Financial Markets and Institutions 11th Edition Jeff Madura Test Bank (ch 1 -25)

Financial Markets and Institutions 11th Edition Jeff Madura
Test Bank

Chapter 1—Role of Financial Markets and Institutions

1. Financial market participants who provide funds are called
a. deficit units.
b. surplus units.
c. primary units.
d. secondary units.

ANS: B PTS: 1 DIF: Easy OBJ: FMAI.MADU.15.01.01
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom's: Knowledge

2. The main provider(s) of funds to the U.S. Treasury is (are)
a. households and businesses.
b. foreign financial institutions.
c. the Federal Reserve System.
d. foreign nonfinancial sectors.

ANS: A PTS: 1 DIF: Easy OBJ: FMAI.MADU.15.01.01
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom's: Knowledge

3. The largest deficit unit is (are)
a. households and businesses.
b. foreign financial institutions.
c. the U.S. Treasury.
d. foreign nonfinancial sectors.

ANS: C PTS: 1 DIF: Easy OBJ: FMAI.MADU.15.01.01
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom's: Knowledge

4. Those financial markets that facilitate the flow of short-term funds are known as
a. money markets.
b. capital markets.
c. primary markets.
d. secondary markets.

ANS: A PTS: 1 DIF: Easy OBJ: FMAI.MADU.15.01.02
NAT: BUSPROG.FMAI.MADU.15.02 STA: DISC.FMAI.MADU.15.02
KEY: Bloom's: Knowledge

5. Funds are provided to the initial issuer of securities in the

© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in
a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

, a. secondary market.
b. primary market.
c. deficit market.
d. surplus market.
ANS: B PTS: 1 DIF: Easy OBJ: FMAI.MADU.15.01.01
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom's: Knowledge

6. Which of the following is a capital market instrument?
a. a six-month CD
b. a three-month Treasury bill
c. a ten-year bond
d. an agreement for a bank to loan funds directly to a company for nine months

ANS: C PTS: 1 DIF: Moderate OBJ: FMAI.MADU.15.01.02
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom's: Comprehension

7. Which of the following is a money market security?
a. Treasury note
b. municipal bond
c. mortgage
d. commercial paper

ANS: D PTS: 1 DIF: Moderate OBJ: FMAI.MADU.15.01.02
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom's: Comprehension

8. The creditors in the federal funds market are
a. households.
b. depository institutions.
c. firms.
d. government agencies.

ANS: B PTS: 1 DIF: Easy OBJ: FMAI.MADU.15.01.03
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom's: Knowledge

9. Equity securities have a expected return than most long-term debt securities, and they exhibit a
degree of risk.
a. higher; higher
b. lower; lower
c. lower; higher
d. higher; lower

ANS: A PTS: 1 DIF: Moderate OBJ: FMAI.MADU.15.01.02
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom's: Comprehension


© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in
a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

,10. Money market securities generally have . Capital market securities are typically expected to have
a .
a. less liquidity; higher annualized return
b. more liquidity; lower annualized return
c. less liquidity; lower annualized return
d. more liquidity; higher annualized return

ANS: D PTS: 1 DIF: Moderate OBJ: FMAI.MADU.15.01.02
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom's: Comprehension

11. If security prices fully reflect all available information, the markets for these securities are
a. efficient.
b. primary.
c. overvalued.
d. undervalued.

ANS: A PTS: 1 DIF: Easy OBJ: FMAI.MADU.15.01.02
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom's: Knowledge

12. If markets are , investors could use available information ignored by the market to earn
abnormally high returns.
a. perfect
b. active
c. inefficient
d. in equilibrium

ANS: C PTS: 1 DIF: Moderate OBJ: FMAI.MADU.15.01.02
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom's: Knowledge

13. If financial markets are efficient, this implies that all securities should earn the same return.
a. True
b. False

ANS: F PTS: 1 DIF: Easy OBJ: FMAI.MADU.15.01.02
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02
KEY: Bloom's: Comprehension

14. The Securities Act of 1933
a. required complete disclosure of relevant financial information for publicly offered
securities in the primary market.
b. declared trading strategies to manipulate the prices of public secondary securities illegal.
c. declared misleading financial statements for public primary securities illegal.
d. required complete disclosure of relevant financial information for securities traded in the
secondary market.
e. all of the above


© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in
a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

, ANS: A PTS: 1 DIF: Easy OBJ: FMAI.MADU.15.01.02
NAT: BUSPROG.FMAI.MADU.15.03 STA: DISC.FMAI.MADU.15.02




© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in
a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.