Financial Markets and Institutions
Exam 2025 Questions and Answers
Money is anything accepted by anyone as payment for services or goods. -
....ANSWER ...-True
Interest rates are determined in the bond markets. - ....ANSWER ...-True
A stock is a debt security that promises to make periodic payments for a specific period
of time. - ....ANSWER ...-False
Monetary policy affects interest rates but has little effect on inflation or business cycles. -
....ANSWER ...-False
The government organization responsible for the conduct of monetary policy in the
United States is the U.S. Treasury. - ....ANSWER ...-False
Interest rates can be accurately described as the rental price of money. -
....ANSWER ...-True
Holding everything else constant, as the dollar weakens vacations abroad become less
attractive. - ....ANSWER ...-True
In recent years, financial markets have become more stable and less risky. -
....ANSWER ...-False
…FOR STUDENTS ONLY…©️2025 ALL RIGHTS RESERVED… 1
,Financial innovation has provided more options to both investors and borrowers. -
....ANSWER ...-True
A financial intermediary borrows funds from people who have saved. -
....ANSWER ...-True
From 2001 to 2008, the dollar depreciated substantially. - ....ANSWER ...-True
From 2007 to 2009, the U.S. economy was hit by the worst financial crisis since the Great
Depression. - ....ANSWER ...-True
Holding everything else constant, as the dollar strengthens foreigners will buy more U.S.
exports. - ....ANSWER ...-False
In a bull market stock prices are rising, on average. - ....ANSWER ...-True
In a bear market stock prices are rising, on average. - ....ANSWER ...-False
Financial institutions are among the largest employers in the country and frequently pay
very high salaries. - ....ANSWER ...-True
Different interest rates have a tendency to move in unison. - ....ANSWER ...-True
Financial markets are what makes financial institutions work. - ....ANSWER ...-
False
In recent years, financial markets have become more risky. However, only a limited
number of tools (such as derivatives) are available to assist in managing this risk. -
....ANSWER ...-False
…FOR STUDENTS ONLY…©️2025 ALL RIGHTS RESERVED… 2
,Although the internet has changed many aspects of our lives, it hasn't proven very useful
for collecting and/or analyzing financial and economic data. - ....ANSWER ...-
False
Every financial market allows loans to be made. - ....ANSWER ...-True
Most people's involvement with the financial system is through financial intermediaries
rather than financial markets. - ....ANSWER ...-True
A critical function of financial markets is an efficient allocation of capital. -
....ANSWER ...-True
The New York Stock Exchange is an example of a primary market. -
....ANSWER ...-False
Equity represents an ownership interest in a firm and entitles the holder to the residual
cash flows. - ....ANSWER ...-True
The capital market is a financial market in which only short-term debt instruments
(generally those with an original maturity of less than one year) are traded. -
....ANSWER ...-False
Many common stocks are traded over the counter, although a majority of the largest
corporations have their shares traded at organized stock exchanges. -
....ANSWER ...-True
Many common stocks are traded at organized exchanges, although a majority of the
largest corporations have their shares traded over the counter. - ....ANSWER ...-
False
…FOR STUDENTS ONLY…©️2025 ALL RIGHTS RESERVED… 3
, Corporations that issue new securities to raise capital now conduct more of this business
in financial markets in Europe and Asia than in the U.S. - ....ANSWER ...-True
Currently, over 80% of the new issues in the international bond market are Eurobonds. -
....ANSWER ...-False
American investors pay attention to only the Dow Jones Industrial Average. -
....ANSWER ...-False
A bond denominated in euros and issued in a country that uses the euro as its currency is
an example of a Eurobond. - ....ANSWER ...-False
An example of direct financing is if you were to lend money to your neighbor. -
....ANSWER ...-True
Liquidity services are services that make it easier for customers to conduct financial
transactions. - ....ANSWER ...-True
A financial intermediary's risk-sharing activities are also referred to as asset
transformation. - ....ANSWER ...-True
The process of financial intermediation is also known as direct finance. -
....ANSWER ...-False
Through economies of scale, financial intermediaries can lower the cost of information
production for each service by applying one information resource to many different
services. - ....ANSWER ...-True
Adverse selection refers to those with high credit risks, being most aggressive in their
search for funds. - ....ANSWER ...-True
…FOR STUDENTS ONLY…©️2025 ALL RIGHTS RESERVED… 4
Exam 2025 Questions and Answers
Money is anything accepted by anyone as payment for services or goods. -
....ANSWER ...-True
Interest rates are determined in the bond markets. - ....ANSWER ...-True
A stock is a debt security that promises to make periodic payments for a specific period
of time. - ....ANSWER ...-False
Monetary policy affects interest rates but has little effect on inflation or business cycles. -
....ANSWER ...-False
The government organization responsible for the conduct of monetary policy in the
United States is the U.S. Treasury. - ....ANSWER ...-False
Interest rates can be accurately described as the rental price of money. -
....ANSWER ...-True
Holding everything else constant, as the dollar weakens vacations abroad become less
attractive. - ....ANSWER ...-True
In recent years, financial markets have become more stable and less risky. -
....ANSWER ...-False
…FOR STUDENTS ONLY…©️2025 ALL RIGHTS RESERVED… 1
,Financial innovation has provided more options to both investors and borrowers. -
....ANSWER ...-True
A financial intermediary borrows funds from people who have saved. -
....ANSWER ...-True
From 2001 to 2008, the dollar depreciated substantially. - ....ANSWER ...-True
From 2007 to 2009, the U.S. economy was hit by the worst financial crisis since the Great
Depression. - ....ANSWER ...-True
Holding everything else constant, as the dollar strengthens foreigners will buy more U.S.
exports. - ....ANSWER ...-False
In a bull market stock prices are rising, on average. - ....ANSWER ...-True
In a bear market stock prices are rising, on average. - ....ANSWER ...-False
Financial institutions are among the largest employers in the country and frequently pay
very high salaries. - ....ANSWER ...-True
Different interest rates have a tendency to move in unison. - ....ANSWER ...-True
Financial markets are what makes financial institutions work. - ....ANSWER ...-
False
In recent years, financial markets have become more risky. However, only a limited
number of tools (such as derivatives) are available to assist in managing this risk. -
....ANSWER ...-False
…FOR STUDENTS ONLY…©️2025 ALL RIGHTS RESERVED… 2
,Although the internet has changed many aspects of our lives, it hasn't proven very useful
for collecting and/or analyzing financial and economic data. - ....ANSWER ...-
False
Every financial market allows loans to be made. - ....ANSWER ...-True
Most people's involvement with the financial system is through financial intermediaries
rather than financial markets. - ....ANSWER ...-True
A critical function of financial markets is an efficient allocation of capital. -
....ANSWER ...-True
The New York Stock Exchange is an example of a primary market. -
....ANSWER ...-False
Equity represents an ownership interest in a firm and entitles the holder to the residual
cash flows. - ....ANSWER ...-True
The capital market is a financial market in which only short-term debt instruments
(generally those with an original maturity of less than one year) are traded. -
....ANSWER ...-False
Many common stocks are traded over the counter, although a majority of the largest
corporations have their shares traded at organized stock exchanges. -
....ANSWER ...-True
Many common stocks are traded at organized exchanges, although a majority of the
largest corporations have their shares traded over the counter. - ....ANSWER ...-
False
…FOR STUDENTS ONLY…©️2025 ALL RIGHTS RESERVED… 3
, Corporations that issue new securities to raise capital now conduct more of this business
in financial markets in Europe and Asia than in the U.S. - ....ANSWER ...-True
Currently, over 80% of the new issues in the international bond market are Eurobonds. -
....ANSWER ...-False
American investors pay attention to only the Dow Jones Industrial Average. -
....ANSWER ...-False
A bond denominated in euros and issued in a country that uses the euro as its currency is
an example of a Eurobond. - ....ANSWER ...-False
An example of direct financing is if you were to lend money to your neighbor. -
....ANSWER ...-True
Liquidity services are services that make it easier for customers to conduct financial
transactions. - ....ANSWER ...-True
A financial intermediary's risk-sharing activities are also referred to as asset
transformation. - ....ANSWER ...-True
The process of financial intermediation is also known as direct finance. -
....ANSWER ...-False
Through economies of scale, financial intermediaries can lower the cost of information
production for each service by applying one information resource to many different
services. - ....ANSWER ...-True
Adverse selection refers to those with high credit risks, being most aggressive in their
search for funds. - ....ANSWER ...-True
…FOR STUDENTS ONLY…©️2025 ALL RIGHTS RESERVED… 4
