TEST BANK for Financial Markets and Institutions 8th Edition by Saunders and Erhemjamts all chapters 1-25 covered

,Financial Markets & Institutions 5th Editio
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n Test Bank
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Chapterb01bIntroductionbAnswerbKey
Trueb/bFalsebQuestions

1. Primarybmarketsbarebmarketsbwherebusersbofbfundsbraisebcashbbybsellingbs
ecuritiesbtobfunds’bsuppliers.
TRUE

2. Secondarybmarketsbarebmarketsbusedbbybcorporationsbtobraisebcashbbybissuingbs
ecuritiesbforbabshortbtimebperiod.
FALSE

3. Inbabprivatebplacement,bthebissuerbtypicallybsellsbthebentirebissuebtobone,borbonlyba
bfew,binstitutionalbbuyers.

TRUE

4. ThebNYSEbisbanbexamplebofbabsecondarybmarket.
TRUE

5. Privatelybplacedbsecuritiesbarebusuallybsoldbtoboneborbmorebinvestmentbbankersba
ndbthenbresoldbtobthebgeneralbpublic.
FALSE

6. Moneybmarketsbarebthebmarketsbforbsecuritiesbwithbanboriginalbmaturitybofb1b
yearborbless.
TRUE

7. Financialbintermediariesbsuchbasbbanksbtypicallybhavebassetsbthatbarebriskierbt
hanbtheirbliabilities.
TRUE

8. Therebarebthreebtypesbofbmajorbfinancialbmarketsbtoday:bprimary,bsecondary,b
andbderivativesbmarkets.bThebNYSEbandbNASDAQbarebbothbexamplesbofbder
ivativesbmarkets.
FALSE

MultiplebChoicebQuestions

9. Whatbfactorsbarebencouragingbfinancialbinstitutionsbtobofferboverlappingbf
inancialbservicesbsuchbasbbanking,binvestmentbbanking,bbrokerage,betc.?

I. Regulatorybchangesballowingbinstitutionsbtobofferbmorebservices
II. Technologicalbimprovementsbreducingbthebcostbofbprovidingbfinancialb
services
III. Increasingbcompetitionbfrombfullbservicebglobalbfinancialbinstitutions
IV. Reductionbinbthebneedbtobmanagebriskbatbfinancialbinstitutions

, A.Ibonly
B. IIbandbIIIbonly
C. I,bII,bandbIIIbonly
D. I,bII,bandbIVbonly
E. I,bII,bIII,bandbIV

Figureb1-1

IBMbcreatesbandbsellsbadditionalbstockbtobthebinvestmentbbanker,bMorganbStanley.bMorg
anbStanleybthenbresellsbthebissuebtobthebU.S.bpublic.

10. Thisbtransactionbisbanbexamplebofba(n)
A. primarybmarketbtransaction
B. assetbtransformationbbybMorganbStanley
C. moneybmarketbtransaction
D. foreignbexchangebtransaction
E. forwardbtransaction

11. MorganbStanleybisbactingbasba(n)b
A.assetbtransformer
B.bassetbbroker
C.bgovernmentbregulator
D.bforeignbservicebrepresentative

12. Abcorporationbseekingbtobsellbnewbequitybsecuritiesbtobthebpublicbforbthebfirstbt
imebinborderbtobraisebcashbforbcapitalbinvestmentbwouldbmostblikelybA.conduc
tbanbIPObwithbthebassistancebofbanbinvestmentbbanker
B. engagebinbabsecondarybmarketbsalebofbequity
C. conductbabprivatebplacementbtobablargebnumberbofbpotentialbbuyers
D. placebanbadbinbthebWallbStreetbJournalbsolicitingbretailbsuppliersbofbfunds
E. nonebofbthebabove

13. Theblargestbcapitalbmarketbsecurityboutstandingbinb2010bmeasuredbbybmarketb
valuebwas
A. securitizedbmortgages
B. corporatebbonds
C. municipalbbonds
D. Treasurybbonds
E. corporatebstocks

14. Thebdiagrambbelowbisbabdiagrambofbtheb
A.secondarybmarkets
B. primarybmarkets
C. moneybmarkets
D. derivativesbmarkets
E. commoditiesbmarkets

15. andb
allowbabfinancialbintermediarybtobofferbsafe,bliquidbliabilitiesbsu
chbasbdepositsbwhilebinvestingbthebdepositors’bmoneybinbriskier,billiquidbass
ets.

, A. Diversification;bhighbequitybreturns
B. Pricebrisk;bcollateral
C. Freebriders;bregulations
D. Monitoring;bdiversification
E. Primarybmarkets;bforeignbexchangebmarkets

16. Depositorybinstitutionsbinclude:b
A.banks
B. thrifts
C. financebcompanies
D. allbofbthebabove
E. AbandbBbonly

17. Matchbthebintermediarybwithbthebcharacteristicbthatbbestbdescribesbitsbfunction.

I. Providebprotectionbfrombadversebevents
II. Poolbfundsbofbsmallbsaversbandbinvestbinbeitherbmoneyborbcapitalbmarkets
III. Providebconsumerbloansbandbrealbestatebloansbfundedbbybdeposits
IV. Accumulatebandbtransferbwealthbfrombworkbperiodbtobretirementbperiod
V. Underwritebandbtradebsecuritiesbandbprovidebbrokeragebservices

1. Thrifts
2. Insurers
3. Pensionbfunds
4. Securitiesbfirmsbandbinvestmentbbanks
5. Mutualbfunds
A. 1,b3,b2,b5,b4
B. 4,b2,b3,b5,b1
C. 2,b5,b1,b3,b4
D. 2,b4,b5,b3,b1
E. 5,b1,b3,b2,b4

18. Secondarybmarketsbhelpbsupportbprimarybmarketsbbecausebsecondarybmarkets

I. Offerbprimarybmarketbpurchasersbliquiditybforbtheirbholdings
II. Updatebthebpriceborbvaluebofbthebprimarybmarketbclaims
III. Reducebthebcostbofbtradingbthebprimarybmarketbclaims
A.Ibonly
B. IIbonly
C. IbandbIIbonly
D. IIbandbIIIbonly
E. I,bII,bandbIII

19. Financialbintermediariesb(FIs)bcanbofferbsaversbabsafer,bmorebliquidbinvestmentbt
hanbabcapitalbmarketbsecurity,bevenbthoughbthebintermediarybinvestsbinbriskybilli
quidbinstrumentsbbecause
A. FIsbcanbdiversifybawaybsomebofbtheirbrisk
B. FIsbcloselybmonitorbthebriskinessbofbtheirbassets
C. thebfederalbgovernmentbrequiresbthembtobdobso