as capital markets, while those that facilitate the flow of long-term funds
are known as money markets.
a. True
b. False - Answer B
Bonds are long-term debt obligations issued by corporations and government agencies to
support their operations.
a. True
b. False - Answer A
Derivative securities are financial contracts whose values are derived from the values of
underlying assets.
a. True
b. False - Answer A
When a depository institution offers a loan, it is acting as a creditor.
a. True
b. False - Answer A
While commercial banks concentrate on commercial loans, credit unions have concentrated on
residential mortgage loans.
a. True
b. False - Answer B
Most mutual funds obtain funds by issuing securities, then lend the funds to individuals and
small businesses.
, A broker executes securities transactions between two parties and charges a fee reflected in the
bid-ask spread.
a. True
b. False - Answer A
Many corporations and government agencies offer their employees pension plans that are
entirely funded by the employer.
a. True
b. False - Answer B
Financial markets
a. facilitate the flow of funds from deficit to surplus units.
b. facilitate the flow of funds from surplus to deficit units.
c. Only answers [facilitate the flow of funds from surplus to deficit units.] and [are markets in
which financial assets such as stocks and bonds can be purchased and sold.] are correct.
d. None of these choices are true.
e. are markets in which financial assets such as stocks and bonds can be purchased and sold. -
Answer C
Which of the following transactions would not be considered a secondary market transaction?
a. An institutional investor sells some Disney stock through his broker.
b. An individual investor purchases some existing shares of IBM stock through his broker.
c. Microsoft issues new shares of common stock using its investment bank.
d. All of these choices would occur in the secondary market. - Answer C
________ are long-term debt obligations issued by corporations and government agencies to
support their operations.
a. Bonds
b. Derivative securities
c. Common stock
d. None of these choices are correct. - Answer A
Long-term debt securities tend to have a ________ expected return and ________ risk than
And All Correct Answers 2025.
Financial market participants who borrow funds are called
a. deficit units.
b. surplus units.
c. primary units.
d. secondary units. - Answer A
Those financial markets that facilitate the flow of long-term funds are known as
a. money markets.
b. capital markets.
c. primary markets.
d. secondary markets - Answer B
If a corporation wants to borrow funds, it can issue bonds in the ______ market.
a. secondary
b. primary
c. deficit
d. surplus - Answer B
Indiana Bank purchased corporate bonds with a 10-year maturity 3 years ago. If it now needs
funds, it could sell those bonds in the ______ market.
a. secondary
b. primary
c. deficit
d. surplus - Answer A
Which of the following is a money market security?
a. six-month treasury bill
b. municipal bond
,The _______________________ required complete disclosure of relevant financial information
for publicly offered securities in the primary market..
a. Glass-Steagall Act
b. Federal Reserve Act
c. Sarbanes-Oxley Act
d. Securities Act of 1933 - Answer D
Because financial markets are ____, securities buyers and sellers do not have full access to
information and cannot always break down securities to the precise size they desire.
a. efficient
b. inefficient
c. perfect
d. imperfect - Answer D
Which of the following is most likely to be described as a depository institution?
a. savings institutions
b. securities firms
c. finance companies
d. pension funds
e. insurance companies - Answer A
Which of the following financial intermediaries are not major investors in stocks?
a. commercial banks
b. insurance companies
c. mutual funds
d. pension funds - Answer A
One reason for the __________ was that mortgage lenders did not always properly verify the
income, job status, and credit history of mortgage applicants before extending a mortgage.
a. credit crisis in the 2008-2009 period
b. stock market crash in 2013
c. mutual fund crisis in 2015
,b. False - Answer A
The federal government commonly acts as a surplus unit.
a. True
b. False - Answer B
Those financial markets that facilitate the flow of short-term funds (with maturities of less than
one year) are known as capital markets, while those that facilitate the flow of long-term funds
are known as money markets.
a. True
b. False - Answer B
Bonds are long-term debt obligations issued by corporations and government agencies to
support their operations.
a. True
b. False - Answer A
Derivative securities are financial contracts whose values are derived from the values of
underlying assets.
a. True
b. False - Answer A
When a depository institution offers a loan, it is acting as a creditor.
a. True
b. False - Answer A
While commercial banks concentrate on commercial loans, credit unions have concentrated on
residential mortgage loans.
a. True
b. False - Answer B
Most mutual funds obtain funds by issuing securities, then lend the funds to individuals and
small businesses.
, A broker executes securities transactions between two parties and charges a fee reflected in the
bid-ask spread.
a. True
b. False - Answer A
Many corporations and government agencies offer their employees pension plans that are
entirely funded by the employer.
a. True
b. False - Answer B
Financial markets
a. facilitate the flow of funds from deficit to surplus units.
b. facilitate the flow of funds from surplus to deficit units.
c. Only answers [facilitate the flow of funds from surplus to deficit units.] and [are markets in
which financial assets such as stocks and bonds can be purchased and sold.] are correct.
d. None of these choices are true.
e. are markets in which financial assets such as stocks and bonds can be purchased and sold. -
Answer C
Which of the following transactions would not be considered a secondary market transaction?
a. An institutional investor sells some Disney stock through his broker.
b. An individual investor purchases some existing shares of IBM stock through his broker.
c. Microsoft issues new shares of common stock using its investment bank.
d. All of these choices would occur in the secondary market. - Answer C
________ are long-term debt obligations issued by corporations and government agencies to
support their operations.
a. Bonds
b. Derivative securities
c. Common stock
d. None of these choices are correct. - Answer A
Long-term debt securities tend to have a ________ expected return and ________ risk than
