WGU C201 Chapter 16 questions with verified answers
audit trail Ans✓✓✓ all market participants must keep detailed records of every
aspect of every trade
Bond AAA Ans✓✓✓ Lowest level of risk
Bond BB Ans✓✓✓ speculative or junk bonds; offer higher interest rates to attract
investors
Bond BBB Ans✓✓✓ Investment=grade bonds
Bond rating Ans✓✓✓ tool investors use to assess the risk of a bond
Call provision Ans✓✓✓ allows issuer to redeem the bond before maturity at a set
price
Commercial banks Ans✓✓✓ Largest financial institutions in the US; offer the
most services
Common Stock Ans✓✓✓ Basic form of corporate ownership
Convertible securities Ans✓✓✓ this features gives the holder the right to
exchange the bond or preferred stock for a fixed number of common stock; pay a
lower interest rate
, Credit crisis Ans✓✓✓ Triggered by subprime mortgages; required federal
government to bailout
Debentures Ans✓✓✓ Unsecured bonds
Discount rate Ans✓✓✓ interest rate at which the Fed makes short term loans to
member banks
ECNs Ans✓✓✓ buyers and sellers meet in a virtual stock market and trade
directly with one another; no specialist or market maker involved
FDIC Ans✓✓✓ Federal agency; insures commercial bank deposits up to 250,000
Federal Reserve System Ans✓✓✓ central bank of the USA; sets monetary policy
and regulates commercial banks
Financial institutions Ans✓✓✓ Intermediary of savers and borrowers; includes
commercial banks, savings banks, credit unions, and life insurance companies
Financial markets Ans✓✓✓ Where securities are issued and traded
Financial system Ans✓✓✓ process by which money flows from savers to users
Fourth market Ans✓✓✓ Direct trading of exchange-listed stocks off the floor of
the exchange or outside the network
audit trail Ans✓✓✓ all market participants must keep detailed records of every
aspect of every trade
Bond AAA Ans✓✓✓ Lowest level of risk
Bond BB Ans✓✓✓ speculative or junk bonds; offer higher interest rates to attract
investors
Bond BBB Ans✓✓✓ Investment=grade bonds
Bond rating Ans✓✓✓ tool investors use to assess the risk of a bond
Call provision Ans✓✓✓ allows issuer to redeem the bond before maturity at a set
price
Commercial banks Ans✓✓✓ Largest financial institutions in the US; offer the
most services
Common Stock Ans✓✓✓ Basic form of corporate ownership
Convertible securities Ans✓✓✓ this features gives the holder the right to
exchange the bond or preferred stock for a fixed number of common stock; pay a
lower interest rate
, Credit crisis Ans✓✓✓ Triggered by subprime mortgages; required federal
government to bailout
Debentures Ans✓✓✓ Unsecured bonds
Discount rate Ans✓✓✓ interest rate at which the Fed makes short term loans to
member banks
ECNs Ans✓✓✓ buyers and sellers meet in a virtual stock market and trade
directly with one another; no specialist or market maker involved
FDIC Ans✓✓✓ Federal agency; insures commercial bank deposits up to 250,000
Federal Reserve System Ans✓✓✓ central bank of the USA; sets monetary policy
and regulates commercial banks
Financial institutions Ans✓✓✓ Intermediary of savers and borrowers; includes
commercial banks, savings banks, credit unions, and life insurance companies
Financial markets Ans✓✓✓ Where securities are issued and traded
Financial system Ans✓✓✓ process by which money flows from savers to users
Fourth market Ans✓✓✓ Direct trading of exchange-listed stocks off the floor of
the exchange or outside the network
