Financial Markets & Institutions Chapter
1 Exam Review ( Question & Answers
2025)
Financial markets and institutions
A) involve the movement of huge quantities of money.
B) affect the profits of businesses.
C) affect the types of goods and services produced in an economy.
D) do all of the above.
E) do only A and B. - CORRECT ANSWERS ✔✔D) do all of the above
Financial market activities affect
A) personal wealth
B) spending decisions by individuals and business firms.
C) the economy's location in the business cycle.
D) all of the above. - CORRECT ANSWERS ✔✔D) all of the above
Markets in which funds are transferred from those who have excess
funds available to those who have a shortage of available funds are
called
A) commodity markets
B) funds market
C) derivative exchange markets
D) financial markets - CORRECT ANSWERS ✔✔D) financial markets
,Financial Markets & Institutions Chapter
1 Exam Review ( Question & Answers
2025)
The price paid for the rental of borrowed funds (usually expressed as a
percentage of the rental of $100 per year) is commonly referred to as
the
A) inflation rate
B) exchange rate
C) interest rate
D) aggregate price level - CORRECT ANSWERS ✔✔C) interest rate
The bond markets are important because
A) they are easily the most widely followed financial markets in the US
B) they are markets where interest rates are determined
C) they are the markets where foreign exchange rates are determined
D) all of the above - CORRECT ANSWERS ✔✔B) they are markets
where interest rates are determined
Interest rates are important to financial institutions since an interest
rate ___________ the cost of acquiring funds and ___________ the
income from assets.
A) decreases; decreases
B) increases; increases
C) decreases; increases
, Financial Markets & Institutions Chapter
1 Exam Review ( Question & Answers
2025)
D) increases; decreases - CORRECT ANSWERS ✔✔B) increases;
increases
Typically, increasing interest rates
A) discourage individuals from saving
B) discourages corporate investments
C) encourages corporate expansion
D) encourages corporate borrowing
E) none of the above - CORRECT ANSWERS ✔✔B) discourages
corporate investments
Compared to interest rates on long-term US government bonds,
interest rates on ____________ fluctuate more and are lower on
average.
A) medium-quality corporate bonds
B) low-quality corporate bonds
C) high-quality corporate bonds
D) three-month Treasury bills
E) none of the above - CORRECT ANSWERS ✔✔D) three-month
Treasury bills
1 Exam Review ( Question & Answers
2025)
Financial markets and institutions
A) involve the movement of huge quantities of money.
B) affect the profits of businesses.
C) affect the types of goods and services produced in an economy.
D) do all of the above.
E) do only A and B. - CORRECT ANSWERS ✔✔D) do all of the above
Financial market activities affect
A) personal wealth
B) spending decisions by individuals and business firms.
C) the economy's location in the business cycle.
D) all of the above. - CORRECT ANSWERS ✔✔D) all of the above
Markets in which funds are transferred from those who have excess
funds available to those who have a shortage of available funds are
called
A) commodity markets
B) funds market
C) derivative exchange markets
D) financial markets - CORRECT ANSWERS ✔✔D) financial markets
,Financial Markets & Institutions Chapter
1 Exam Review ( Question & Answers
2025)
The price paid for the rental of borrowed funds (usually expressed as a
percentage of the rental of $100 per year) is commonly referred to as
the
A) inflation rate
B) exchange rate
C) interest rate
D) aggregate price level - CORRECT ANSWERS ✔✔C) interest rate
The bond markets are important because
A) they are easily the most widely followed financial markets in the US
B) they are markets where interest rates are determined
C) they are the markets where foreign exchange rates are determined
D) all of the above - CORRECT ANSWERS ✔✔B) they are markets
where interest rates are determined
Interest rates are important to financial institutions since an interest
rate ___________ the cost of acquiring funds and ___________ the
income from assets.
A) decreases; decreases
B) increases; increases
C) decreases; increases
, Financial Markets & Institutions Chapter
1 Exam Review ( Question & Answers
2025)
D) increases; decreases - CORRECT ANSWERS ✔✔B) increases;
increases
Typically, increasing interest rates
A) discourage individuals from saving
B) discourages corporate investments
C) encourages corporate expansion
D) encourages corporate borrowing
E) none of the above - CORRECT ANSWERS ✔✔B) discourages
corporate investments
Compared to interest rates on long-term US government bonds,
interest rates on ____________ fluctuate more and are lower on
average.
A) medium-quality corporate bonds
B) low-quality corporate bonds
C) high-quality corporate bonds
D) three-month Treasury bills
E) none of the above - CORRECT ANSWERS ✔✔D) three-month
Treasury bills
