TEST BANK FOR
Financial Markets And Institutions 8th Edition Anthony Saunders
Chapter 1
Student name:
1) What factors are encouraging financial institutions to offer overlapping financial services
such as banking, investment banking, brokerage, etc.? 1.I. Regulatory changes allowing
institutions to offer more services
2.II. Technological improvements reducing the cost of providing financial services
3.III. Increasing competition from full-service global financial institutions
4.IV. Reduction in the need to manage risk at financial institutions
A) I only
B) II and III only
C) I, II, and III only
D) I, II, and IV only
E) I, II, III, and IV
2) IBM creates and sells additional stock to the investment banker Morgan Stanley. Morgan
Stanley then resells the issue to the U.S. public through its mutual funds.
This transaction is an example of a(n):
A) primary market transaction.
B) asset transformation by Morgan Stanley.
C) money market transaction.
D) foreign exchange transaction.
E) forward transaction.
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,3) IBM rcreates rand rsells radditional rstock rto rthe rinvestment rbanker rMorgan rStanley.
rMorgan rStanley rthen rresells rthe rissue rto rthe rU.S. rpublic rthrough rits rmutual rfunds.
Morgan rStanley ris racting ras ra(n)
A) asset rtransformer.
B) asset rbroker.
C) government rregulator.
D) foreign rservice rrepresentative.
E) derivatives rtrader.
4) A rcorporation rseeking rto rsell rnew requity rsecurities rto rthe rpublic rfor rthe rfirst rtime rin
rorder rto rraise rcash rfor rcapital rinvestment rwould rmost rlikely:
A) conduct ran rIPO rwith rthe rassistance rof ran rinvestment rbanker.
B) engage rin ra rsecondary rmarket rsale rof requity.
C) conduct ra rprivate rplacement rto ra rlarge rnumber rof rpotential rbuyers.
D) place ran rad rin rthe r r Wall rStreet rJournal rsoliciting rretail rsuppliers rof rfunds.
E) issue rbonds rwith rthe rassistance rof ra rdealer.
5) The rlargest rcapital rmarket rsecurity routstanding rin r2019 rmeasured rby rmarket rvalue rwas:
A) securitized rmortgages.
B) corporate rbonds.
C) municipal rbonds.
D) Treasury rbonds.
E) corporate rstocks.
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,6) The rdiagram rbelow ris ra rdiagram rof rthe:
A) secondary rmarkets.
B) primary rmarkets.
C) money rmarkets.
D) derivatives rmarkets.
E) commodities rmarkets.
7) and r allow ra rfinancial rintermediary rto roffer rsafe rliquid
rliabilities rsuch ras rdeposits rwhile rinvesting rthe rdepositors' rmoney rin rriskier rilliquid rassets.
A) Diversification; rhigh requity rreturns
B) Price rrisk; rcollateral
C) Free rriders; rregulations
D) Monitoring; rdiversification
E) Primary rmarkets; rforeign rexchange rmarkets
8) Depository rinstitutions rinclude:
A) banks ronly.
B) thrifts ronly.
C) finance rcompanies ronly.
D) banks rand rthrifts.
E) All rof rthese rchoices rare rcorrect.
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, 9) Match rthe rintermediary rwith rthe rcharacteristic rthat rbest rdescribes rits rfunction.
r 1.I. rProvide rprotection rfrom radverse revents
2.II. rPool rfunds rof rsmall rsavers rand rinvest rin reither rmoney ror rcapital rmarkets
3.III. rProvide rconsumer rloans rand rreal restate rloans rfunded rby rdeposits
4.IV. rAccumulate rand rtransfer rwealth rfrom rwork rperiod rto rretirement rperiod
5.V. rUnderwrite rand rtrade rsecurities rand rprovide rbrokerage rservices
1. Thrifts
r2.Insurer
s
3. Pension rfunds
4. Securities rfirms rand rinvestment rbanks
5. Mutual rfunds
A) 1, r3, r2, r5, r4
B) 4, r2, r3, r5, r1
C) 2, r5, r1, r3, r4
D) 2, r4, r5, r3, r1
E) 5, r1, r3, r2, r4
10) Secondary rmarkets rhelp rsupport rprimary rmarkets rbecause rsecondary rmarkets: r 1.I.
roffer rprimary rmarket rpurchasers rliquidity rfor rtheir rholdings.
2. II. rupdate rthe rprice ror rvalue rof rthe rprimary rmarket rclaims.
3. III. rreduce rthe rcost rof rtrading rthe rprimary rmarket rclaims.
A) I ronly
B) II ronly
C) I rand rII ronly
D) II rand rIII ronly
E) I, rII, rand rIII
11) Financial rintermediaries r(FIs) rcan roffer rsavers ra rsafer, rmore rliquid rinvestment
rthan ra rcapital rmarket rsecurity, reven rthough rthe rintermediary rinvests rin rrisky rilliquid
rinstruments rbecause:
Version 1 4
Financial Markets And Institutions 8th Edition Anthony Saunders
Chapter 1
Student name:
1) What factors are encouraging financial institutions to offer overlapping financial services
such as banking, investment banking, brokerage, etc.? 1.I. Regulatory changes allowing
institutions to offer more services
2.II. Technological improvements reducing the cost of providing financial services
3.III. Increasing competition from full-service global financial institutions
4.IV. Reduction in the need to manage risk at financial institutions
A) I only
B) II and III only
C) I, II, and III only
D) I, II, and IV only
E) I, II, III, and IV
2) IBM creates and sells additional stock to the investment banker Morgan Stanley. Morgan
Stanley then resells the issue to the U.S. public through its mutual funds.
This transaction is an example of a(n):
A) primary market transaction.
B) asset transformation by Morgan Stanley.
C) money market transaction.
D) foreign exchange transaction.
E) forward transaction.
Version 1 1
,3) IBM rcreates rand rsells radditional rstock rto rthe rinvestment rbanker rMorgan rStanley.
rMorgan rStanley rthen rresells rthe rissue rto rthe rU.S. rpublic rthrough rits rmutual rfunds.
Morgan rStanley ris racting ras ra(n)
A) asset rtransformer.
B) asset rbroker.
C) government rregulator.
D) foreign rservice rrepresentative.
E) derivatives rtrader.
4) A rcorporation rseeking rto rsell rnew requity rsecurities rto rthe rpublic rfor rthe rfirst rtime rin
rorder rto rraise rcash rfor rcapital rinvestment rwould rmost rlikely:
A) conduct ran rIPO rwith rthe rassistance rof ran rinvestment rbanker.
B) engage rin ra rsecondary rmarket rsale rof requity.
C) conduct ra rprivate rplacement rto ra rlarge rnumber rof rpotential rbuyers.
D) place ran rad rin rthe r r Wall rStreet rJournal rsoliciting rretail rsuppliers rof rfunds.
E) issue rbonds rwith rthe rassistance rof ra rdealer.
5) The rlargest rcapital rmarket rsecurity routstanding rin r2019 rmeasured rby rmarket rvalue rwas:
A) securitized rmortgages.
B) corporate rbonds.
C) municipal rbonds.
D) Treasury rbonds.
E) corporate rstocks.
Version 1 2
,6) The rdiagram rbelow ris ra rdiagram rof rthe:
A) secondary rmarkets.
B) primary rmarkets.
C) money rmarkets.
D) derivatives rmarkets.
E) commodities rmarkets.
7) and r allow ra rfinancial rintermediary rto roffer rsafe rliquid
rliabilities rsuch ras rdeposits rwhile rinvesting rthe rdepositors' rmoney rin rriskier rilliquid rassets.
A) Diversification; rhigh requity rreturns
B) Price rrisk; rcollateral
C) Free rriders; rregulations
D) Monitoring; rdiversification
E) Primary rmarkets; rforeign rexchange rmarkets
8) Depository rinstitutions rinclude:
A) banks ronly.
B) thrifts ronly.
C) finance rcompanies ronly.
D) banks rand rthrifts.
E) All rof rthese rchoices rare rcorrect.
Version 1 3
, 9) Match rthe rintermediary rwith rthe rcharacteristic rthat rbest rdescribes rits rfunction.
r 1.I. rProvide rprotection rfrom radverse revents
2.II. rPool rfunds rof rsmall rsavers rand rinvest rin reither rmoney ror rcapital rmarkets
3.III. rProvide rconsumer rloans rand rreal restate rloans rfunded rby rdeposits
4.IV. rAccumulate rand rtransfer rwealth rfrom rwork rperiod rto rretirement rperiod
5.V. rUnderwrite rand rtrade rsecurities rand rprovide rbrokerage rservices
1. Thrifts
r2.Insurer
s
3. Pension rfunds
4. Securities rfirms rand rinvestment rbanks
5. Mutual rfunds
A) 1, r3, r2, r5, r4
B) 4, r2, r3, r5, r1
C) 2, r5, r1, r3, r4
D) 2, r4, r5, r3, r1
E) 5, r1, r3, r2, r4
10) Secondary rmarkets rhelp rsupport rprimary rmarkets rbecause rsecondary rmarkets: r 1.I.
roffer rprimary rmarket rpurchasers rliquidity rfor rtheir rholdings.
2. II. rupdate rthe rprice ror rvalue rof rthe rprimary rmarket rclaims.
3. III. rreduce rthe rcost rof rtrading rthe rprimary rmarket rclaims.
A) I ronly
B) II ronly
C) I rand rII ronly
D) II rand rIII ronly
E) I, rII, rand rIII
11) Financial rintermediaries r(FIs) rcan roffer rsavers ra rsafer, rmore rliquid rinvestment
rthan ra rcapital rmarket rsecurity, reven rthough rthe rintermediary rinvests rin rrisky rilliquid
rinstruments rbecause:
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